From the desk of Regina Lindsey (June 2017)

While much of the focus from the national media has been on the firing of FBI Director James Comey, there has been other news out of D.C. that impacts Southeast Texas.

One of the stories that barely made a blip was a new deal the Trump administration struck with China clarifying U.S. policy on liquefied natural gas (LNG) exports to China.

When LNG entered the Southeast Texas market, it brought the most stabilizing force to our economy in some time. This, in addition to those companies’ largesse, is the rationale behind the Greater Beaumont Chamber of Commerce’s decision to recognize Cheniere and Golden Pass as the 2017 Spindletop Award winners.

Cheniere was the first exporter of LNG in the country, and both Golden Pass and Sempra have filed permit applications to build export facilities in the region. According to the International Gas Union, Japan is currently the largest market for LNG, followed by South Korea and China. China is the fastest growing market, but as the world’s most populated country shifts from coal-based to cleaner energy, contracts with LNG exporters signed in the early 2000s were about to expire. China’s total LNG demand last year was 26 million metric tons, and in March it accounted for 7 percent of total LNG imports into the country. It is expected that Chinese demand for LNG will reach 75 million metric tons per year — or about $26 billion at today’s prices — by 2030, triple the current amount of LNG imports. The new deal positions the U.S. to more aggressively capture some of that market, making us more competitive with Australia, Russia, and Canada by allowing exporters to engage more long-term contracts. Currently, shipments are sold on the so-called spot market for immediate delivery. U.S. LNG export terminal developers will now be able to target Chinese buyers directly, and the deal could also support direct Chinese investment in the terminals.

Additionally, the Trump administration nominated two commissioners to the Federal Energy Regulatory Commission (FERC). FERC is the agency with authority to approve natural gas pipelines and liquefied natural gas terminals and has been a source of frustration for many of our region’s proposed projects. Under the Obama administration, the permitting process was frustratingly slow and expensive. The agency has been paralyzed since early in the Trump administration, when the White House demoted the chairman, Norman Bay, and named Commissioner Cheryl LaFleur acting chairman. Bay resigned, leaving FERC with two Democratic commissioners in place and no quorum. If the two nominees, Neil Chatterjee and Robert Powelson, are confirmed by the Senate, it should leave the industry feeling sanguine about its projects, as both are strong supporters of natural gas and natural gas pipelines to move gas to market.
With the announcement of these two moves, there’s no reason to think that the LNG industry has reached its apogee today, and that bodes well for all of us in Southeast Texas.