Nov. 27, 2016 10:00 a.m. ET
The U.S. has become a net exporter of natural gas, further evidence of the how the domestic oil and gas boom is reshaping the global energy business.
The U.S. has exported an average of 7.4 billion cubic feet a day of gas in November, more than the 7 billion cubic feet a day it has imported, according to S&P Global Platts, an energy trade publisher and data provider. Exports also topped imports for a few days in September, Platts reported. It has been nearly 60 years since the U.S. last shipped out more natural gas than it brought in annually, according to the U.S. Energy Information Administration.
The milestone comes less than a year after restrictions on most crude oil exports were lifted, allowing tankers of crude to be freely shipped overseas for the first time nearly half a century, and together they mark a significant and potentially permanent change in the way U.S. energy flows around the world. Overseas producers now have to deal with the growing clout of the U.S. energy industry, which is aggressively looking to ramp up its global market share to help offset a long period of low prices.
“It’s indicative of things to come,” said Sid Perkins, managing partner at the brokerage Ion Energy Group. Natural gas is “going to be taking on the characteristics of a global-macro market, like crude, where global factors will influence what happens to gas.”
A blast of cold weather could cause heating demand to rise and tip the U.S. back into being a net importer, analysts said. Still, the rise in overseas sales is a welcome development for an industry that produced far more than the U.S. can consume.
A glut of supply dragged prices down to a 17-year low in March. They have rebounded by more than 80% since then, as summer demand has worked through high inventories and winter consumption looks set to pick up, but are still well below their levels before the oil boom deflated.
Gas exports have risen more than 50% since 2010. The U.S. will ship gas equal to as much as a fifth of its annual consumption abroad by 2020, Citigroup estimates. The Energy Department says the country will be the world’s third-largest producer of liquefied natural gas for export by that year, trailing Australia and Qatar.
The biggest buyers are North American Free Trade Agreement partners Mexico and Canada. A series of new pipelines running across the southern border helped shipments to Mexico reach an all-time high in August and accounted for almost 6% of total U.S. gas production, according to the EIA. Mexico uses U.S. gas to run power generators and offset declines in domestic production.
Exports to Canada—where U.S. gas heats homes and businesses—have remained relatively steady over the past few years and accounted for 2.5% of production in August.
Some analysts fear President-elect Donald Trump’s pledge to revisit U.S. trade policy with Mexico could slow the rise of gas exports to that country, but the industry also is cracking open new markets farther from home.
Shipments from Cheniere Energy Inc.’s Sabine Pass liquefied natural gas terminal have grown to average 1.5 billion cubic feet of gas a day since February, when exports from the facility began.
Cheniere initially intended to receive LNG when it opened the terminal in 2008. But with the surge of natural gas being released from shale formations, it became the first U.S. gas company to request government permission to reverse the flow and ship the gas abroad instead.
Plans to export natural gas to countries such as Singapore and South Korea, which have free trade agreements with the U.S., could be authorized quickly. But shipments to countries that don’t have such agreements, a group that includes big LNG buyers like Japan, require additional government scrutiny. Cheniere won approval to sell gas to that latter group in 2011.
‘Gas is just one of the first signs of the growing strength of U.S. production power.’
Cheniere continues to expand Sabine Pass, and several other export terminals are expected to come online starting in 2017 and 2018. In 2013, the Freeport LNG terminal at Quintana Island, Texas, became the second to win government approval to export. It is slated to begin shipping out gas in 2018. Dominion Resources plans to begin shipping LNG bound for Cheniere from its terminal on the Chesapeake Bay next year.
Slowing demand and surging supplies have pushed global spot prices of LNG down and have made it harder to ink the long-term contracts that underpin financing for export terminals. Royal Dutch Shell PLC said earlier this year that it would delay making a final decision on its plans to help develop a natural gas export terminal at the site of an existing import terminal in Lake Charles, La., saying the market is already amply supplied. A Shell spokesman said the company plans to periodically review the project.
Still, the exports show how American shale energy producers continue to expand their influence in ways few predicted a decade ago.
“Gas is just one of the first signs of the growing strength of U.S. production power,” said Anthony Yuen, global energy strategist at Citigroup.
—Timothy Puko contributed to this article.
Tags: Chenier, Cheniere, domestic oil and gas boom, Donald Trump, Energy Department, global energy business, global market share, India, Japan, liquefied natural gas, Mexico Canada, natural gas, North American Free Trade Agreement, Royal Dutch Shell, S&P Global Platts, U.S. energy industry, U.S. has become a net exporter of natural gas, U.S. Is Now a Net Exporter of Natural Gas