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Why Cheniere Is Bringing US LNG to Europe for the First Time

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Apr. 20 2016, Published 11:26 a.m. ET

US natural gas production

US natural gas production hit a record high in 2015. The United States produced around 80 billion cubic feet per day, which was up 5% from 2014. The increase in production was due to a strong increase in shale gas output that introduced new export opportunities to the country.

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Cheniere Energy

Cheniere Energy (LNG) is exporting liquid natural gas, or LNG, from the United States. It’s the first US company to receive a federal permit to export LNG. In February 2016, Cheniere Energy shipped its first tanker with liquefied natural gas from its Louisiana terminal to Brazil. Within two months, Cheniere shipped its sixth cargo ship, the Creole Spirit. The ship is headed to Portugal. It left the Sabine Pass on April 15. According to reports, it’s expected to arrive at the port of Sines in Portugal in about a week. This is the first time US shale will enter Europe.

US gas to Europe

Cheniere’s shipment to Europe could be the first step in a long race. According to a Wall Street Journal report, Deutsch Bank estimates that the United Stated could become Europe’s biggest natural gas supplier within a decade. Currently, Russia supplies one-third of Europe’s  natural gas. You can see from the above chart that Europe has the most favorable economics for US LNG. Poland, Bulgaria, and Germany are all interested in receiving US LNG (UNG).

Other players

The parties that have shown interest in LNG exports include Dominion Resources (D), Energy Transfer Equity (ETE), and Kinder Morgan (KMI). Dominion Resources and Energy Transfer have gotten approval. Dominion Resources is already starting the necessary construction. A decision is pending on Energy Transfer Equity’s Lake Charles LNG export project.

In the next part of this series, we’ll look at 2015’s LNG trade and the prospects for the coming years.

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