The U.S., once a net importer of natural gas, is now on the threshold of becoming a major exporter of LNG. In the early part of the 21st century, companies began building LNG import terminals in advance of an expected decline in domestic natural gas production.
What was once seen as a strong investment began to sour as unconventional natural gas producers started to unlock the vast amounts of shale gas reserves in North America. While the first of these shale plays to reach production in the U.S., the Barnett Shale in the Fort Worth Basin, was considered to be a source of incremental volumes of the country’s gas supplies, it was anticipated that the majority would be coming from LNG imports.
What imports?
However, in the years since the advent of Barnett Shale production, the need for LNG imports has dissipated as natural gas output has soared from the likes of the Haynesville, Fayetteville, Eagle Ford and Marcellus plays.
Production from these plays was brought on so quickly, with reserve levels so high, that they not only met domestic demand but, in fact, have overwhelmed this demand to the point where natural gas prices have fallen more than 75% since 2008.
Meanwhile, global LNG prices have much higher values than domestic gas prices, especially in the wake of the 2011 Fukushima disaster in Japan. As Japan shutters its nuclear power program, its demand for LNG has continued to rise. European countries have also expressed interest in backing out Russian gas due to that country’s strong-arm negotiating tactics.
The price discrepancy has potentially given new life to many of the expensive LNG terminals constructed in recent years that have gone largely unused as the owners of these facilities sought permission to export LNG volumes from the U.S. to more lucrative foreign markets.
Cheniere Energy Inc.’s Sabine Pass terminal was the first terminal to receive permission from the Federal Energy Regulatory Commission and the U.S. Department of Energy (DOE) to export up to 803 billion cubic feet (Bcf) per year—2.2 Bcf per day—of domestically produced LNG volumes to countries both with and without free trade agreements (FTA) with the U.S. The company stated that it expects to begin exporting these volumes by the end of this year. It has since submitted five more applications to export LNG to both FTA and non-FTA countries.
Then there were two
Once Sabine Pass comes online, it will join ConocoPhillips’ Kenai terminal in the Kenai Peninsula in Alaska as the only U.S. LNG export terminals. The comparatively small Alaska facility has been transporting LNG from the Cook Inlet to Japan since 1969 and has the capacity to export 1.3 million tons of LNG per year.
ConocoPhillips announced in 2011 that it planned on shuttering the plant, but these plans were scraped shortly after the Fukushima incident, and the plant resumed operations in early 2012. The facility’s export license expired on March 31, 2013, but the DOE granted approval in April 2014 to export 40 Bcf of LNG from 2014 to 2016.
Alaska may also be home to a second LNG export terminal should the Alaska LNG project move forward. The project, which is backed by BP Plc, ConocoPhillips, ExxonMobil Corp., TransCanada Corp. and the state of Alaska, would involve construction of a liquefaction plant, storage facilities and an export terminal on the Kenai Peninsula; an 800-mile pipeline from south-central Alaska to the North Slope; and a gas treatment plant and transmission lines connected to producing fields.
It is estimated that the project would cost between $45 billion and $65 billion and have the capacity to produce and export up to 20 million metric tons of LNG annually.

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