Louisiana Poised for Major LNG Exports

Federal regulators approved today the first large-scale natural gas export facility in the U.S. located in Sabine Pass outside Lake Charles, Louisiana, recognizing the rapid tidal swing from Americans becoming importers to exporters. Louisiana leads the way in a country abundantly rich in the natural resource. Northwest Louisiana’s Hayneville Shale should now become economically viable to continue the drilling process as gas will eventually rise above the $2 cellar price it has dwelled of late.

An energy industry watcher said the key will be whether the price of natural gas rises enough to help the state’s extraction industries without hurting the petrochemical industry, which has a major presence in and around Baton Rouge, with major deposits now seen Statewide.

The Federal Energy Regulatory Commission cleared Cheniere Energy Inc.’s construction of the Sabine Pass LNG terminal in Cameron Parish. The facility, will chill natural gas into a liquid that can be shipped on tankers and allow U.S. producers to export natural gas overseas for potentially huge profits. The existing LNG import facility at the site will be converted to also handle exports. Two other companies are in line to compete for this business.

Sempra Energy Inc. says it will develop a $6 billion liquefied natural gas export terminal at its existing import terminal at Hackberry in southwestern Louisiana. This new export facility will need additional production sources to push America’s glut of LNG, currently at the $2 level to the world price exceeding $8 per 1000 cubic feet.

This is the third LNG export terminal in the works for Louisiana. The  Federal Energy Regulatory Commission is allowing each company to modify import terminals for exports, making Louisiana the first large-scale U.S. gas exporter state.

David Dismukes, associate director of the LSU Center for Energy Studies, and local economist Loren Scott both said the announcements signal a boon for Louisiana in the short term.

“Either one of these two projects would be the largest single investment in southwest Louisiana history,” Scott said of Cheniere and Sempra.

Dismukes and Scott said the export facilities and liquefaction plants are generally more labor- and capital-intensive to build than the import and regasification terminals, though neither could say for certain how many construction and permanent jobs will be created.

Scott said the jobs will likely be very high-paying.

“It’s not one of those deals where you build a plant and it’s going to employ eight people,” he said.

Scott also said this is good news for the Haynesville Shale in northwest Louisiana and offshore drilling, where the rig count has fallen from a peak of 142 in 2010 down to about 45 now.

“You’ve got to get some increase in demand for natural gas to get the price high enough for operators to stay in the Haynesville Shale,” he said.