America’s Entrance into the Big Leagues of Liquid Natural Gas and Energy Exports

After developing significant infrastructure, and partnerships, the United States has entered the business of exporting Liquid Natural Gas en masse. This entry will create many jobs and could help raise export rates, but it has not been well-received by other large players in the energy sectors, because they hoped to prevent the United States from increasing its market share. There has been a noticeable dip in crude oil prices in the past year and the market is suffering from this continued decrease. However, it is the same players who initiated the fall in prices who now are feeling the price drop.

Image courtesy of Shell © 2011, some rights reserved.
Image courtesy of Shell © 2011, some rights reserved.

Saudi Arabia made an aggressive move to create a glut in the market via the selling of enormous amounts of crude oil months ago, in the hope of damaging both exports from Iran and Liquid Natural Gas companies who were threatening to take away business from the nation.  Naturally this plan seems to have backfired as they are now feeling the repercussions just as much as any other facet of the energy sector, and as of yet there is no end in sight, with traders on Wall Street and London still shorting the stock (betting that it will fall), therefore decreasing investor confidence. There are fears that over the next year, as sanctions are lifted from Iran and new crude oil joins the market, the situation will worsen. Now with so many investors’ funds tied up in the creation of export centres for Liquid Natural Gas (which are extremely expensive to create due to the dangerous qualities of energy transit), some of the United States Liquid Natural Gas market is feeling a crunch, but sadly this surplus of oil is not the only hurdle the market must overcome.

The United States is facing competition not only from the Middle East, but Russia. Its natural gas giant, Gazprom, pose a truly foreboding enemy. Russia has stated that it can effectively bar the Americans from the European energy market given Russia’s lower transport costs and, at the moment, a higher working rate of return, allowing Russia to potentially drop the price to an unattainable rate for American Liquid Natural Gas to enter the market. One hope is that strenuous ties between Russia and Europe, as well as the ratio of oil price to Liquid Natural Gas beneficial trend, continue long enough to allow for the US to establish a strong foothold. The hope being that Europe will, with America pumping Liquid Natural Gas into the market, restructure their contracts with Russia and then allow more demand, due to less Russian exports to the area, for American exporters to enter the Asian market. Again though, this is not the final barrier that American Liquid Natural Gas firms must seek to cross before successfully instituting themselves as a competitive share of the market.

Two more unaddressed issues are those of the environment and public sentiment, both of which seemed to be harmed by the process of accumulating Liquid Natural Gas and hydraulic fracking into shale shelfs deep below the surface. The process essentially is based on using high powered water cannons to penetrate deep into shale deposits, releasing pockets of Natural Gas, which then can be converted to Liquid Natural Gas. The problem is that this can wreak havoc on the environment.  Not only have there been multiple cases of explosions due to gas expanding too quickly, but there is also the issue of damaging the water table. Naturally the public, who do not directly benefit from the expansion of Liquid Natural Gas projects, see little need to support or even allow fracking to take place. In some cases, residents are even protesting legislation in order to protect their towns, counties and states. Needless to say the American Liquid Natural Gas exporters have been fighting an uphill battle, and though it may be tough, many would venture to say that they will, in the end, be successful.

The combination of factors that have created the milieu for America’s entrance into Liquid Natural Gas as exporters have not made this process easy; a glut of Saudi oil, Russia’s establishment in the market, and environmental concerns coupled with poor public sentiment. This is also not even considering that the United States is not the only exporter trying to enter the market at the moment. Australia is facing all of these issues and also just beginning to export Liquid Natural Gas, and as far as is known, this could harm American attempts at entry to the market. It is undeniable that there is a demand for Liquid Natural Gas and that this may increase in the future due to its abundance. American exporters have the supply to help serve the international demands for energy, so it should have confidence, but exporters will need to overcome these hurdles as they face a difficult challenge of gaining market share.

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