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US gas imports tumble as shale booms

Imports fall to the lowest level in more than 20 years as companies line up to export the country's shale bounty

The shale boom continues to reshape the US energy landscape and global gas trade. The country’s natural gas imports plunged by nearly a quarter last year, driven by “unprecedented levels of domestic natural gas production” and rising exports, the US Energy Information Administration (EIA) said in a recent report.

Net US gas imports fell 23% to around 1.5 trillion cubic feet (cf) in 2012, the EIA said, the lowest level since 1990.

Both pipeline and liquefied natural gas (LNG) imports tumbled, with piped imports falling by 5% to 2.96 trillion cf, and LNG imports declining by half to 175 billion cf.

Around 94% of US gas imports arrived via pipeline from Canada and Mexico. Pipeline imports from Mexico declined by 77% last year, the EIA said, to 300 million cf. Imports from Canada fell by a more modest 5%, to 2.96 trillion cf. Surging production from the Marcellus shale in the northeast dented demand for Canadian imports into the region.

LNG

US LNG imports last year were at their lowest level since 1999, the EIA said, with lower volumes from all its trading partners, particularly Egypt, Qatar, and Yemen. Around 84% of US LNG imports came from Qatar and Trinidad and Tobago last year.

Exports of US LNG also fell in 2012 to 9bn cf, most of which went to Japan from Conoco’s Alaskan LNG project. Limited natural gas supply from the mature North Cook Inlet gasfield cut volumes available for export from the plant.

US Exports

While imports were down, exports were up. As policymakers and industry have debated whether or not the US should export its shale gas bounty, companies have already started doing just that.

Total US gas exports increased by 8% in 2012, to 1.6 trillion cf. This was driven by soaring pipeline volumes which increased by 11% last year to 1.59 trillion cf. Pipeline exports comprised around 98% of total US gas exports.

Pipeline exports to Canada ticked up by 4% to 971bn cf. Exports to Mexico, meanwhile, surged by 24% to a record level of 620bn cf. Mexico is increasingly looking to the US to supply natural gas as state-run oil company Pemex fails to keep up with demand.

Relatively low natural gas prices in the United States and increased natural gas demand in Mexico for power generation and industrial use likely contributed to the pipeline export increases to Mexico.

Domestic US gas production has soared over the past decade driven by a ramp up in shale-gas output.  Last year alone US gas output increased by around 5%, reaching 24.06 trillion cf. Increased production and warm weather in the US caused the average Henry Hub price for 2012 to fall to its lowest level since 1998.

As US gas prices have fallen in recent years, prices in Asia and Europe have risen. This price gap has made exports of liquefied natural gas (LNG) to those distant markets a viable prospect. And companies that have seen their import plants sit idle have lined up for permits to convert those facilities to export projects.

The US Department of Energy, though, has so far approved just two LNG export projects and there are a further 26 applications pending.

Cheniere’s Sabine Pass Liquefaction and Freeport LNG are the only projects which have so far received government approval to export LNG to both Free Trade and non-Free Trade agreement countries.

The Sabine Pass project in Louisiana is so far the only facility which has received the Federal Energy Regulatory Commission approval needed to build liquefaction facilities. This terminal is expected to begin operating in 2016.

New US energy secretary Ernest Moniz has offered some hope to companies with projects that have been left in regulatory flux, telling congress last month that his department would move “expeditiously” on reviewing permit applications.  He said that decisions for some proposals should be made by the end of this year.

The US has just one operational LNG liquefaction plant in Kenai, Alaska. The Kenai LNG Plant’s export license expired in March this year. Conoco, which owns and operate the facility, said it will apply to extend the license. 

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