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Obama Politics: Gas-Export Study Delay Puts U.S. Projects in Limbo for This Year

By Jim Snyder
Sep 18, 2012 2:14 PM CT

The Energy Department’s delay in releasing a report on liquefied natural-gas exports puts in limbo for this year as many as 12 applications including projects backed by Dominion Resources Inc. and Sempra Energy. (SRE)

The department commissioned the study last year to assess the economic impact of exports on domestic energy use after granting Cheniere Energy Inc. (LNG) permission to ship gas from Louisiana. It said future permits won’t be issued until the study is completed.

The first part of the study is complete, and a second portion was scheduled to come out in the first quarter. That date was pushed back to late in the U.S. summer, which ends Sept. 22. A posting on the department website now says it will be “complete by the end of the year.”

“It is really unfortunate, but I don’t think anything happens until we see the results of that report,” said Bill Cooper, president of the Center for Liquefied Natural Gas, which advocates for gas shipments. The Washington-based group includes LNG producers, shippers and terminal operators.

“None of the applicants, I’m certain, want to see a delay in the regulatory process,” Cooper said in an interview.

The study was started after lawmakers led by Representative Edward Markey, a Massachusetts Democrat, and Senator Ron Wyden, an Oregon Democrat, said overseas sales might increase domestic energy prices.

The delay probably will push release of the Energy Department’s report until after the election in November.

‘Complicated Analysis’

“This is a complicated economic analysis assessing a dynamic market,” Jen Stutsman, an Energy Department spokeswoman, said in an e-mail. “We take our responsibility to issue these determinations seriously and want to make sure the necessary time is taken to get it right.”

Investors including Sempra Energy in partnership with Mitsubishi Corp. and Mitsui & Co. Ltd., Freeport LNG with Macquarie Group Ltd., and Dominion Resources, have applied for approvals from the Energy Department.

U.S. permits are required to sell gas to countries that aren’t free-trade partners with the U.S., a group that includes Japan and Spain.

As natural-gas prices soared in the last decade, energy companies sought permission to build import terminals. Hydraulic fracturing, or fracking, for natural gas has opened access to reserves that previously couldn’t be produced economically, driving prices to a decade low and letting companies shift gears and seek overseas buyers for the fuel.

In fracking, oil and gas companies shoot a mixture of water, sand and chemicals underground to crack shale rock formations and free fossil fuels trapped inside.

To contact the reporter on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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LNG EXPORT: U.S. Gas Exports Put on Back Burner

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By TENNILLE TRACY

The Obama administration is telling Japan and other allied countries they will have to wait before moving forward on plans to buy American natural gas, people involved in the talks said.

A dramatic increase in U.S. natural-gas production has led several U.S. companies, including Sempra Energy SRE +0.23% and Dominion Resources Inc., D +0.15% to seek permits from the Department of Energy to export gas to countries that lack free-trade agreements with the U.S. Exxon Mobil Corp. XOM -0.73% Chief Executive Rex Tillerson said Wednesday his company was looking at exporting from the U.S. Gulf Coast and Canada.

Sempra and Dominion are working with Japanese partners that want to import the gas as their country looks for new power sources. The U.S. currently exports relatively small amounts of natural gas via pipelines to Canada and Mexico, but a wave of recent export proposals marks the first time in decades that companies have sought to liquefy U.S. gas and transport it overseas.

But exports have become a hot-button topic for some lawmakers in Washington and have highlighted uncertainty about what kind of energy power the U.S. wants to become as companies unearth huge supplies of natural gas in shale rock.

“We are going to have to answer some basic questions about our role as a producer,” Michael Levi, a senior fellow at the Council on Foreign Relations, said. “The fact that some of these debates have been so difficult stems from their novelty.”

Japan’s prime minister raised the gas-export issue with President Barack Obama at an April 30 meeting, one of several occasions on which Tokyo has pushed the administration.

But the U.S. has told Japan, a leading military ally in the Pacific, it will have to wait, in large part because of the political sensitivities, participants in the talks said.

“I think it’s going to require more people taking a look at it,” an administration official said, adding, “We’re very sympathetic to Japan. They’re in a very difficult situation.”

Following the disaster at its Fukushima Daiichi nuclear plant last year, Japan pulled the plug on all of its nuclear reactors, forcing it to replace a power source that generated about 30% of its electricity. The government is studying whether to restart some of the reactors, but nuclear power is likely to play a smaller role in five or 10 years.

That is when the U.S. natural gas could start arriving, but only if the U.S. grants permits to export terminals that would liquefy the gas for shipping across the Pacific.

Japan isn’t the only country waiting. “The requests come from everywhere,” the administration official said. Natural gas is much cheaper in the U.S. than in Europe and Asia, where the fuel’s value is often tied to the price of oil. Companies importing American gas would be able to reduce costs with contracts tied to the lower U.S. prices.

Mr. Tillerson laid out the case for exports at Exxon’s shareholder meeting Wednesday, saying they would create jobs and help the U.S. trade balance. Sen. Lisa Murkowksi, a Republican from Alaska, asked President Obama in April to expedite permits for natural-gas exports. She said exports could give Alaska a market for gas from its North Slope, which lacks a gas pipeline to the lower 48 states.

Opponents, including Rep. Ed Markey of Massachusetts and some other congressional Democrats, say the U.S. could boost its energy security by keeping its natural gas at home. Oil-and-gas entrepreneur T. Boone Pickens, in an interview, objected to the idea of selling the gas at a discount to global prices. “You’re kind of giving your own stuff away, and it’s stupid to do that,” said Mr. Pickens, who wants U.S. trucks to use natural gas.

Japanese officials said they recognized the Obama administration’s political challenges.

“It is difficult for the U.S. to say yes [to exports] because of the presidential election,” said Hirohide Hirai, director of the petroleum and natural-gas division of Japan’s economy ministry. “There won’t be any deal with any country before November.”

U.S. officials say they are weighing how exports would affect job creation, trade and the domestic price of natural gas. A price spike would hurt consumers and weaken a competitive advantage enjoyed by U.S. manufacturers that use natural gas as a raw material. An Energy Department assessment is due later this year, and an administration official said decisions will follow in a “timely manner.”

—Mitsuru Obe and Isabel Ordonez contributed to this article.

Write to Tennille Tracy at tennille.tracy@dowjones.com

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USA: Mitsubishi Inks Development Deal with Cameron LNG

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Mitsubishi Corporation said it has signed a Commercial Development Agreement with Cameron LNG, a subsidiary of Sempra Energy, to liquefy approximately 4 million metric tones of natural gas at Cameron LNG terminal.

The agreement binds the parties to negotiate a 20-year tolling agreement, based on agreed-upon terms outlined in the Commercial Development Agreement. The intending tolling agreement will enable Mitsubishi Corporation to become a foundation customer of LNG produced at Cameron LNG terminal, and Mitsubishi Corporation will market them to overseas utility customers.

In recent years, due to the rapid increase of natural gas production in the United States, some LNG receiving terminals are planned to be converted to LNG export terminals by additionally building liquefaction facilities.

Cameron LNG receiving terminal in Hackberry is expected to start conversion in late 2013 with operations to commence in late 2016. The completed liquefaction facility will utilize Cameron LNG’s existing facilities, and is expected to be comprised of three liquefaction trains with a total export capability of approximately 12 million tonnes per annum (Mtpa) of liquefied natural gas (LNG). In January 2012, Cameron LNG received approval from the U.S. Department of Energy (DOE) to export up to 12 Mtpa of domestically produced LNG from the Cameron LNG terminal to all current and future Free Trade Agreement countries. The authorization to export LNG to countries with which the U.S. does not have a Free Trade Agreement is pending review by the DOE. Cameron LNG expects to receive the required permits from the Federal Energy Regulatory Commission (FERC) and enter into a turnkey contract in 2013 for engineering and construction services for the project.

Natural gas which Mitsubishi Corporation will procure from the North American natural gas market will be processed through the Cameron LNG facility pursuant to a tolling agreement for 4 Mtpa, which LNG will then be marketed to utility customers. To secure natural gas from the market in safely and cost competitive manner, Mitsubishi Corporation will utilize expertise of independent gas marketer CIMA Energy Ltd. (headquartered in Houston, Texas) which Mitsubishi Corporation holds 34% share.

Under a situation where Japan is currently importing LNG mainly from the Middle East and Southeast Asia, LNG import from the United States will contribute to diversification of energy resources and increase flexibility of supply plan by utilizing fluid North America’s natural gas market in parallel.

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Japan: Osaka Gas Eyes U.S. LNG

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Japan’s Osaka Gas is in negotiations to buy liquefied natural gas from Dominion Resources, Sempra Energy and Freeport LNG in the United States, Bloomberg reported, citing Tetsushi Ikuta, general manager of Osaka Gas energy resources and international business development.

He said that Osaka Gas may invest in planned LNG terminals in Maryland, Louisiana and Texas.

Osaka Gas said recently that it plans to purchase 7.19 million mt of LNG during fiscal 2012.

The company also plans to invest 290 billion yen (3.49 billion U.S. dollars) in LNG storage facilities and laying pipelines in five years from fiscal 2012-2016.

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USA: Sempra Wins DOE Approval for Cameron LNG Export

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The U.S. Department of Energy granted Sempra a long‐term authorization to export up to the equivalent of 1.7 Bcf/d of natural gas as LNG to FTA countries for 20 years from the proposed Cameron, Louisiana, LNG liquefaction plant.

The ruling paves the way for a second approval allowing Sempra to export LNG to all LNG import nations, with or without U.S. free trade agreements.

Cameron LNG is situated on a 260-acre industrial-zoned site along the Calcasieu Channel in Hackberry, Louisiana. It is located 18 miles from the Gulf of Mexico and within 35 miles of five major interstate pipelines that serve nearly two-thirds of all U.S. natural gas markets.

The $900 million LNG terminal is currently capable of processing up to 1.5 billion cubic feet of natural gas per day.

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