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So much natural gas has been produced in the United States from hydraulic fracturing — or fracking — of shale formations that the industry is looking to foreign markets to soak up the vast new supply.
North American ports are switching from importing gas from other major producing regions, such as Russian and the Middle East, to exporting it to energy-hungry markets such as Europe and Asia.
The glut of U.S.-produced shale gas also is affecting other aspects of the international gas market. In the late 1990s, countries such as Russia and Qatar spent heavily to build facilities to store liquefied natural gas (LNG) — gas that has been converted to liquid for ease of storage and transport — in hopes of selling it to the United States. Now they may have to compete with the United States for a share of the growing overseas market.
The change in natural gas markets has geopolitical implications. It is estimated that Iran has 15.8 percent of the world's natural gas reserves, second only to Russia. Iran plans to develop six offshore gas-drilling sites in the Persian Gulf.
Still, despite access to one of the largest gas fields in the world, Iran has been slow to develop its gas resources because international sanctions have hindered foreign investment. The sanctions were imposed because of Iran's development of nuclear-weapons technology. In October, however, a Chinese company expressed interest in investing in Iran's natural gas projects.
Exporting natural gas is a complex process. Before it can be loaded onto a tanker and shipped overseas, gas arriving via pipeline must be cooled to a liquid, which requires not only special infrastructure but also Department of Energy approval under an extensive permitting process.
An artist's rendering shows the proposed Jordan Cove liquefied natural gas facility in Coos Bay, Ore. (Jordan Cove Energy Project, L.P.)
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In Oregon, officials of the Jordan Cove Energy Project are deciding whether to build a $3.5 billion terminal at the international port of Coos Bay to ship U.S.-produced gas overseas. The terminal, which would make Oregon the western export gateway for LNG, would tap into gas pipelines along the California border that in turn connect to suppliers in the Rocky Mountains.
But the terminal faces potential competition. A joint venture backed by three large energy companies — Apache, Encana, and EOG Resources — was granted a license in October by Canada's National Energy Board to build an LNG export terminal at the deepwater port of Kitimat, British Columbia. The terminal is expected to be completed by 2015 and have the capacity to ship 1.4 billion cubic feet of natural gas per day.
Proponents of the West Coast projects say terminals will be cost-effective because they are convenient to the Asian market. But states in other U.S. regions also are moving forward with export terminals.
Along the Gulf Coast, Houston-based Cheniere Energy plans to build a $6 billion terminal in Louisiana to ship gas to Europe and Asia. And Freeport LNG is proceeding with a $2 billion project on the Texas coast with a goal of exporting 1.4 billion cubic feet of LNG per day, or about $4 billion to $6 billion of gas annually, to Europe and Asia. Both locations are close to major shale-gas production areas in Texas, Arkansas and Louisiana.
Freeport's terminal opened in 2008 to import LNG. But Michael Smith, Freeport's CEO, said the time was right to convert the facility for export. “The shale story just kept building and building over the past few years until, finally, we did the engineering and it just made sense,” he said.
— Daniel McGlynn
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