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Few factors will have a greater effect on future U.S. natural gas production—or gas pricing—than the degree to which U.S. LNG exporters are successful in penetrating Asian, European and other markets. The dozen liquefaction/LNG export facilities now under construction along the Gulf and East coasts could demand up to 7 Bcf/d, or about one-tenth of current U.S. production. It’s possible, though, that demand could be far less if U.S. LNG can’t compete successfully, or several Bcf/d higher if exporter success leads to development of additional projects. Today, we review our latest Drill Down Report on the international LNG market and how U.S. exporters may fare.

The international market for liquefied natural gas (LNG) is an inherently risky business where returns depend on paying back huge upfront infrastructure investments with cash flows based on volatile energy prices. Tectonic shifts in the market are giving North American LNG exporters and natural gas producers an opportunity to become pivotal players. The world is on the cusp of an LNG supply glut that may last several years, and the old order of long-term supply contracts with prices indexed to oil is being phased out in favor of a market structure that features more destination flexibility, more spot market sales—and, for U.S. and maybe some Canadian and Mexican LNG exporters—more liquefaction “tolling” deals with LNG prices linked to gas. Today, we continue our look at what these changes mean for the North American energy sector.

Exports of U.S.-sourced natural gas as liquefied natural gas (LNG) will likely begin within a year’s time, and will ramp up through the 2016-19 period. That much seems certain. What’s less clear is whether the capacity of U.S. liquefaction/export projects will plateau at the roughly 6 Bcf/d in the “First Four” projects now under construction or continue rising higher. Yesterday’s decision by the BG Group to delay it’s commitment to the 2 Bcf/d capacity of the Lake Charles LNG terminal until 2016 certainly casts doubts on those further expansions. Prospects for additional export projects hinge on a few interrelated factors, including the higher capital costs associated with some next-round projects; the costs and challenges of shipping LNG through the expanded Panama Canal; and the possibility of competing LNG export projects being developed elsewhere, including western Canada. Today we consider these factors and handicap the handful of export projects on the cusp of advancing.

An ugly combination of sagging overseas demand for liquefied natural gas (LNG), new LNG supply coming online in Asia and cheaper oil dragging down prices has taken some wind out of the sails of U.S. LNG export prospects. After all, the LNG export boom was premised on rising world LNG demand and the pricing of gas at  Henry Hub natural gas levels—a welcome alternative to traditional suppliers indexed to what used to be higher cost oil. The question becomes, will these setbacks just slow the pace of new LNG export projects in the U.S., or will the potential market be limited to the projects already locked in? Today, we consider recent developments and what they mean for LNG export projects—and U.S. natural gas producers.

Using the US natural gas production boom to promote the idea of a sustainable “global gas glut”, Asian importers have successfully managed to chip away at the longstanding oil-indexed pricing mechanism for liquefied natural gas (LNG) overthe past two years. While oil-indexation in LNG contracts will certainly not disappear overnight, the shale revolution has provided gas importers with significant negotiating leverage and a new degree of pricing flexibility. Today we examine the trend toward more US centric LNG pricing.

The second of two Department of Energy reports on the impact of LNG exports on the US economy was published last week by NERA. These reports focus on macroeconomic impacts that do little to guarantee the investment returns of the 15 projects awaiting approval. Today we dig into the pricing mechanisms that have to work for buyers and sellers before these terminals can lock in the throughput they need to justify their investment.