DOE Authorizes LNG Exports to Non-FTA Nations

The US Department of Energy (DOE) announced on June 26 that it had issued a final authorization for Sabine Pass Liquefaction’s Expansion Project (Sabine Pass) to export domestically produced liquefied natural gas (LNG) to nations that do not have a Free Trade Agreement (FTA) with the United States.

With this most recent authorization – the third since February 2013 – the Sabine Pass LNG Terminal in Cameron Parish, Louisiana, on the Gulf of Mexico, has been authorized to export a total volume of LNG up to the equivalent of 3.58 billion standard cubic feet per day (Bcf/d) of natural gas for a period of 20 years.

Federal law generally requires approval of natural gas exports to countries that have an FTA with the United States. For countries that do not have an FTA with the United States, the Natural Gas Act directs the Department of Energy to grant export authorizations unless the agency finds that the proposed exports “will not be consistent with the public interest.”

In making the announcement, the DOE noted that this is only the beginning of US natural gas production. “This increase in domestic natural gas production is expected to continue,” the agency stated, “with the Energy Information Administration (EIA) forecasting a record average production rate of 78.92 Bcf/d in 2015.”

In related news, the EIA on July 28 released its latest Drilling Productivity Report (DPR) – announcing that the productivity of natural gas wells in the Marcellus Shale and the neighboring Utica Shale is steadily increasing because of ongoing improvements in precision and efficiency of horizontal drilling and hydraulic fracturing occurring in those regions. Since January 2012, the agency said, natural gas production in the Marcellus and Utica regions has accounted for fully 85 percent of the increase in natural gas production and has driven recent growth in total US natural gas production.

The DPR provides a month-ahead projection of both oil and natural gas production for the seven most significant shale formations in the United States. Although the DPR regions are grouped according to the name of the predominant shale formation, the report analyzes all drilling and production within each geographic area. In practice, this means natural gas production activity in the Marcellus region, which includes Pennsylvania and West Virginia, encompasses not only the Marcellus formation, but also portions of the Utica shale and conventional formations that lay beneath those states. The Utica DPR region, which includes resources that lay beneath Ohio, includes production from the bulk of the Utica formation as well as production from the Point Pleasant shale formation and (to a lesser extent) conventional resources.

Other shale-producing regions covered by the report include Bakken (underlying parts of Montana and North Dakota in the United States, and Saskatchewan and Manitoba in Canada); Permian (West Texas and southeastern New Mexico), Eagle Ford (South Texas), Niobrara (northeastern Colorado and parts of adjacent Wyoming, Nebraska, and Kansas), and Haynesville (southwestern Arkansas, northwest Louisiana, and East Texas).

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