Natural Gas Stocks 2014: As Russia's clash with Ukraine and the West boils on, pressure is mounting for the federal government to loosen export regulations on U.S. liquefied natural gas.
Currently, the U.S. exports natural gas to only a handful of countries, such as Canada. No U.S. LNG is exported to Europe.
That's mainly because the key factor in gaining the U.S. Department of Energy's blessing to export is whether or not the importing country has a free-trade agreement (FTA) with the United States.
Before this week, a total of six permits for sales to non-FTA nations, like India and Japan, had been issued – five of those permits had been granted in the last 10 months.
But on Monday, the Department of Energy conditionally approved the $7.5 billion Jordan Cove LNG project in Coos Bay, Ore., making it the seventh export terminal to receive a federal permit to export to a non-FTA nation. Final approval for the project is still subject to environmental and regulatory review, the Department of Energy said.
The Jordan Cove terminal will export to Asia, and not to Europe, where lawmaker proponents of LNG exports hope that U.S. LNG would undermine Russia's grip on Europe's natural gas markets.
Russian President Vladimir Putin has threatened multiple times to restrict gas supplies as a weapon in this conflict with Ukraine and the West. This places heightened urgency and importance on the exportation of U.S. LNG as a means to meet increasing world energy demands.
And that's a major bullish sign for natural gas stocks in 2014…
Geopolitical Pressures Boost Need for U.S. LNG
U.S. exports of LNG could mitigate any shortages in Europe caused by the Ukraine-Russia conflict.
Prior to Monday's conditional approval, the Department of Energy's six approved projects to export LNG to countries without FTAs amounted to a flow-rate volume of 8.5 billion cubic feet per day (ft3/d) of LNG. Compare that to the 6 billion ft3/d that Russia exports to Europe via Ukrainian gas pipelines; Russia provides 30% of Europe's gas using pipelines that cross Ukraine.
"Expanding U.S. LNG exports is an opportunity to combat Russian influence and power, and we have an energy diplomacy responsibility to act quickly," U.S. Rep. Fred Upton, R-MI, chairman of the Natural Resources Committee, said earlier this month. "We will continue to advance legislation and develop new proposals that allow market forces and technology to help expand Eastern Europe's access to affordable energy beyond Russia."
Even though the United States is the world's largest natural gas producer, efforts to export LNG have been drowning in federal rules, financing issues, and construction demands – winning federal approval can take three years or more.
Only one of the six approved projects has final approval from the federal government, and it will not start exporting natural gas until 2019.
That's why the Obama administration's decision on Monday to conditionally approve the Jordan Cove export terminal was met with praise from lawmakers.