North America has a number of LNG export projects underway, mostly in Kitimat, British Columbia. But yesterday the US Federal Energy Regulatory Commission (FERC) approved the first application for such a facility in the lower 48. Until these projects are operational, North American natural gas will continue to be trapped by geography. And, given that prices here are near $2.00 per million btu, I thought it would be enlightening to pull the most recent data chart from FERC, showing what customers pay for the same amount of NG, in liquified form, around the world. | see: World LNG Estimated April 2012 Landed Prices.
While it may seem obvious that US and Canadian natural gas producers, and the laws of the free market, yearn to capture the yawning spread to much higher prices in Europe and Asia, it’s not clear yet where global prices will converge, exactly, when North America sends its first LNG “trains” out to the world. I have taken a middle road on North American NG supply (in contrast to my views on global oil) and have been adamant for years that supply optimists and supply pessimists will both eventually be disappointed. Mainly, I think that once the resource is hit hard, pulled along by the next leg of demand from exports, that all the latent problems associated with fracking–the energy and water intensiveness of drilling, and the damage to the environment in populated areas—will reveal themselves. My colleague Chris Nelder has suggested, accordingly, that the dream of booming LNG exports is ultimately a siren song that policy makers might want to consider. Or, reconsider, if you will. Indeed, capturing some portion of the higher world price will absolutely mark the bottom for North American NG, and thus the end of the price level which Americans currently enjoy. Perhaps this is why investors from Jeffrey Gundlach and Wilbur Ross are buying natural gas assets right now, according to The Business Insider.