Energy Department Approves Freeport LNG Exports
November 26, 2014The U.S. Energy Department issued on November 25 two final authorizations for Freeport LNG Expansion, L.P. and FLNG Liquefaction, LLC to export domestically produced liquefied natural gas (LNG) to countries that do not have a Free Trade Agreement (FTA) with the United States.
The Freeport LNG Terminal in Quintana Island, Texas is authorized to export LNG up to the equivalent of 1.4 billion standard cubic feet per day (Bcf/d) of natural gas and 0.4 Bcf/d, for a total authorized volume of 1.8 Bcf/d, for a period of 20 years.
LNG sold out of the U.S. Gulf Coast is generally hub-linked, effectively sold on a cost-plus model, a mechanism which is expected to lead to lower prices, according to the IHS Unconventional Energy Blog. This is one key characteristic which led to a plethora of announced export projects and, importantly, long-term contracts to back them up, IHS says. The increase in domestic natural gas production is expected to continue, with the Energy Department’s Energy Information Administration forecasting a record production rate of 75.05 Bcf/d in 2014.
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 Department finds that the proposed exports “will not be consistent with the public interest.”
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