(NOTE: We have revised this article to correct an error in
the earlier version, which should no longer be relied upon.)
) and Qatar Petroleum International have applied for regulatory
approval for the export of U.S. liquefied natural gas (LNG) from a
terminal near the Texas-Louisiana border.
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A joint venture between the U.S. energy major and Qatar Petroleum −
Golden Pass Products LLC − plans to export up to 15.6 million tons
of LNG annually, or about 2 billion cubic feet per day, by
expanding existing units at Port Arthur. The project, which is
pending approvals from the Department of Energy and Federal Energy
Regulatory Commission, could take as many as five years to build
the liquefaction facilities at the terminal.
Per the agreement, the parties will export LNG to countries with
which the U.S. has a free-trade settlement and intend to invest up
to $10 billion in the project. ExxonMobil holds a 30% stake in the
Golden Pass Products while Qatar holds the remaining 70%.
The growing use of hydraulic fracturing techniques in the
extraction of oil and natural gas liquids from shale has led to the
excess supply of natural gas. Hence, after years of investing
billions of dollars in building import terminals to ship fuel from
places like Qatar and West Africa, energy companies in the U.S. are
now looking to make the country a major energy exporter. After
suffering a collapse in domestic prices, the U.S. natural gas
companies are now looking to sell the surplus gas to international
markets at much higher prices.
A major contender,
Cheniere Energy Inc.
) has already started construction of a $5.6 billion terminal at
Sabine Pass, Louisiana - near Exxon's Golden Pass facility - and
has authorization to transport LNG globally from the terminal.
Cheniere will likely start deliveries by 2015 and to U.K., South
Korea, India and Spain customers.
Hence, ExxonMobil's contribution along with Cheniere and others to
export LNG from the U.S. − which produces about 72 billion cubic
feet of natural gas per day − will enhance domestic exports,
thereby generating employment and boosting the country's economy.
Some analysts however criticize the move, contending that export
will increase prices for domestic consumers. Additionally, it will
also lead to the increased use of hydraulic fracturing, which could
cause pollution. These analysts are worried that water supply will
be contaminated by hydraulic fracturing or fracking while tapping
gas in the shale rock formation as it involves the explosion of
rock with chemical-laced water and sand under the surface.
We maintain our long-term Neutral recommendation for ExxonMobil,
the largest natural gas producer in the U.S. ahead of
Chesapeake Energy Corporation
). The company holds a Zacks #3 Rank (short-term Hold rating).