Shell sees inflation, politics capping LNG exports

By SELINA WILLIAMS

LONDON—Inflation and US domestic politics are likely to limit the amount of liquefied natural gas (LNG) exported from proposed projects in North America to around 60 million tons per year (MMtpy) to 70 MMtpy over the next decade, Royal Dutch Shell's chief financial officer, Simon Henry, said.

Currently, companies including ExxonMobil, ConocoPhilips, BP, Sempra Energy, Cheniere Energy, Shell and Apache are seeking to export LNG from the US and Canada in efforts to find more profitable markets amid a continent-wide gas glut, due to the shale gas boom, that has depressed prices.

Companies are hoping to capture value for cheap North American natural gas in energy-hungry markets in Asia, where gas sells for several times more than the US price.

Shell estimates that projects to export around 130 MMtpy of LNG from the US and Canada combined are on the drawing board.

Constructing the export infrastructure alone would cost around $300 billion, with additional costs to develop the gas production to support the projects, Mr. Henry said.

"If you get inflation, which you certainly would if everyone's building at once, that's going to be a constraint. The other constraint is going to be in Washington [D.C.], where, at some point, the [US] government will decide that exporting cheap American energy and cheap American jobs to our competitors is no longer acceptable," Mr. Henry told reporters on the sidelines of an industry event in London.

To date, only Cheniere Energy has approval to ship 2.2 billion cubic feet per day of LNG from the Sabine Pass export facility in Louisiana to countries not covered by US free trade agreements.


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