Will shale gas commercially support LNG export from the US?

With massively increased natural gas production due to improved drilling and development technologies, namely horizontal drilling and hydraulic fracturing, shale gas development in the US needs to find new demand to improve prices.

T. Boone Pickens and others stress that the transportation sector should take better advantage of the "clean" fuel alternative, and many have supported natural gas as a fleet truck solution.

Also, natural gas-fired power plants produce a fraction of the greenhouse gases that coal-fired power plants do, which has helped to increase the number of gas power construction projects in the US.

Because natural gas is, well, a gas, it has typically been relegated to domestic markets. In other words, natural gas is transported and sold where pipelines can carry it. But LNG offers a solution, a wider market for natural gas. And increasing demand in Europe, India and China could snap up production in the US and possibly help to raise prices on the Henry Hub.

But is shale gas export via LNG commercially viable?

Cheniere Energy thinks so. The company skirted the headlines again this week -- twice -- with new sales agreements for its Sabine Pass LNG facility proposed for the Gulf Coast of Louisiana. In addition to previous agreements with Chinese and Spanish firms, this week's two MOUs involved Sumitomo (Japanese) and EDF (France).

While Bechtel has been tapped to provide the engineering to support the transformation, final governmental approval for the Sabine Pass LNG terminal has not been given to switch the facility from import to export.

Additionally, there are a few other facilities that have proposed the idea, as well, which certainly gets natural gas producers, who have been battling depressed prices for some time now, very excited.

The second-largest producer of natural gas in the US, Chesapeake Energy has divulged that the company is interested in exporting LNG. While the company isn't planning to invest in an LNG export facility, Chesapeake will support LNG export efforts by signing long-term supply agreements.

In fact, Chesapeake has signed a MOU with Cheniere concerning its Sabine Pass LNG facility, promising up to 500,000 mcf/d of gas to the facility.

“Every operator on the Gulf Coast has a liquefaction plan,” said Mike Stice, senior vice president for natural gas projects at Chesapeake Energy. “In the near term, if you get the right political wave, you can do it really quickly.”

Nonetheless, I've heard contradictory reports from analysts concerning the economic viability of exporting shale gas production via LNG to international markets.

What are your thoughts?

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Phaedra Friend Troy is the content director for PennEnergy.com, an all-energy website that provides oil and gas, power and infrastructure news, analysis, reports and more. Sign up for a free daily enewsletter today.