North American shale may soon find an international market via LNG

Until Liquefied Natural Gas (LNG) technology was developed, natural gas production was regional because the hydrocarbon had to be transported via pipeline. While European and Asian markets realize a growing demand for natural gas, the North American natural gas market has been glutted by ever-increasing production from various emerging shale plays.

In fact, increasing production in the Marcellus Shale, Barnett Shale, Haynesville Shale, Horn River Shale, Fayetteville Shale and others has forced some producers to pull back on drilling campaigns and even shut-in production. By not producing all of the unconventional natural gas in these formations, producers can limit production and affect the supply-demand curve.

While natural gas prices have substantially dropped since their highs in 2008, prices have remained somewhat steady above the $4 mark on the Henry Hub for some time now.

In an effort to connect this production with eager markets abroad, nine LNG import facilities on the US Gulf Coast have submitted applications with authorities to convert or add LNG liquefaction and export capabilities.


Sabine Pass LNG

Most recently, British producer BG Group has formed a joint venture with Southern Union and applied for federal approval to convert its Lake Charles, Louisiana LNG import facility into an LNG liquefaction and export facility.

At its Sabine Pass LNG project, Cheniere Energy (NYSE:LNG) is working to add liquefaction and export capabilities to its facility, as well, lining up LNG buyers in Asia and Europe, as well as South America.

Furthermore, Freeport LNG located near Houston, Texas, has received permits to re-export LNG shipments that are currently being held in storage due to lack of demand.

Additionally, Apache Corp. (NYSE:APA), EOG Resources (NYSE:EOG) and Encana Corporation (TSX:ECA) (NYSE: ECA) are working to build a pipeline to connect Horn River Shale natural gas in Canada to a proposed Kitimat LNG export facility on the Western Canadian coast.

As companies work out the commerciality to transform North America into an LNG supplier, producers in the US and Canada are eagerly awaiting the development of a new market for their natural gas production.

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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.