President Donald Trump’s visit to Louisiana on Tuesday, and his stop at Sempra Energy’s $10 billion Cameron Parish natural gas-export facility, highlights a key policy goal for his administration: boosting U.S. energy exports to support the thousands of jobs these projects are expected to create.
The timing of the visit has also put a spotlight on the risks that come with Louisiana's big bet on sending natural gas overseas.
On Monday, Chinese officials said the country would more than double its tariff on imports of U.S. liquefied natural gas, or LNG, from 10% to 25%, in retaliation for the latest round of U.S. tariff increases in the ongoing trade war between the world's two largest economies.
WASHINGTON — President Donald Trump will make his second Louisiana trip of the year on Tuesday to highlight the state's booming southwest indu…
China is the world's fastest-growing consumer of LNG, and is expected to import 69 million metric tons, or 9 billion cubic feet/day, of the fuel this year, representing nearly 9% of the world market, according to the International Gas Union.
And while the trade war continues to escalate, so too does Louisiana's construction of massive export facilities. Louisiana already leads the nation in LNG exports and its capacity is set to surge in coming years.
The state is home to Cheniere Energy's Sabine Pass facility, the dominant LNG exporter accounting for about 3.5 bcfd, or about two-thirds of current U.S. capacity. The total exports from Louisiana will more than double, to 7.7 bcfd, with the addition of Sempra's plant plus the other two currently under construction, including an additional plant at Cheniere's facility and the new Venture Global Calcasieu Pass project.
Can't see video below? Click here.
Louisiana's LNG capacity would more than double again -- from just under 8 billion cubic feet a day (bcfd) to more than 16 bcfd -- if another four LNG plants approved by the Federal Energy Regulatory Commission are built.
There are four more behind that in the early stages of approval, some of which are looking at sites in Plaquemines and LaFourche Parishes.
"It is a positive that we’re becoming an (energy) export economy," said Pierre Conner, executive director of the Tulane Energy Institute. "The river and coast positions us well to take advantage of the fact the U.S. is becoming an energy exporter...but it comes with geopolitical risks."
The huge growth in U.S. LNG exporting capacity -- most of which is proposed for either Louisiana or Texas -- has the full blessing of Trump, who has urged FERC to speed through approvals of these projects.
Last moth, when announcing approval of the latest Louisiana LNG project, the Driftwood project at Calcasieu River FERC chairman Neil Chatterjee said, "this has been one of (President Trump's) top energy priorities." The president last week assured Louisiana politicians that he would maintain restrictive shipping rules that favor domestic LNG shippers.
U.S. natural gas prices have been kept low in recent years due to the massive production surge created through hydraulic fracturing, or fracking. At the benchmark Henry Hub location, gas has consistently traded below $3 per million British thermal unit. In Asia, prices can be triple that, which makes it profitable to export U.S. gas overseas despite the cost to convert it to LNG and then ship it across the Pacific Ocean.
Japan is still the world's largest importer of LNG, forecast to bring in about 196 million metric tons, or about 23% of the world market, this year, according to the IGU. But it is a stagnant market, having grown less than 1% since 2015, and China is quickly catching up.
Tellurian said its Lake Charles natural gas project has been cleared by federal regulators, a major hurdle in the company's three-year quest t…
Louisiana sits at the nexus of several long-haul pipelines. Easy access to the Gulf of Mexico has drawn the interest of companies that want to build the massive export facilities that take in natural gas, cool and contract it into liquid form and then load it on specialized ships.
And while most of the thousands of new jobs would be temporary, coming during the construction phases of both the processing plants as well as new pipelines, the plants themselves will require far fewer workers -- usually about 300 direct employees on a site the size of Sempra's.
Jim Richardson, professor of economics at LSU, says the new jobs are welcome and will spur indirect employment in their areas, although they won't replace the jobs lost in the oil and gas sector over the last few decades.
At its height in the late 1970s, the oil and gas sector employed over 100,000 people in Louisiana, Richardson said. About half the jobs were lost during the oil slump in the early 1980s and another 20,000 disappeared when oil prices tumbled starting in 2014, he said, noting that the industry employs about 35,000 people in the state today.
"Nobody really expects that number to shoot up anytime soon," even with the gas infrastructure growth, as it is much less labor-intensive, says Richardson.
Louisiana's petrochemicals production has also expanded due to the availability of cheap natural gas that's used to power chemical plants. The previously-stalled South Louisiana Methanol project was revived in January as a $2.2 billion joint venture between Todd Corp. and SABIC of Saudi Arabia on that basis, but China's retaliatory tariffs on methanol and rising steel costs that have resulted from U.S. tariffs on Chinese steel put such projects at risk.
"The U.S. is turning into a net exporter (of methanol) by the end of 2019," according to Rachel Qian, an analyst at ICIS, which tracks chemicals markets. But a continuing U.S.-China trade dispute would mean China likely would look to alternative producers in Latin America and elsewhere for long-term contracts. That could have a chilling effect on new projects like South Louisiana Methanol, forcing executives at those companies to scramble for clients in slower-growing markets like Europe.
The LNG market has grown rapidly, and has been tagged by some promoters as a "bridge fuel" that is cleaner than coal and oil and can power the global economy while renewable energy builds capacity.
The U.S. has gone from producing just 1.5 million metric tons in 2015 to 68 million metric tons last year, and its planned or proposed capacity additions of more than 100 million metric tons a year -- 75% of the new capacity planned over the next couple of decades -- put it on course to compete with the current dominant suppliers, Australia and Qatar, according to the International Energy Agency, a Paris-based energy watchdog.