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Thursday, December 25, 2014
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(Rick Hickman / American Press)

(Rick Hickman / American Press)

Low price, lack of hurdles boost local LNG market

Last Modified: Friday, May 10, 2013 2:51 PM

By Eric Cormier / American Press

Easy access to natural gas, whether it’s from Louisiana or Texas, has been one of the primary reasons energy companies are interested in basing export operations in Southwest Louisiana.

Companies like Magnolia LNG, which is moving ahead with plans to build a $2.2 billion liquefaction and export plant on 108 acres of land owned by the Port of Lake Charles, find themselves in an enviable position because of a lack of roadblocks to their market.

The size of Magnolia’s plant and fact that its customer-based energy needs will be simpler to meet are factors that company executives believe will make it easier to open by on schedule. They expect to break ground by 2015 and start moving product by 2017.

“This is a midscale project. We will attract customers looking for smaller quantities of LNG. We’re not worrying about non-FTA countries,” said Ernie Megginson, Magnolia’s vice president of project management.

In February, Magnolia was granted approval by the Department of Energy to ship LNG oversees for a period of 25 years to countries that have free-trade agreements with the United States.

“This LNG may be exported to Australia, Bahrain, Canada, Chile, Columbia, Dominican Republic, El Salvador, Guatemala, Honduras, Jordan, Mexico, Morocco, Nicaragua, Oman, Panama, Peru, Republic of Korea, and Singapore, and to any nation that the United States subsequently enters into a FTA (Free Trade Agreement) requiring national treatment for trade in natural gas, provided that the destination nation has the capacity to import ocean going vessels,” as stated in an order from the Energy Department’s Office of Fossil Energy.

Cheniere Energy is constructing a bigger facility on 1,000 acres of land in Sabine Pass. More than $5 billion is being spent on two production facilities, with two more units in the planning stages and another two to follow.

Cheniere is the only one of more than a dozen companies nationwide that has been given Energy Department authorization to sell LNG to non-free trade countries. That means the company can sell to the rest of the world.

Debates are ongoing in Washington, D.C., over whether other companies will be granted the same right.

Cheniere has signed contracts with LNG importers registered in England, Spain, South Korea, India and France.

The high volume and low cost of domestic gas makes exporting an appealing venture for companies like Cheniere, even if the federal government’s application process is expensive and time consuming.

This month, LNG in the Lake Charles region has cost $3.79 compared with $10.17 in the United Kingdom, $14.40 in India, $14.55 China, $14.95 in Japan, and $15.11 in Brazil.

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