By Hirofumi Matsuo, senior writer
U.S. Secretary of Energy Ernest Moniz disclosed in an interview with Nihon Keizai Shimbun on May 3 that the U.S. had started exporting liquefied natural gas (LNG) produced with shale gas, and at least six LNG tankers had headed for South America, Europe, and Asia. The availability of a new LNG exporter will give consumer countries in Asia and Europe more procurement options and is likely to invigorate the LNG market.
Major market player
Moniz explained that annual exports of 80 million tons of LNG, equivalent to Japan’s yearly consumption, were approved for countries without a free trade agreement (FTA) with the U.S. In addition to the LNG terminal in Louisiana, which started experimental shipments in February, there are plans for four more facilities to start production in 2017-18. Moniz said that “the U.S. will become a major player in the LNG market.”
Major LNG consumers Japan and South Korea currently import from Southeast Asia and the Middle East, mostly under long-term contracts lasting for more than 20 years, which impose various restrictions, such as unloading of shipments only at designated ports or a ban on resale of surplus LNG. On the other hand, the price of U.S. natural gas is determined by the demand-supply situation in the market and there is no restriction on resale.
The G7 energy ministers’ meeting in Kitakyushu City that ended on May 2 affirmed cooperation in developing a highly transparent LNG market. It is hoped that the start of U.S. LNG exports will serve as a turning point in rectifying rigid trade practices.
Japan, Europe need to build more infrastructure
Moniz stated that the plan to set up the LNG trading hub Japan proposed at the G7 ministerial is “feasible.” However, he explained that “the U.S. has been using natural gas for years, so the infrastructure is in place.” He pointed out that Japan and Europe “will need to build the infrastructure for unloading, storage, and transportation” in order to develop an LNG market.
Commenting on the outlook for the oil market, Moniz pointed out that U.S. crude oil production in 2016 will be down by 500,000-600,000 barrels per day from the peak in 2015. He indicated that the present over supply of crude oil would be eliminated and demand and supply “would be balanced within a year.”
While the number of rigs for drilling shale oil or shale gas in the U.S. has been reduced significantly, there is still a considerable stockpile in the country. Moniz said that oil companies will continue to hold back investments for the time being despite the recent rebound in crude oil prices.
With regard to nuclear energy, the Obama administration, which advocates “a world free of nuclear weapons,” is closely monitoring the possession of surplus plutonium and highly enriched uranium, which can be converted to produce nuclear arms. He termed the Japanese government’s transfer of plutonium from a research facility in Tokaimura, Ibaraki Prefecture, to the U.S. “an important step forward.” He stated: “Japan and the U.S. will remain strong partners in nuclear nonproliferation, nuclear safety, and all other areas of nuclear energy.”