Natural Gas Glut Won't Curb Putin

 | Mar 06, 2014 | 11:33 AM EST  | Comments
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There's a terrific feel good story developing in the news this week. It's encapsulated by the lead story on the left hand column of today's New York Times: "U.S. Hopes Boom in Natural Gas Can Curb Putin."

The only problem is that the article is not realistic and, in some ways, it's very cynical. That's because, apart from a desultory permitting process, the government's not doing anything to help speed up when natural gas will be ready for export. And the idea that the State Department is pushing for accelerating the process, as the article says, is fanciful.

While it is true that we have a gigantic glut in natural gas in this country, such a surfeit that we literally burn off more in the oil exploration process than we actually use to heat homes, we do not have any of the infrastructure needed to ship liquefied natural gas -- the form it takes to get it to Europe. I would be shocked if more than one plant is up and running by the end of the decade -- the Cheniere Energy (LNG) facility in Louisiana.

I have been a huge champion of Cheniere CEO Charif Souki, who is the ambidextrous man behind the gigantic export terminal that's under construction and could begin large-scale exporting in 2016. I call him ambidextrous because the only reason he's so far ahead of all of the others trying to take advantage of our glut to export is that he is converting a wrong-headed import structure into export hub.

But don't count on Souki's liquefied gas as a weapon against Putin. The reason why Souki's been able to build this multi-billion facility is that the natural gas is already spoken for, and none of the utilities that have agreed to take the gas are in areas currently feasting on Putin's gas. It is true that a U.K. and a Spanish utility have locked in some natural gas in but neither country uses Russian gas. The rest of the natural gas will be taken to countries as diverse as South Korea and India.

Cheniere is building a second "train," as they call it, that isn't yet spoken for, but I don't expect that to start shipping until 2018 at the earliest. These things take forever to build.

The only other export facility that is even remotely able to export natural gas to Europe is the Cover Point project that Dominion Resources (D) id retrofitting to reverse what had been a facility meant for importing. Again, I highly doubt that it can play a role.

Everything else is strictly "gleam in the eye" or "pie in the sky." As Mark Papa, the now-retired CEO of EOG Resources (EOG) told us recently, don't expect anything meaningful to leave this country until 2018.

So feel good all you want about the story but understand that it doesn't add up. In fact, it's ridiculous to even be taken seriously by anyone. Put it in the "too good to be true" file and forget about it.

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