Trouble in Panama a boon for Australian LNG?

A couple of stories today for LNG followers. First, the US House released a new study demanding that the Department of Energy lift restrictions on every LNG export project in the country:

The rapid growth in American natural gas production offers a variety of opportunities, including the chance for America to become a natural gas exporting nation. Doing so would benefit the U.S. as well as our allies and trading partners, many of who have been vocal in their support of such exports.

The economic benefits of exporting liquefied natural gas (LNG) outweigh the costs, according to a report conducted for the Department of Energy (DOE). This report found that America can produce more than enough natural gas to meet domestic demand affordably while also supporting export markets. The report further concluded that the net benefits of exports apply to consumers as well as the overall economy, and that these benefits increase along with the level of exports. Other studies have reached similar conclusions.

Although the economic benefits of LNG exports are significant, they may well be exceeded by the geopolitical benefits. By becoming a natural gas exporter, the U.S. can supplant the influence of other exporters like Russia and Iran while strengthening ties with our allies and trading partners around the world. U.S. LNG can also help the developing world by providing a much-needed source of affordable energy, and offer those countries pursuing environmental objectives the option of using clean-burning natural gas.

However, time is of the essence and DOE’s slow approval process for LNG exports is squandering the chance to maximize our energy advantage. DOE has only made five decisions since the first non-FTA application was submitted over three years ago, and more than 20 applications still await action. America’s window of opportunity will not remain open for long. In the face of continued delays, nations with near-term energy needs will be forced to look elsewhere for supplies, LNG facilities will have difficulty securing financing in an uncertain regulatory environment, and America will see greater competition from other LNG exporters. To avert these risks to our global LNG export leadership potential, the committee urges DOE to approve all pending LNG export applications by the end of 2014. In addition, the committee will consider legislative reforms to streamline and expedite the approval process to better reflect America’s new energy abundance and the benefits of natural gas exports.

What is most interesting is the strategic angle. If the US were to follow through with this it could be exporting much more LNG than Australia by 2025, crushing the price along the way. Hardly favourable to all US allies, but those helping contain China, Iran and Russia clearly take precedence.

Whether this letter is anything more than the regular argy bargy around the politics of LNG exports remains to be seen but the pressure for approvals remains high.

On the other side of the ledger, the Panama Canal dispute has worsened again. From the FT:

Giant ships will have to wait longer before they can ply their way through the Panama Canal after talks between the canal’s authority and the Spanish-led consortium building new locks broke down, throwing the $5.2bn expansion project into disarray days before it celebrates its centenary.

The breakdown in talks “puts the Panama Canal expansion and up to 10,000 jobs at immediate risk”, the consortium said. “Without an immediate resolution, Panama and the ACP face years of disputes before national and international tribunals over their steps that have pushed the project to the brink of failure.”

Sacyr shares had tumbled nearly six per cent to €3.66 by midday on the news

The row kicked off in January when the Spanish consortium threatened to halt work in a dispute over a $1.6bn cost over-run. But Grupo Unidos por el Canal subsequently backed down and the two sides attempted to hammer out a compromise.

Those talks saw the two parties, and insurance group Zurich, discuss various options. But with no solution on the table by the latest deadline of midnight on Tuesday, the contractors said the canal authority, the ACP, had broken off talks after failing to bend in its “unreasonably rigid position”.

…It also says the breakdown means it cannot pay subcontractors, and said Zurich estimated that “the project will be delayed by three to five years without an agreement”.

I find it hard to believe that so central a piece of infrastructure can be derailed by so little money (in the scheme of things). The window for completion to affect US exports of LNG is 2018 so I still expect this to go away well before it’s a problem.