The last decade has seen a shale gas drilling boom, effectively pushing the U.S. from an energy importer to an energy exporter. Late in 2006, shale gas production in the United States perplexed the U.S. Liquified Natural Gas (LNG) import market and the global LNG industry. Until that point, the United States was expected to be one of the larger LNG importers, not a global exporter. Now we have energy experts predicting that this growth will weaken Russia’s grip on Europe’s stronger markets, aid in the effort to clean the air in coal dominated Asian markets, and even provide cheaper options for African nations.
All signs point to gas market experts being far from center in their 2016 estimates. They anticipated a surplus and a resulting gas price reduction by late 2017, but they couldn’t have foreseen the events we have coming together now. Unites States LNG producers are expanding to keep pace as the Asian winter demand steadily climbs, with spot prices expected to reach a three-year high. One such producer exported roughly 81 billion cubic feet of LNG in October. While all of this is occurring, Qatar, who was once the world’s largest exporter, has sold out of all supply.
To further strengthen the United States’ position in this rapidly growing market, we are seeing an influx of freight and logistics organizations moving in the LNG direction in order to reduce carbon footprint and meet trade requirements. DHL led the push to convert their fleets to LNG in 2015, quickly followed by FedEx and UPS. That same year, the first LNG-fueled ships began running their routes between Puerto Rico and Florida, effectively proving the fuel to be an excellent alternative.
French shipping group CMA CGM has begun the process of moving their vessels to LNG, stating that liquified natural gas is the maritime fuel of the future. During an announcement this week, CMA CGM stated that, beginning in 2020, an “unprecedented” 300,000 tons of LNG will fuel nine of their vessels, and that by their account they are the only logistics company in their category to be outfitting vessels with LNG.
What does all of this mean for Alpha Seven Energy and our partners? International regulations are screaming for fewer emissions in the transportation sector and LNG is sitting in a unique position. With liquified natural gas proving to be a viable option, more environmentally conscious organizations will move in the LNG direction in an effort to reduce harmful greenhouse gas emissions.
So, with Qatar emptying its supplies, freight companies moving to LNG so quickly, and consistently climbing demand in Asia, we find ourselves well positioned. Alpha Seven Energy is taking full advantage of what is shaping up to be an incredibly lucrative market opportunity. A reported 23 cargoes of LNG were shipped out of Louisiana’s Sabine Parish in November, where ASE currently has two projects running. And we didn’t find ourselves here by mistake.