Inflation, Politics Seen Capping North America LNG Exports-Shell

By Selina Williams

LONDON--Inflation and U.S. domestic politics are likely to limit the amount of liquefied natural gas exported from proposed projects in North America to around 60 million to 70 million tons a year over the next decade, Royal Dutch Shell PLC's (RDSB.LN) Chief Financial Officer Simon Henry said Tuesday.

Currently companies including ExxonMobil Corp. (XOM), ConocoPhilips Co. (COP), BP PLC (BP.LN), Sempra Energy (SRE), Cheniere Energy Inc. (LNG), Shell and Apache Corp. (APA) are seeking to export LNG from the U.S. and Canada in efforts to find more profitable markets amid a continent-wide gas glut, due to the shale gas boom, that has depressed prices.

Companies are hoping to capture value for cheap North American natural gas in energy-hungry markets in Asia where gas sells for several times more than the U.S. price.

Shell estimates that projects to export around 130 million tons of LNG a year from the U.S. and Canada combined are currently on the drawing board. Constructing the export infrastructure alone would cost around $300 billion, with additional costs to develop the gas production to support the projects, Mr. Henry said.

"If you get inflation, which you certainly would if everyone's building at once, that's going to be a constraint and the other constraint is going to be in Washington [DC] where at some point the [U.S.] government will decide that exporting cheap American energy and cheap American jobs to our competitors is no longer acceptable," Mr Henry told reporters on the sidelines of an industry event in London.

To date, only Cheniere Energy has approval to ship 2.2 billion cubic feet a day of LNG from the Sabine Pass export facility in Louisiana to countries not covered by U.S. free-trade agreements.

Write to Selina Williams at [e-mail].

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