Despite dramatic growth in both US natural gas production and US LNG exports over the past several years, parts of the United States, specifically New England, still rely on LNG imports of gas shipped from overseas. Notably, almost one year ago to the day, natural gas that originated at Yamal LNG in Russia arrived in New England to help meet demand during the cold winter weather. Despite the proximity to one of the largest natural gas resources on the planet, New England relies upon LNG imports as building significant new pipeline capacity in the region remains difficult.
Beyond pipelines, the Jones Act prevents US LNG from meeting this demand, as well. The Jones Act requires that goods shipped between US ports are transported on ships that are built in the US, owned by US citizens, and operated by US citizens or permanent residents under the US flag. However, there are no LNG carriers that are compliant with the Jones Act, so LNG cannot currently be shipped between US ports. Harold Hamm, CEO of Continental Resources, recently remarked at a conference that limited waivers to the Jones Act should be granted so that LNG could be shipped from US export terminals to New England. This commentary will consider some context around that suggestion.
Since 2011, dry gas production in the continental US has grown by about 20 Bcf/d to nearly 85 Bcf/d. In that same period, US LNG imports have dropped from 800 MMcf/d to around 200 MMcf/d. Imports to New England accounted for approximately half of US LNG imports through 2015. In recent years, imports to New England have accounted for over 75% of US imports.
Nearly all of these imports arrive at the Everett LNG terminal near Boston to provide natural gas to New England.
Most of the LNG arriving at the Everett LNG terminal comes from Point Fortin in Trinidad and Tobago. In the past, the terminal also imported LNG from Yemen. However, due to civil war in Yemen, LNG exports ceased in 2015 and have not resumed. Now, the Everett terminal must find LNG from other sources to meet demand. In January of 2018, an LNG tanker arrived from the UK to deliver LNG that originated at Yamal LNG in Russia.
The US has granted Jones Act waivers or exemptions in the past to allow other ships to transport goods between US ports. Without waivers/exemptions, Jones Act compliant LNG carriers, and additional natural gas pipelines to New England, New England is likely to remain reliant on LNG from abroad to meet regional demand, especially during extremely cold winter months.