31 May 2013 09:37 [Source: ICB]
Dow Chemical praised the US Department of Energy's (DoE) decision on 17 May to allow a second non-Free Trade Agreement (FTA) export permit for liquefied natural gas (LNG), calling it a "prudent step in pursuit of a measured and balanced approach".
The DoE granted Freeport LNG conditional authorisation to export LNG to non-FTA (free trade agreement) countries from a Texas terminal.
Freeport LNG has been given conditional authorisation to export LNG to non-FTA countries
Should the Quintana Island facility pass an environmental review and receive regulatory approval, the terminal is conditionally authorised to export 1.4bn cubic feet (bcf)/day of LNG for 20 years.
LNG exports have been a hot topic of debate in the chemicals industry, a business that relies on natural gas for about 85% of its feedstock requirements.
The DoE has issued two studies on the issue - a report conducted by the Energy Information Agency (EIA) in January 2012 and an analysis by NERA Economic Consulting in December 2012.
Dow spoke out against the DoE studies, saying they failed to consider the importance of manufacturing on the US economy.
But the US chemical major said on 17 May that the DoE's Freeport decision was "a step toward a more robust national energy strategy and provides the greater clarity and certainty that businesses need to make investment decisions".
Where some want free rein for exports and others want none at all, Dow has been in the middle ground of that debate, said George Biltz, vice president of energy and climate change for the company.
"Free trade and exports are next to God and motherhood," Biltz said of Dow's backing of the concepts. "We think it's very positive that the DoE hasn't gone to either [export argument] extreme."
In its decision in favour of Freeport LNG's request, the DoE said that it found the NERA report to be "fundamentally sound".
The DoE said it will proceed cautiously with the more than 20 other non-FTA permit applications that are awaiting approval, taking a "measured approach" and monitoring the natural gas market to make sure that the granting of successive applications do not harm the public interest.
Dow called the invoking of the public interest determination as key to following the law, and that it will have a "wait-and-see" approach to further approvals.
With LNG export contracts lasting 15-20 years in some cases, permit approvals create fixed demand for the product over a fixed amount of time during which markets can change, Biltz said. The DoE's measured approach is "wise" under such circumstances, he said.
"We're pleased they're taking that approach," he said.
LNG EXPORT PROJECT FAILS TO TEMPT DOW
Dow Chemical will not take part in Freeport LNG's liquefied natural gas (LNG) export project, although it remains a minority investor in Freeport LNG's import terminal, the company said.
Dow currently has a 15% stake in Freeport LNG's import terminal but will not invest in the export project, noted Dow spokesperson Nancy Lamb.
"Dow is not involved in the Freeport LNG export application, and we are not investing money in the export venture," said Lamb.
Dow would not comment on what it plans to do with its 15% stake in the import terminal.
"Dow is a limited partner in the Freeport LNG import terminal, and as a limited partner we are not consulted by the general partner on the day-to-day operations of Freeport LNG," she added.
The general partner is Freeport LNG-GP, which is 50%-owned by US-based energy company ConocoPhillips with the other 50% owned by Michael Smith, chairman and CEO of Freeport LNG.
"Dow invested in Freeport LNG's import terminal in 2004 when experts from the industry all agreed that the US would not be able to access natural gas to support domestic demand, and more specifically, Dow's direct use in existing manufacturing sites in Texas," noted Lamb.
Freeport LNG's import terminal started commercial operations in June 2008, but with the "sea change" in US natural gas supplies from shale formations since then, the company will focus on natural gas liquefaction and LNG exports, it said on its website.
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