As you look over the impressive list of planned projects for North American liquefied natural gas (LNG) exports, you can see a parallel in the heavy project slate for planned new world scale crackers in the US. Both are being driven by the US shale gas boom. Yet there is the potential for one to threaten the other.
Unlimited US LNG exports could create volatility in natural gas and natural gas liquids (NGLs) prices, contends US-based Dow Chemical.
While LNG exports for fuel would consist primarily of dry gas where, in the process, NGLs are stripped out, LNG containing ethane and propane could be shipped out as well, according to the company.
"It is not a given that NGLs will always be stripped out prior to shipping," says Kevin Kolevar, vice president of government affairs and public policy at Dow.
"For example, Japan has specs for wet gas concentrate in LNG. And to what extent would other countries look to use wet gas? We have not heard assurances from the oil and gas community that they would strip out the NGLs."
This is an important aspect for the chemical sector - one that will continue to be explored. There's an argument that LNG exports could actually increase NGL supplies, precisely because the NGLs are stripped out.
Dow contends that it supports LNG exports but is concerned that an unchecked level of exports could drive up prices and volatility in gas and NGLs. "The fact that so much capacity is being planned to come on in a compressed timeframe causes concern," said Kolevar.
"It is all about predictability. In the late 1990s, we saw tremendous volatility in natural gas prices, which deterred investment in the chemical sector," he added.
Dow estimates that over a 10-year timeframe, the US could export up to 5-6bn cubic feet/day (bcf) of natural gas through LNG without disrupting the market if that capacity comes on in a linear fashion.
That would amount to 38-46m tonnes/year of LNG. Yet, there is a total of 199.5m tonnes/year of LNG export capacity being planned in the US, according to an ICIS analysis. And of that amount, 128.6m tonnes/year of capacity are associated with projects with defined completion dates between 2015 and 2018.
There is virtually no chance this comes on in a disciplined, linear fashion - neither will the wave of new world scale ethane crackers. It's simply not the nature of capital intensive businesses.
Of course not all of the planned capacity will be built. And even for those projects that do start up, LNG shipments will not always be at full capacity. This will all depend on market conditions and competitive dynamics at home and abroad.
But US chemical companies are concerned. Already four companies have joined the advocacy group America's Energy Advantage, which is against unfettered LNG exports.
It's important to remember that the chemical industry is not the only group seeking to take advantage of cheap US natural gas prices.
Along with LNG projects, other major draws on natural gas will come from utilities in the form of gas-fired power plants, as well as fertilizer projects.
Meanwhile, the US petrochemical sector is planning seven new world-scale crackers and expansions of existing facilities for a total of 10.2m tonnes/year of additional ethylene capacity. This represents a whopping 38% of existing US capacity.
And speaking of parallels between the rash of planned US crackers and LNG export facilities, one LNG export project website struck a common theme - "thousands of jobs and billions of dollars invested".