ExxonMobil Corporation (XOM) is mulling over exporting liquefied natural gas (LNG) from North America. With 340,000 shale gas acres in Western Canada’s Horn River Basin, ExxonMobil is the largest gas producer in North America.
In the past, the company was bullish on domestic U.S. consumption and had even spent nearly $2 billion to build the Golden Pass LNG terminal near the Texas-Louisiana border. Now, however, the company is evaluating export options as LNG supply is superseding the domestic demand. Plans to export LNG from the U.S. and Canada indicate a major shift in the company’s thinking.
ExxonMobil is likely to initiate its North American exports either from the Gulf Coast or Western Canada. But exporting LNG from the U.S. will involve a massive upfront capital investment and thus the company is examining its viability.
Energy companies had once rushed to search for unconventional oil and gas production methods, when they felt that demand was high. This resulted in huge reserves of natural gas through a technique called fracking. The outcome was ample supplies at low prices that directed companies to enhance their facilities to liquefy domestic natural gas and export it.
A number of export projects have been proposed in the U.S. over the past year. An LNG export facility would take a minimum four years to come online. Cumulatively, an amount exceeding 10% of the U.S. gas needs could be exported from the planned export plants by the end of the decade.
Keeping all these intricacies in mind, ExxonMobil is analyzing the success from this project. At present, the company has no plan to alter the expensive Golden Pass terminal into an exporting facility.
The basic idea of export from U.S. has been opposed by Chesapeake Energy Corporation (CHK), the second-largest natural gas producer in the country. The rival company does not want natural gas to be exported abroad, as going forward, it believes the capacity will be utilized in the U.S. itself.
Irving, Texas-based ExxonMobil is the world’s largest publicly traded oil company, engaged in the exploration and production of oil and natural gas, refining and marketing of petroleum products, manufacturing of chemicals, and other energy-related businesses.
ExxonMobil holds a Zacks# 3 Rank, which is equivalent to a Hold rating for a period of one to three months. We maintain a Neutral rating on the stock for the long term.
CHESAPEAKE ENGY (CHK): Free Stock Analysis Report
EXXON MOBIL CRP (XOM): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment