Tanker’s U-turn shows how shale is changing world gas trade

A cargo of chilled natural gas hauled from Louisiana in late December has become a symbol of how global trade is changing for a fuel increasingly seen as a cheap, cleanerburning option for countries from Latin America to China and India.

The tanker Maran Gas Achilles passed through the Panama Canal and was headed toward Asia at a speed of 20 knots when, suddenly, it made a sharp U-turn in the Pacific. Next stop: Mexico’s Manzanillo terminal on the southwest coast, where it unloaded.

The abrupt route change shows how the U.S., which began shale gas exports just last year, is creating a new paradigm in an industry that once revolved almost entirely around longterm contracts with set destinations. As the new kid on the block, exporters of U.S. liquefied natural gas — led by Cheniere Energy and Royal Dutch Shell — are seeking the best price at any given time. As U.S. exports grow, it’s a strategy that could shift the economics of LNG toward an emerging spot market akin to oil.

“The U.S. puts gas into places on short notice at a good price,” said Jason Feer, head of business intelligence at ship broker Poten & Partners Inc., in a telephone interview. “It’s been flexible. The market’s becoming more short term and the U.S. has been very effective at meeting those needs.”

The U.S. stands to become the world’s third-largest exporter by 2020, when it’s expected to ship about 8.3 billion cubic feet a day of capacity, or 14 percent of the world’s share, according to London-based consultant Energy Aspects. That growth is a testament to the power of the shale boom of the last decade, helping to reduce the country’s reliance on foreign energy sources.

Drilling technologies such as hydraulic fracturing have made it profitable to tap vast resources of carbon fuels trapped in rock thousands of feet below the surface. The results: A natural gas supply glut stuck stubbornly in place since mid-2015, and billions of dollars redirected toward new export facilities by Cheniere, Dominion Resources, Kinder Morgan and others.

Breanne Dougherty, a natural gas analyst for Societe Generale in New York, calls the U.S. push into the global LNG market “an unarguable game changer.”