What the Trans-Pacific Partnership Means for LNG

Final negotiations on the Trans Pacific Partnership (TPP) trade agreement could herald a new era of LNG exports for the United States.  

According to statements given to Wall Street Journal, negotiations on the TPP, the largest free-trade agreement the U.S. has ever entered into, are entering the final stages. The Trans-Pacific Partnership, an extensive trade agreement involving twelve countries that share Pacific Coast borders, has been in formal negotiation since 2010. Currently, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the United States are all part of the negotiations. 

Passage of the agreement may signal a dramatic increase in LNG exports as tariffs on energy products are slashed. Additionally, the agreement would streamline the current U.S. Department of Energy export facility review process. The Japanese market in particular has been eyeing the United States as a growing source for LNG imports. In the wake of the Fukushima nuclear disaster, Japan shut down its nuclear power facilities and has increasingly become dependant on coal and LNG imports. As of 2012 it was the world’s largest LNG importer accounting for 37% of world LNG trade. Currently, Japanese companies hold stake in three of the first four LNG export terminals the U.S. approved. 

The U.S. is already on track to become a net exporter of natural gas by 2018 according to the U.S. Energy Information Administration, and LNG export facilities have overwhelmingly received government approval. Currently, there are seven LNG terminals that are operating or have been approved, and there are over 50 applications currently awaiting government approval. Additionally, the Department of Energy is considering exporting up to 45% of total US gas produced. 

However, the possibility of increased LNG exports has many in the environmental community concerned. According to a statement released by the Sierra Club with the passage of the TPP, “the DOE loses its authority to regulate exports of natural gas to countries with which the United States has a free trade agreement that includes so-called ?national treatment for trade in gas. The TPP, therefore, would mean automatic approval of LNG export permits—without any review or analysis—to TPP countries.” Additionally, a higher demand for LNG exports could cause increased fracking, a practice seen by many in the environmental community as ecologically dangerous. 

A key provision of the TPP is that it allows additional countries to join the agreement at a later time. So, in addition to the LNG prospects with countries currently part of the agreement there is the potential for other Asian markets to join the TPP at a later time.