ExxonMobil's Weapons of Gas Destruction

ExxonMobil has a loaded gun pointed at the U.S. natural-gas market — and it isn’t the only one.

The ammunition is liquefied natural gas. Exxon is scheduled to start up another three LNG projects in Qatar this year. They will produce more than three billion cubic feet a day of natural gas and freeze it for transportation. Europe and Asia are potential markets. But the U.S. could be a magnet for LNG cargoes, despite not really needing it, a paradox that spells low prices.

LNG is joining up the world’s hitherto largely regional natural-gas markets just as demand is faltering. Declining natural-gas production in countries such as the U.S. and U.K., and rising energy prices, prompted LNG production and receiving terminals to sprout on coastlines around the world. Some 28% of internationally traded natural gas was in the form of LNG in 2008, according to data from BP PLC.

Two things have turned this scenario on its head. One is recession. The other is the development of unconventional natural-gas resources in the U.S., leaving it oversupplied for now. Several Wall Street analysts expect inventories to reach the maximum capacity of about 3.9 trillion cubic feet later this year.

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