By Edward McAllister and Ayesha Rascoe
(Reuters) - U.S. regulators on Monday approved the country's first liquefied natural gas export plant in nearly 50 years, which will open up cheap and abundant American supplies to importers across the globe.
The Federal Energy Regulatory Commission (FERC) approval paves the way for construction to begin at Cheniere Energy's LNG plant at Sabine Pass, Louisiana, which will chill natural gas to a liquid for shipping overseas by as early as 2015.
It marks a huge turnaround for the U.S. energy market that five years ago was scrambling to build gas import terminals before shale gas drilling provided decades of domestic reserves. Analysts say the project alone will do little to alleviate the glut in supplies that have sent domestic prices to 10-year lows, however.
The FERC ruling comes as U.S. natural gas inventories are set to spill over due to record high production from newly developed gas deposits.
A string of export projects have been proposed in the United States to supply thirsty markets in Europe and Asia where gas prices are up to seven or eight times higher.
For now, Cheniere looks likely to be the only project to get the go ahead. The U.S. government has suspended decisions on expanding U.S. gas exports until a study on the price impact of such exports on domestic consumers is completed late summer.
U.S. natural gas prices dropped below $2 per million British thermal unit this month for the first time since 2002, easing fuel costs.
"Politically, it might look bad, but this amount of gas is a drop in the ocean," said Nikos Tsafos, analyst at PFC Energy in Washington, DC. "I don't think this will move natural gas prices."
Houston-based Cheniere will build a plant to export up to 2.2 billion cubic feet of natural gas per day, the equivalent of 16 million metric tons (17.64 million tons) per year (mtpa) of LNG or about 3 percent of U.S. daily supply.
The plant will be built in two stages, the first consisting of two production units, or trains, of 4 mtpa each, FERC said.
"Today's order finds that the project can be constructed and operated safely and with minimal environmental impacts," FERC said in a statement.
Customers from Europe, India and South Korea have already signed long-term supply deals with Cheniere.
Cheniere said it has engaged eight financial institutions to raise up to $4 billion in debt to help finance construction at Sabine.
In February, private equity firm Blackstone Group LP said it would invest $2 billion in Cheniere Energy Partners to help fund the plant's construction.
(Reporting by Edward McAllister in New York and Ayesha Rascoe in Washington; Editing by Gary Hill; Dale Hudson and Carol Bishopric)