http://www.bloomberg.com/news/2013-05-08/u-s-should-export-natural-...

US and LNG exports

Illustration by Bloomberg View

U.S. Should Export Natural Gas, Not Coal

President Barack Obama’s suggestion last weekend that he may favor greater U.S. exports of liquefied natural gas is a welcome sign. More exports would spur more domestic production and help balance U.S. trade.

LNG exports could also help counter the unsettling increase in American exports of coal to Europe. In 2012, the U.S. sent about 66.4 million short tons (60.2 million metric tons) of coal across the Atlantic, 23 percent more than the year before. Exporting coal works against the progress the U.S. has made in lowering its own greenhouse-gas emissions by replacing coal power with cleaner-burning natural gas.

In Europe and Asia, where natural gas sells for $10 to $16 per million British thermal units -- three to four times the U.S. price -- demand is high. Imports from the U.S. could also give European countries greater power to bargain on prices with Russia’s OAO Gazprom, now a dominant supplier of natural gas. All that’s missing are the U.S. facilities to liquefy gas for export.

Opposition to building these terminals comes mainly from U.S. manufacturing companies that don’t want to see domestic natural-gas prices go up as some of the supply is sold overseas. Dow Chemical Co., Alcoa Inc. and other industrial-energy users argue that by raising domestic prices, exports would slow the U.S. manufacturing renaissance and hobble economic growth. Paul Cicio, president of the Washington-based trade group Industrial Energy Consumers of America, has called for delaying approvals for some new export terminals to avoid a domestic price shock.

Individual consumers, too, have reason to wince at the prospect of electricity and natural-gas bills going up because of greater exports.

More Production

Yet any increase in prices would be temporary if gas production rises, too. The low U.S. prices of the past year and a half (last June, they were less than $2.50 per million Btu, and have since risen to about $4) led many energy companies to stop drilling. With more demand from exports, more production is to be expected. As much as 80 percent of foreign demand for American natural gas could be met by new drilling, studies suggest.

In a December report for the U.S. Energy Department, NERA Economic Consulting found -- as other researchers have before -- that exports would bring a net economic benefit by helping to balance U.S. trade. The increase in gross domestic product may amount to $20 billion, or possibly as much as $47 billion if very large amounts of LNG -- 12 billion cubic feet per day -- are exported, the NERA study found.

Delaying or restricting export terminal permits would not only negate that benefit. It would also put the U.S. in a new trade quandary: Because there is no national-security reason to limit exports of the U.S.’s new surplus of natural gas, doing so would amount to unfair competition. As Michael Levi of the Council on Foreign Relations has pointed out, the World Trade Organization might see limits on U.S. natural-gas exports as no less unfair than are China’s restrictions on exports of rare-earth elements.

The U.S., with its $38.8 billion trade deficit, shouldn’t see its booming oil and gas production as a reason to secede from global energy markets.

Obama seems to agree; in Costa Rica on May 4, he said he envisions the U.S. becoming a net natural-gas exporter by 2020. If so, he has some work to do converting words into action.

Last year, the Energy Department gave a permit to one facility in Louisiana to sell LNG to countries without trade agreements with the U.S. -- including sales to Japan and European nations. Nineteen more applications are pending. Given the expense and time involved in building these plants -- several billion dollars each and at least four years -- only a few can be expected to come to fruition.

A recent Moody’s Investors Service report predicted that if three more plants -- in Texas, Maryland and Louisiana -- are soon approved, as expected, it will still take until 2020 for the U.S. to export significant quantities of natural gas.

On May 4, Obama said, “I’ve got to make an executive decision broadly about whether or not we export liquefied natural gas at all.” Though the decision has yet to be made, the right one is clear, and the approvals of the new plants should be made without delay.

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This is folly and past events indicate as much.  We have a great supply of an energy source.  Why are we hellbent on using it up as fast as possible?

Agreed Marcus.
Here we share the same perspective.

As well. Corporate greed will plunder what it can here then move on to somewhere else....

Hi Lance,

I found this story and just thought people would like to see it.   Your comment about Corporate greed made me think.  How much would the Chesapeake deductions be if they sent the gas to Japan...

How do you know who they're selling your production to as it is ?

Maybe domestic maybe foreign - or is there some disclosure made ?

Think.

Economics

Politics

Trade imbalance. 

There is only a limited window of opportunity to sign LNG export contracts. There are dozens of shale plays worldwide, at some point the opportunity to export LNG will be lost and so will the opportunity to improve our trade imbalance.  This would bring back wealth to the U.S.  If we don't act, another country will fill that void.

The current administration does not really like fossil fuels, however, he will support any activity that moves the price in a direction that is closer to equality with green energy, which is very expensive and cannot compete with fossil fuels, even with our taxpayer subsidies.

We must continue to expand markets for our natural gas. CNG & LNG vehicle fuel, truck fleet and significant gains in the commuter transportation sector.  LNG exports being in the mix will place demands upon further exploration and technologies to develop and  implement the energy strategy.  Jobs will be created.

Now for the futuristic prediction:  At some point the middle east oil wells flat line production will hit their decline curves, no one knows for sure when, but if the above strategy is in place, we in the US will not have to pay $20 per gallon for gasoline, and we will be in a great worldwide market.  At this point the long awaited time to charge the middle east $100 per bushel for wheat will or could be a reality. 

"There is only a limited window of opportunity to sign LNG export contracts. There are dozens of shale plays worldwide, at some point the opportunity to export LNG will be lost and so will the opportunity to improve our trade imbalance."

You just described why rushing to export is a disaster waiting to happen.  We build billions of infrastructure for LNG terminals and then, within five years the market drops off.  It's happened before...just not here.  Other countries have tried to build out LNG exports and have been crushed by market forces. 

LNG imports to the US have been crushed in the past due to market forces.  This happened in a mix of governmental price controls and decontrol subsequent to the 1968 NGPA. 

Since the deregulation of natural gas, market forces and economics have better controlled the domestic production climate.

I still believe there is an opportunity to at a minimum, to take a measured approach to LNG exports, independent companies are better suited to evaluate risk and understand global economics than our government.  

Keep in mind, the DOE was formed in the Carter administration to reduce our 30% dependence on foreign oil, since, the DOE has grown to a $24 Billion annual budget, and we are above 70% dependent on foreign oil.  

If the DOE was the primary driver of our shale development, please help me to better understand how?

LNG exports have potential to increase energy prices, however that would stimulate more exploration and jobs further advancing supply.

If the US is going to be a part of a global economy, I would much rather have the economics of free trade pleasantly surprise me than our government.  

Free trade - based on whatever it takes to pay for the OPECs' standards of living.

Free Trade Koolaid, gentlemen.

"If the DOE was the primary driver of our shale development, please help me to better understand how?"

Good heavens, no.  The DOE couldn't find oil if they were looking in the crankcase of my car. 

"LNG exports have potential to increase energy prices, however that would stimulate more exploration and jobs further advancing supply."

Maybe for a brief time, yes.  But look at the European market right now.  Prices are prohibitively high.  If we were to export LNG then we would need to make a profit.  So Europe would have to pay through the nose to get our supply.  They're already doing that for their own stuff.  US LNG exports would have to vastly beat the European/Asian market price each and every day for it make any sense for them to import.  The problem then becomes one of supply replacement.  As US companies try to replace the supply that they're selling in Europe/Asia the E&P costs rise and so does the net cost to the importers.  There's a crash in this market cycle every time, no matter what the good is.  The problem is we'd have to spend billions to see just when and at what price the market collapses on us.  I'm not investing in any company that's interested in that sort of economic model.

"If the US is going to be a part of a global economy, I would much rather have the economics of free trade pleasantly surprise me than our government."

Free trade is great but it's not free.  It's nowhere close.  When there are NOC's that dominate the landscape there's no way for private companies to actively compete on a global scale.

Marcus,
NOC's = Nationalized Oil Companies ?

Yes.  Think Russia and Venezuela. 

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