Study: US LNG exports seen as big gain for Asian prices, small loss for US

By JIM POLSON and JONATHAN N. CRAWFORD
Bloomberg

An impending flood of US shale gas into the global market stands to lower the price of the heating fuel in Asia by almost 5% while marginally raising costs to customers at home, a study commissioned by the US Energy Department shows.

Exports of 20 billion cubic feet of US gas by 2040 may cut prices in the Asia-Pacific market by 73 cents/MMBtu, while increasing US prices by a mere 17 cents in the same period, according to the study authored by Oxford Economics and the Center for Energy Studies at Rice University.

Despite the climb in domestic prices, the shipments would be “marginally positive” for the US economy because of bigger profits and more spending on production of the fuel, the report shows.

The analysis, posted on the Energy Department’s website Monday, comes as US regulators consider an unprecedented number of proposals to export natural gas from booming shale fields. The surge in production from the tight-rock formations led to record stockpiles of the fuel domestically, and producers are looking for markets abroad to alleviate the glut.

“As exports increase, the spread between US domestic prices and international benchmarks narrows,” according to the report. “In every case, greater LNG exports raise domestic prices and lower prices internationally. The majority of the price movement (in absolute terms) occurs in Asia.”

Asia will benefit most as countries including China and India lack adequate domestic gas supplies and will depend increasingly on LNG imports, the authors said. Europe, which has access to Russian gas by pipeline, wouldn’t see a change in prices from US exports, they said.

The Energy Department has approved projects that may send as much as 10 billion cubic feet/day of US gas abroad and is considering applications for another 35 billion. The heightened interest is what prompted the latest report, an update of a 2012 study that found economic benefits from exporting 12 billion cubic feet/day.

Echoed Results

The results echoed the December 2012 study that DOE commissioned from NERA Economic Consulting. The agency will use the research as it evaluates export applications, department spokesman Eben Burnham-Snyder said by phone.

Exports may lead to shrinking profit margins for cement, concrete and glass makers who use gas as a fuel in the US, Monday’s report shows. Chemical, plastics and fertilizer producers have fought the shipments, saying they could raise manufacturing costs, curbing economic growth and leading to job losses.

Among the projects pending Energy Department approval are the Golden Pass LNG terminal near Sabine Pass, Texas, proposed by Qatar Petroleum International and ExxonMobil; Veresen’s Jordan Cove LNG project in Coos Bay, Oregon; and Energy Transfer’s Lake Charles LNG terminal in Louisiana.

The US may become a net-exporter of gas as early as 2016 based on US Energy Information Administration forecasts. The first of what’s expected to be a deluge of LNG shipments out of the lower 48 states is slated to leave Cheniere Energy’s Sabine Pass terminal on the US Gulf Coast in January.

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