US should conduct additional analysis on LNG exports - Eastman

11 February 2013 21:26  [Source: ICIS news]

NEW YORK (ICIS)--The US Department of Energy (DOE) should conduct additional economic analysis on the impact of liquefied natural gas (LNG) exports on natural gas prices and consumers, an executive at US-based Eastman Chemical said on Monday.

“We support the DOE conducting additional economic analysis on the impact LNG exports have on the affordability of this resource to US consumers to ensure a holistic view of the issues is understood and determined to be in the public interest,” said Ray Ratheal, Eastman’s director of energy policy.

“We believe it is important that our government take the time to understand how LNG exports would affect domestic pricing, and thus the ability to have access to low cost materials, by understanding the impact that increased demand of [natural gas] would have on domestic consumers,” he added.

Eastman strongly supports LNG exports that are consistent with US trade obligations and exiting law, Ratheal said.

However, he noted that the latter requires that LNG export applications are evaluated with the public interest in mind.

The US DOE notes on its website that “federal law generally requires approval of natural gas exports to countries that have a free trade agreement [FTA] with the United States”.

However, for non-FTA countries, the DOE “is required to grant applications for export authorisations unless the department finds that the proposed exports ‘will not be consistent with the public interest’. Factors for consideration include economic, energy, security and environmental impacts”.

“We support whatever level of LNG exports is judged to be consistent with the public interest, as long as such judgment is based on a balanced and comprehensive analysis that captures the true impact of LNG exports,” Ratheal said.

“We ultimately view this as a supply/demand issue, so increasing the demand of this resource could lead to increased domestic natural gas prices,” he noted.

However, he added that it is unclear exactly how much domestic prices would be impacted since public policy issues around how LNG will be exported are still being evaluated.

“Planned investments in chemical and other manufacturing sites will create direct and indirect employment and grow our economy, but those investments are predicated on reasonably priced natural gas,” Ratheal said.

A study conducted by NERA Economic Consulting concluded that LNG exports would result in a net benefit to the US economy. The study was commissioned by the DOE and released on 5 December 2012.

“The NERA study minimises likely domestic demand increases across sectors and fails to compare the benefits to the US from domestic consumption versus export,” Ratheal said.

“Approval of increased exports must be supported by the public interest, which should rely on research that is based on sound assumptions and methodologies,” he added.

Eastman is one of four chemical companies that have joined the advocacy group America’s Energy Advantage, which opposes unfettered US LNG exports without “carefully considering the economic consequences”.

The other chemical companies in the group are Dow Chemical, Hunstman and Celanese, along with steel producer Nucor and aluminum producer Alcoa.

By: Joseph Chang
+1 713 525 2653

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