LNG exports not likely to largely impact US natgas prices

20 May 2013 21:32  [Source: ICIS news]

HOUSTON (ICIS)--The US has ample domestic supplies of natural gas to meet future demand without significant price increases, and liquefied natural gas (LNG) exports are unlikely to have a large impact on domestic prices, said a study that was released on Monday.

Conducted by the Bipartisan Policy Center (BPC), the report analysed a “realistic range” of supply and demand drivers and concluded that the US is uniquely positioned to take advantage of the economic, environmental and energy security benefits of the country’s natural gas resource.

BPC analysed a range of future LNG exports of 2 billion cubic feet (bcf)/day) to 6.4 bcf/day, and results showed that the US is projected to become a net exporter of natural gas between 2017 and 2021.

“The price of US natural gas will influence LNG export levels far more than LNG exports will influence domestic prices,” the report said.

“However, contrary to the concerns recently expressed by some large users of natural gas, increased exports are likely to have only a modest impact on domestic gas prices,” it added.

The study also concluded that overall economic growth and increased demand in the industrial and electric power sectors are primary drivers to increased natural gas consumption.

“Recent years have seen a flurry of new industrial-sector investments aimed at taking advantage of low-price natural gas and abundant natural gas liquids (NGLs),” the report said.

Also, recent studies suggest that heavy-duty vehicle operators could achieve substantial fuel cost saving by switching to natural gas, and those vehicles stand to make significant gains in market share and vehicle miles travelled by 2030.

In addition, energy-related carbon dioxide emissions are primarily driven by overall economic growth, and pricing carbons results in greater emission reductions, the report said.

“Natural gas resources have the potential to create new market opportunities for expanded natural gas use in ways that will grow the economy and improve the environmental performance of the US energy system, if the environmental challenges associated with natural gas development using horizontal drilling and hydraulic fracturing are addressed by [the] industry in collaboration with state and federal regulators,” the BPC said.

LNG exports has been a hot topic of debate in the chemicals industry, a business that relies on natural gas for about 85% of its feedstock requirements.

In 2012, the US Department of Energy (DOE) issued a report on the effects of increased natural gas exports on domestic energy markets and a report on the macroeconomic pacts of LNG exports.

Since then, Dow Chemical and several chemical producers have spoken out against the report, particularly with the argument that LNG exports would raise natural gas prices.

However, ExxonMobil said restricting LNG exports could hurt the US economy.

Last week, the DOE approved a second LNG export permit, allowing Freeport LNG to export natural gas from a Texas terminal to non-Free Trade Agreement countries.

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By: Tracy Dang
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