US LNG exports create net economic benefits: DOE study
Washington (Platts)--5Dec2012/537 pm EST/2237 GMT
US liquefied natural gas exports are projected to create net economic
benefits that would ramp up with higher levels of exports, according to a
long-awaited study commissioned by the US Department of Energy and released
In all cases, "benefits that come from export expansion more than
outweigh the losses from reduced capital and wage income to US consumers, and
hence LNG exports have net economic benefits in spite of higher domestic
natural gas prices," according to the study, which was conducted by NERA
The study is the second of two LNG studies commissioned by DOE. The
first study, conducted by the Energy Information Administration, found that
LNG exports would increase domestic wellhead gas prices. The second study
looked at the broader economic impacts of exports, with an emphasis on the
energy and manufacturing sectors.
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The studies are crucial because they will help DOE decide whether to
approve pending applications to export LNG.
DOE must quickly approve exports to countries that have free trade
agreements with the US, but the department can limit or block exports to
non-FTA countries if it finds they are not in the public interest. Companies
have applied to export 23.71 Bcf/d of gas as LNG to non-FTA countries.
So far, DOE has only approved one facility, Cheniere Energy's 2.2 Bcf/d
Sabine Pass project in Louisiana, to export LNG to non-FTA countries. The
department has said that it will not approve additional non-FTA exports until
it has received and reviewed the two studies and public comments on their
DOE will accept public comment on the NERA study for 45 days after it
appears in the Federal Register. Reply comments will be accepted for 30 days
NET BENEFITS SEEN IN ALL STUDIED SCENARIOS
The NERA study released Wednesday looked at the impact of LNG exports on
the US economy under a range of different assumptions about the level of
exports, global market conditions and US production costs.
"Across all these scenarios, the US was projected to gain net economic
benefits from allowing LNG exports," the study concluded.
"Moreover, for every one of the market scenarios examined, net economic
benefits increased as the level of LNG exports increased. In particular,
scenarios with unlimited exports always had higher net economic benefits than
corresponding cases with limited exports."
Net benefits are highest if the US produces large quantities of shale
gas at low cost, if world demand for gas increases rapidly and if LNG exports
from other regions are limited, the study said.
However, if US gas production costs rise significantly, or if there are
plenty of supplies from other regions, the US would not export LNG, the
The global market will limit domestic price increases arising from LNG
exports because importers will not buy US exports if wellhead prices rise
above competing supplies, the study explained.
Forecast natural gas price increases after LNG exports begin would range
from zero to $0.33/Mcf in 2010 dollars, according to the study. The largest
price hikes after five or more years of exports could range from $0.22 to
$1.11/Mcf, also in 2010 dollars.
"The higher end of the range is reached only under conditions of ample
US supplies and low domestic natural gas prices, with smaller price increases
when US supplies are more costly and domestic prices higher," it said.
However, LNG exports will not help all socioeconomic groups, the study
said. "Overall, both total labor compensation and income from investment are
projected to decline, and income to owners of natural gas resources will
LNG exports will lead to shifts in employment, with gas production and
export industries attracting workers away from other industries, the study
said. "LNG exports are not likely to affect the overall level of employment
in the US," it said.
"Serious competitive impacts are likely to be confined to narrow
segments of industry," the study concluded.
--Kate Winston, firstname.lastname@example.org
--Edited by Lisa Miller, email@example.com