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US likely to limit LNG exports to keep low gas price

05.03.2012  | 

The US government is likely to impose limits on exports of LNG in order to keep its natural gas prices low, said executives from two major oil firms. Several companies are planning to build plants that would convert some of this domestic surplus of gas into LNG that could be shipped internationally.

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By JAMES HERRON

PARIS -- The US government is likely to impose limits on exports of liquefied natural gas in order to keep its domestic natural gas prices low, executives from two major oil companies with operations in the country said on Thursday.

This means that European natural gas prices are likely to remain much higher than those in the US for years to come, with negative implications for the competitiveness of European industry, they said.

Natural gas prices in the US have fallen to 10-year lows because of a boom in production of gas trapped in shale rock. The US government "wants to keep this surplus to keep the price down," in the long term, said Christophe de Margerie, chief executive of France's Total, at the Petrostrategies conference in Paris.

Several companies are planning to build plants that would convert some of this domestic surplus of gas into LNG that could be shipped internationally.

It isn't official policy, but the US Department of Energy "will limit exports to keep pressure downwards [on natural gas prices] in the US," said de Margerie. European gas prices are therefore likely to remain at a significant premium to those in the US, he said.

This could benefit US industry because "low prices for natural gas offer manufacturers a powerful competitive advantage," said Mark Williams, the downstream director for energy giant Royal Dutch Shell.

If natural gas prices remain cheap in North America, and oil prices remain high, this does mean there is a great opportunity for natural gas to gain market share in the transport sector, Williams said.

"Liquefied natural gas offers great potential as a transport fuel," he said.

Shell plans to build a network of LNG refuelling stations for trucks across Canada, he said. It is also looking at sites in Texas and Louisiana where it could build facilities that would chemically convert natural gas into diesel, Williams said.

Both projects would be major multi-year investments and require new infrastructure, he said. For this reason, it is hard to predict how big a role natural gas will play in North American road transport, he said.


Dow Jones Newswires



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