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US study shows LNG exports can benefit economy

12.05.2012  | 

The long-awaited study, twice delayed by the Energy Department, will help the Obama administration decide whether to approve more than a dozen proposals to export US natural gas. The study delivers a solid endorsement of natural-gas exports at a time when the issue is hotly debated.



WASHINGTON -- A long-awaited study commissioned by the Obama administration said natural-gas exports will benefit the US economy, potentially opening the door for several multibillion-dollar export plants that could reshape the global energy market.

The study, which the administration had said would be central to its decision on export approvals, analyzed more than a dozen scenarios for US production and exports of natural gas.

It found that "across all these scenarios, the US was projected to gain net economic benefits from allowing [liquefied natural gas] exports. Moreover, for every one of the market scenarios examined, net economic benefits increased as the level of LNG exports increased."

The export issue has divided gas producers and consumers. Some large US manufacturers that use natural gas have expressed fears that allowing too many exports would undercut their competitiveness.

The looming prospect of the US becoming a major exporter of natural gas underscores how the energy revolution is transforming US economic prospects. Just a few years ago, many energy companies were planning to build facilities to import LNG into the US.

But thanks to the boom in hydraulic fracturing and horizontal drilling, the US has in a short time become a gas-producing powerhouse. That glut of cheap gas has helped underpin a revival in manufacturing, helped lower electricity costs for consumers, and given the US newfound flexibility in dealing with other major gas producers around the world, such as Russia and Iran.

The Department of Energy has withheld export permits for companies seeking to ship gas overseas to nations such as Japan that don't have free-trade agreements with the US, saying it was waiting for the results of the study. By law, any such exports must be in the national interest.

The study's endorsement gives the department a green light to move ahead with approvals. There are currently 15 such export projects awaiting approval, though few energy analysts expect all proposed projects will be built.

Among the projects in the works is a plant proposed by ExxonMobil Corp., the largest US gas producer, with investment from Qatar.

The Energy Department said Wednesday that it would review the economic impact study as well as public comments "prior to making final determinations" on approving LNG export applications. It said it would study each application on a case-by-case basis.

The glut of US gas has made it potentially profitable for companies to ship LNG to Europe and East Asia, where prices are much higher. But despite the domestic boom, exports have been controversial in Washington, and until Wednesday it wasn't clear how the report would weigh the pluses and minuses.

Environmentalists fear that allowing exports will encourage more natural-gas production, which many oppose because they fear that hydraulic fracturing could contaminate groundwater.

Other opponents, which include petrochemical companies that use gas as a feedstock, fear that increasing exports from the US will drive up the price of cheap domestic gas closer to world prices, which could undermine the competitive advantage US industry currently enjoys.

The study concluded that exports could raise the domestic price of natural gas by between $0.22 per million cubic feet and $1.11 per million cubic feet within five years. Natural gas was trading in New York up 4% at $3.69 on Wednesday afternoon.

Dow Jones Newswires

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Dr. Hans D. Linhardt, P.E.

DOE does not know what to do. The focus should be on US heavy truck LNG infrastructure and supply. Export of LNG into the global market will lead to increase of US NG prices and the benefits of clean LNG heavy trucks and eventuall LNG/CNG fuel stations across the country will be slowed. Also the chemical industry cannot stand higher NG prices. They just returned back to the USand are planning major expansions. Also GTL plants are in serious planning stages that certainly help decrease dependence on foreign crude imports. The LNG export plays are short term money makers but will succumb to global shale gas plays and leveling of LNG prices. There should not be more than 5% of our NG exported to foreign countries. As a matter of fact we also need large amounts of NG for power generation a the EPA is shutting down our coal fired power plants.

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