US natural gas consumption in US forecast to avg 69.7 bcf/d in 2013 (23 tcf/year)…we are obviously producing much more than we can consume…
But prices aren’t dropping everywhere…The existing price differentials btw N. Am, Euro & Asian natural gas mkts make the prospect for exports attractive to some producers. Asian LNG spot price to peak at average of $16.90/MMBtu in 2013 (goldmansachs), while european prices are hovering around $12 mmbtu. ($2-3/mmBtu, $7-8, $16-17)One study: 6-7 bcf/day an achievable & comfortable level of exp.Min price difference (int’l & US) of $3.40 for US LNG to be competitive?(Per MMBtu, $2.15 liquefaction + $1.25 shipping + $0.70 re-gas)Panama Canal expansion by 2014 likely improve the econ of U.S. NG shipments out of the Gulf Coast to the Asia-Pacific mkts.
Prospects for lng exports final
Prospects for US LNG Exports Frank Verrastro Senior Vice President & James R. Schlesinger Chair for Energy and Geopolitics March 2013
Unconventional GasU.S. shale gas production from the major plays has increased dramatically
Unconventional Gas Projected Contribution of Shale Gas to Total US Supply U.S. dry gas production, trillion cubic feet per year History 2010 Projections 23% Shale gas 21% Non-associated onshore 9% Non-associated offshore 26% Tight gas 9% Coalbed methane 2% 10% Associated with oilSource: EIA, Annual Energy Outlook 2013 Early Release
US has been exporting natural gas (in limited quantities) for years- Spot cargoes – Alaskan LNG- Pipeline gas to Mexico and Canada- Re-exports of imported LNG from the Freeport terminal in Texas, and the Sabine Pass & Cameron terminals in Louisiana
Unconventional Gas Increased Production Could Allow U.S. to Become a Net Exporter of Natural Gas by 2020Source: U.S. Energy Information Administration, Annual Energy Outlook 2012, June 25, 2012
Unconventional Gas Potential Gas Pathways Non-Associated gas Gas to Power/ Residential & Gas Pipeline Commercial Associated gas LNG for Export Liquefaction LNG for Transport Gas to Chemicals Chemical Reaction Gas To Liquids (GTL) Syngas Refined Crude Oil Oil ProductsSource: Royal Dutch Shell
US Export Application Process• Federal law requires that the Department of Energy approve natural gas exports to countries that have a free trade agreement (FTA) with the US• For all other countries, the Department of Energy is required to grant applications for export authorizations unless the Department finds that the proposed exports are inconsistent with the public interest. “Public interest” determination considers economic, energy security, and environmental impacts• FERC must also approve export facilities• Open issues: WTO compliance? Applicability of other trade agreements/preferences relative to FTA equivalent status?
Proponents and Opponents of LNG Exports• Proponents of LNG exports are drawn from the “free trade” and gas producer communities, the latter based on concerns over limited growth domestic markets and depressed prices;• Opponents are mostly industrial consumers, who want to use the newfound abundance of natural gas to fuel a domestic “manufacturing renaissance”…as part of a new industrial policy• Politicians can be found on both sides of the argument (pro-jobs growth vs. higher consumer prices); environmental issues surrounding gas development are also prevalent.• Economics of liquefaction & export as well as market opportunities, competition, politics and foreign policy considerations will likely limit export volumes.
So, Where are We?• At the end of 2012, DOE released a commissioned study on the economic impact of LNG exports. The report (supportive of exports on economic grounds) provoked controversy, and was open for public comment• The public comment period is now over, but when a decision will be made is uncertain. Probably this year.• One export facility has already been approved (Sabine Pass, 2.2 bcf/d)• There are currently 18 LNG export project applications under review (combined export capacity of 28.02bcf/d) and awaiting permit approval from DOE• Timing of the DOE approval(s) is uncertain: policy statement or “slow walk?”• Congressional intervention could impede the export process, but is unlikely in the short term. However, in the longer term, Congress may look to address broader questions about energy policy provoked by the LNG debate, reassessing policy in light of abundance (whereas previous policies were based on the notion of scarcity) and/or environmental impacts (beyond traditional siting considerations)