Exports of LNG May Raise U.S. Prices as Much as 54%, Agency Says
Exporting liquefied natural gas may increase U.S. prices for the fuel as much as 54 percent, the Energy Information Administration said in a report sought by the Energy Department for its review of export permits.
The findings support manufacturers who oppose sales overseas, saying their production costs would rise. Sempra Energy (SRE), owner of the Cameron gas terminal in Louisiana, Freeport LNG in partnership with Macquarie Group Ltd. (MQG), and Dominion Resources Inc. (D) are seeking permits to ship the fuel, as hydraulic fracturing boosts production.
U.S. natural-gas prices, at record lows this month, will increase under all scenarios considered by the agency, which provides research to the Energy Department, even without any shipments to foreign countries.
“Rapid increases in export levels lead to large initial price increases that moderate somewhat in a few years,” the agency said in the report. “Slower increases in export levels lead to more gradual price increases but eventually produce higher average prices during the decade between 2025 and 2035.”
After Cheniere Energy Inc. (LNG) won a U.S. permit in May to ship gas from its Sabine Pass facility in Louisiana, manufacturers using natural gas, led by the Washington-based Industrial Energy Consumers of America, complained that sales to foreign countries may raise prices at home.
In allowing more exports, the U.S. may be “trading away the enormous economic advantage of having large, low-cost domestic natural gas supply,” Wyden said in an e-mailed statement on Jan. 6.
Daily exports of 6 billion cubic feet, phased in over six years, would produce an increase as high as 14 percent in 2022. Boosting exports to 12 billion cubic feet over four years would drive prices up 36 percent in 2018, the report said.
While natural gas exports would spur production, prices at the well would rise 54 percent in 2018 under a more pessimistic estimate by the agency of total gas resources, according to the report.
Price changes for industrial consumers, on a percentage basis, tend to be lower than adjustments at the wellhead, the agency said in the report.
Natural gas futures settled at a 10-year low yesterday, pushed down by low demand as milder weather during mild U.S. weather, and abundant supply from gas extracted from shale formations such as Marcellus in Pennsylvania.
Natural gas for February delivery fell 1.6 cents to $2.472 per million British thermal units on the New York Mercantile Exchange, the lowest settlement since March 2002. Gas futures have tumbled 44 percent from a year ago.
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