Loews CEO Tisch Sees Boon in U.S. Natural Gas Exports

Loews Corp., the New York-based conglomerate with holdings in insurance, energy and hotels, believes U.S. natural gas exports would add jobs without hampering the economy, Chief Executive Officer James Tisch said.

Gas prices rising to $4.50 per million British thermal units would probably spur producers to drill for an additional 10 billion cubic feet a day of gas, generating 100,000 U.S jobs, Tisch said today in an interview at his office.

The comments follow a Dec. 5 U.S. Energy Department report that supported exports and drew warnings it underestimated potential costs to consumers. The report forecast overall economic benefit from exports even though they could lead to higher fuel prices that might crimp jobs and pay in agriculture and manufacturing. Dow Chemical Co. CEO Andrew Liveris said the report underestimated those costs.

“Exporting natural gas will not significantly increase the price of natural gas because the supply curve is so flat,” said Tisch. He pointed to Loews’s unit, HighMount Exploration & Production LLC, which produced the equivalent of 173 million cubic feet of gas in 2011. “We’re sitting on undrilled gas, we look at the price and our costs every day and we’re ready to drill as soon as the price gets to a reasonable amount.”

Gas fell 1.4 percent to $3.41 per million Btu today in New York.

Higher Prices

Gas will trade between $4.50 and $5 per million Btu for the next 5 years to 7 years, Tisch said. That’s the price needed to justify gas drilling, regardless of whether the U.S. begins exporting the heating and power plant fuel, he said.

The Energy Department is weighing at least 15 applications from energy companies looking to build terminals for exporting liquefied natural gas, or LNG. Last week’s analysis advanced debate in Washington over how to shape the U.S. energy mix as a drilling technique known as hydraulic fracturing, or fracking, unlocks once-inaccessible gas from dense rock such as shale.

Cheniere Energy Partners LP began construction in August of a $5.6 billion export terminal in Louisiana, the first in the contiguous U.S. It’s expected to begin operation in 2015.

Loews doesn’t invest in LNG terminals or buy gas for export, and has no plans for such investments, Tisch said.

Loews estimates that each additional 1 billion cubic feet a day of gas production in the U.S. creates as many as 10,000 jobs in the energy and steel industry, according to Tisch. Most of the $30 billion of investment needed to export 10 billion cubic feet per day would be spent in the U.S., he said.

Loews’s wholly-owned HighMount would benefit from higher demand from exports, Tisch said. So would Boardwalk Pipeline Partners LP, which is owned 55% by Loews and Diamond Offshore Drilling, half-owned by Loew, he said.

The report to the Energy Department underestimates the economic benefit of cheap gas in manufacturing, according to Dow. Every job created in manufacturing creates as many as eight new jobs across the economy, the chemicals company said in a Dec. 6 statement.

(Corrects percentage ownership by Loews of affiliates in penultimate graph.)
Before it's here, it's on the Bloomberg Terminal. LEARN MORE