The Energy Information Administration’s 2014 Energy Outlook forecasts an increase in natural gas production of 56 percent by 2040, reaffirming what those in the industry already knew: we’re now in a position to not only supply our own needs but to help supply others through our exports as well.
Since the US was the world’s fourth-largest importer of LNG as recently as 2007, it’s understandable that some may still be hesitant to get behind the idea of exporting this surprisingly sudden wealth of natural resources. But the fact remains that the US is now the world’s biggest natural gas producer, thanks to the shale oil and gas boom created by hydraulic fracturing, and production is set only to go up for the next several decades, at least.
By 2040, the EIA sees cumulative net LNG exports increasing by a whopping 160 percent, and US net use of imported energy sources plummeting to 4 percent by from 16 percent in 2012 and 30% in 2005.
Instead of importing, America is scrambling to retool LNG import facilities for exports and to build new LNG export facilities, with the business of Japan, China, South Korea and others at stake.
Prices Will Fluctuate, Then Steady
One of the primary arguments against exporting natgas is that exporting it will result in higher prices.
That’s actually true, but not a good argument against exports. Natgas prices have been low because of a supply glut. Even if exports are restricted or banned outright, the price will still go up. It has to for natgas operators to fund continued exploration and production activity. Exports allow for an increased demand that will ensure that operators can afford to invest in exploration and production.
The EIA says, a “stronger near-term price growth is followed by a lagged increase in supply by producers, eventually causing prices to settle” and slow down.
Export Restrictions Could Hurt International Relations
As a leader in the free trade market, the US can’t very well give in to a nationalistic desire to hoard its own resources.
After using our political might to attack China’s trade restrictions, how do we justify placing restrictions on our own exports, in defiance of Article XI of the General Agreement on Tariffs and Trade?
Under the Natural Gas Act (NGA), it’s considered “in the public interest” to export to countries with whom the US has a Free Trade Agreement. That’s clear. But what should also be clear is that the US shouldn’t automatically restrict exports to all non-FTA countries. Those decisions should be made on a case-by-case basis to keep US exports from going to hostile countries like Iran or Cuba while allowing exports to countries like Japan, India, the Philippines and Haiti.
Export is a more rational approach, opening global markets to US producers of natgas while stabilizing global natgas markets and prices.
Non-FTA Export Question No Reason to Stall
Exports to countries with whom the US has a Free Trade Agreement are considered “in the public interest” under the Natural Gas Act (NGA). But the NGA allows for evaluation of permit applications for exports to non-FTA countries to determine whether they’re “in the public interest”—in other words, the NGA doesn’t place an outright ban on exports to non-FTA countries, and neither should the powers that be.
Under the NGA’s evaluation process, proposed exports to hostile nations such as Iran or Cuba would be appropriately denied, while exports to non-FTA countries like Japan, India, the Philippines, and Haiti could and should be considered and approved.
Accelerated LNG Export Permit Pace Signals Export Future
Though there was a one-year lag between the Obama administration’s first two permit approvals, causing consternation, to say the least, there’s a ray of hope in the fact that the third permit was approved within three months of the second. Speedy permit approval is critical, especially when you consider that completion of LNG export terminals is a process that can take three to four years.
There are still 21 applications pending. Let’s hope that while processing permit applications for LNG export terminals the Obama administration is mindful of the fact that the Energy Department has estimated that increased natgas exports could create 25,000 new direct jobs and another 40,000 indirect jobs.
Written by: Chris Faulkner