This report responds to a May 29, 2014 request from the U.S. Department of Energy's Office of Fossil Energy (DOE/FE) for an update of the Energy Information Administration's (EIA) January 2012 study of liquefied natural gas (LNG) export scenarios. This updated study, like the prior one, is intended to serve as an input to be considered in the evaluation of applications to export LNG from the United States under Section 3 of the Natural Gas Act, which requires DOE to grant a permit to export domestically produced natural gas unless it finds that such action is not consistent with the public interest. Appendix A provides a copy of the DOE/FE request letter. DOE/FE asked EIA to assess how specified scenarios of increased exports of LNG from the Lower 48 states could affect domestic energy markets, focusing on consumption, production, and prices. The DOE/FE scenarios posit total LNG exports sourced from the Lower 48 states of 12 billion standard cubic feet per day (Bcf/d), 16 Bcf/d, and 20 Bcf/d, with these exports phased in at a rate of 2 Bcf/d each year beginning in 2015.
This report responds to an August 2011 request from the Department of Energy's Office of Fossil Energy (DOE/FE) for an analysis of "the impact of increased domestic natural gas demand, as exports." Appendix A provides a copy of the DOE/FE request letter. Specifically, DOE/FE asked the U.S. Energy Information Administration (EIA) to assess how specified scenarios of increased natural gas exports could affect domestic energy markets, focusing on consumption, production, and prices. DOE/FE provided four scenarios of export-related increases in natural gas demand (Figure 1) to be considered: * 6 billion cubic feet per day (Bcf/d), phased in at a rate of 1 Bcf/d per year (low/slow scenario), * 6 Bcf/d phased in at a rate of 3 Bcf/d per year (low/rapid scenario), * 12 Bcf/d phased in at a rate of 1 Bcf/d per year (high/slow scenario), and * 12 Bcf/d phased in at a rate of 3 Bcf/d per year (high/rapid scenario). Total marketed natural gas production in 2011 was about 66 Bcf/d. The two ultimate levels of increased natural gas demand due to additional exports in the DOE/FE scenarios represent roughly 9 percent or 18 percent of current production. DOE/FE requested that EIA consider the four scenarios of increased natural gas exports in the context of four cases from the EIA's 2011 Annual Energy Outlook (AEO2011) that reflect varying perspectives on the domestic natural gas supply situation and the growth rate of the U.S. economy. These are: * the AEO2011 Reference case, * the High Shale Estimated Ultimate Recovery (EUR) case (reflecting more optimistic assumptions about domestic natural gas supply prospects, with the EUR per shale gas well for new, undrilled wells assumed to be 50 percent higher than in the Reference case), * the Low Shale EUR case (reflecting less optimistic assumptions about domestic natural gas supply prospects, with the EUR per shale gas well for new, undrilled wells assumed to be 50 percent lower than in the Reference case), and * the High Economic Growth case (assuming the U.S. gross domestic product will grow at an average annual rate of 3.2 percent from 2009 to 2035, compared to 2.7 percent in the Reference case, which increases domestic energy demand). DOE/FE requested this study as one input to their assessment of the potential impact of current and possible future applications to export domestically produced natural gas. Under Section 3 of the Natural Gas Act (NGA) (15 U.S.C. § 717b), DOE must evaluate applications to import and export natural gas and liquefied natural gas (LNG) to or from the United States. The NGA requires DOE to grant a permit unless it finds that such action is not consistent with the public interest. As a practical matter, the need for DOE to make a public interest judgment applies only to trade involving countries that have not entered into a free trade agreement (FTA) with the United States requiring the national treatment for trade in natural gas and LNG. The NGA provides that applications involving imports from or exports to an FTA country are deemed to be in the public interest and shall be granted without modification or delay. Key countries with FTAs include Canada and Mexico, which engage in significant natural gas trade with the United States via pipeline. A FTA with South Korea, currently the world's second largest importer of LNG, which does not currently receive domestically produced natural gas from the United States, has been ratified by both the U.S. and South Korean legislatures, but had not yet entered into force as of the writing of this report.
As estimates for the amount of U.S. natural gas resources have grown, so have the prospects of rising U.S. natural gas exports. The United States is expected to go from a net importer of natural gas to a net exporter by 2020. Projects to export liquefied natural gas (LNG) by tanker ship have been proposed—cumulatively accounting for about 12.5% of current U.S. natural gas production—and are at varying stages of regulatory approval. Projects require federal approval under Section 3 of the Natural Gas Act (15 U.S.C. §717b), with the U.S. Department of Energy's Office of Fossil Energy and the Federal Energy Regulatory Commission being the lead authorizing agencies. Pipeline exports, which accounted for 94% of all exports of U.S. produced natural gas in 2010, are also likely to rise. What effect exporting natural gas will have on U.S. prices is the central question in the debate over whether to export. A significant rise in U.S. natural gas exports would likely put upwards pressure on domestic prices, but the magnitude of any rise is currently unclear. There are numerous factors that will affect prices: export volumes, economic growth, differences in local markets, and government regulations, among others. With today's natural gas prices relatively low compared to global prices and historically low for the United States, producers are looking for new markets for their natural gas. Producers contend that increased exports will not raise prices significantly as there is ample supply to meet domestic demand, and there will be the added benefits of increased revenues, trade, and jobs, and less flaring. Consumers of natural gas, who are being helped by the low prices, fear prices will rise if natural gas is exported. Electric power generation represents potentially the greatest increase in natural gas consumption in the U.S. economy, primarily for environmental reasons. Natural gas emits much less carbon dioxide and other pollutants than coal when combusted. Other types of consumption are not likely to increase natural gas demand domestically for a long time. Use in the transportation sector to displace oil is likely to be small because expensive new infrastructure and technologies would be required. There is discussion of a possible revival of the U.S. petrochemicals sector, but the potential extent of a change is unclear. Getting natural gas to markets where it can be consumed, whether domestically or internationally, may be the industry's biggest challenge. Infrastructure constraints, environmental regulations, and other factors will influence how the market adjusts to balance supply and demand. Environmental groups are split regarding natural gas use, with some favoring increased use to curb emissions of certain pollutants, while others oppose expanded use of natural gas because it is not as clean as renewable forms of energy, such as wind or solar. The use of hydraulic fracturing to produce shale gas has also raised concerns among environmental groups particularly concerned with its possible impacts on water quality. The possibility of a significant increase in U.S. natural gas exports will factor into ongoing debates on the economy, energy independence, climate change, and energy security. As the proposed projects continue to develop, policymakers are likely to receive more inquiries about these projects. Proposals to expedite and expand LNG exports have already been raised in the 113th Congress, including in S. 192 and H.R. 580. Two other bills, H.R. 1189 and H.R. 1191, would reform the DOE's process for determining the public interest regarding LNG exports and prohibit exports of natural gas produced on federal lands.
As estimates for the amount of U.S. natural gas resources have grown, so have the prospects of rising U.S. natural gas exports. The United States is expected to go from a net importer of natural gas to a net exporter by 2016. With recent natural gas prices relatively low compared to global prices and historically low for the United States, producers are looking for new markets for their natural gas. Projects to export liquefied natural gas (LNG) by tanker ship have been proposed—cumulatively accounting for over 60% of current gross U.S. natural gas production. Pipeline exports, which accounted for 99% of all exports of U.S. natural gas in 2013, are also likely to continue rising. However, under the Natural Gas Act, the Department of Energy (DOE) and the Federal Energy Regulatory Commission (FERC) must authorize the export of the natural gas commodity and related facilities, respectively. This overarching federal role in the expansion of U.S. natural gas exports has been the subject of ongoing oversight and debate in Congress. What effect exporting natural gas will have on U.S. domestic prices is a central question in the debate over whether to export. A significant rise in U.S. natural gas exports would likely put upwards pressure on domestic prices, but the magnitude of any rise is uncertain. There are numerous factors that will affect prices: export volumes, economic growth, differences in local markets, and government regulations, among others. Producers contend that increased exports will not raise prices significantly as there is ample supply to meet domestic demand, and there will be the added benefits of increased revenues, trade, and jobs, and less flaring. Consumers of natural gas, who also benefit from the current low prices, fear prices will rise if natural gas is exported. The DOE's most recent price study concluded that greater LNG exports “result in higher levels of real gross domestic product (GDP), which more than offsets the adverse impact of somewhat higher energy prices.” Export opponents have been critical of DOE's conclusions. Environmental groups are split regarding natural gas use, with some favoring increased use to curb emissions of certain pollutants, while others oppose expanded use of natural gas because it is not as clean as renewable forms of energy, such as wind or solar. The use of hydraulic fracturing to produce shale gas for export markets has also raised concerns among environmental groups particularly concerned with its possible impacts on groundwater quality. The possibility of a significant increase in U.S. natural gas exports will factor into ongoing debates on the economy, energy independence, climate change, and energy security. Congressional interest has focused on the DOE's process and criteria for approving LNG commodity exports to non-free trade agreement (FTA) countries. Several bills in the 114th Congress would facilitate the approval of such permits. Both the House and Senate versions of the LNG Permitting Certainty and Transparency Act (H.R. 351 and S. 33), the Domestic Prosperity and Global Freedom Act (H.R. 89), and the Export American Natural Gas Act of 2015 (H.R. 428) would impose various deadlines on DOE export permit decisions. The American Job Creation and Strategic Alliances LNG Act (H.R. 287) would extend free trade treatment to World Trade Organization member nations with respect to LNG export permitting by DOE. The Crude Oil Export Act (H.R. 156) would repeal limitations on export of Outer Continental Shelf natural gas under the Outer Continental Shelf Lands Act (43 U.S.C. 1354). Other bills have been introduced that would affect natural gas production and infrastructure.
According to Department of Energy (DOE) and industry expectations, in the next few years the United States is expected to change from a net importer of natural gas to a net exporter, with those exports destined for different regions of the world, especially Asia. More than 30 companies have received approval from DOE for large-scale exports of U.S. liquefied natural gas (LNG) -- natural gas cooled for transportation -- beginning in 2015 or 2016 via specialized LNG carriers. Congress is considering whether to propose legislative language that would require U.S. LNG be exported via U.S.-built-and-flagged carriers with the goal of supporting U.S. shipbuilders and mariners. This book discusses DOE and industry expectations for the market for U.S. LNG exports and how the proposed requirement could affect jobs in the U.S. maritime industry and the broader U.S. economy.
Within the next five years, the United States may become a large exporter of natural gas for the first time in decades. Increased development of U.S. natural gas resources, particularly shale gas, along with low domestic prices in recent years and idle liquefied natural gas (LNG) infrastructure, have drive: change in the US. The United States has exported some amounts of natural gas for close to 100 years, but has generally imported more than it has exported. However, imports have been declining since 2005, while exports have been climbing. As the debates over the economy, energy independence, climate change, and energy security continue, Congress is beginning to face important questions regarding a potential increase in U.S. natural gas exports. This book examines the changes in the U.S. natural gas market and the prospects and implications of the United States becoming a significant net natural gas exporter.
Advances in drilling technology and production strategies such as hydraulic fracturing and horizontal drilling have made shale gas more accessible and have boosted US natural gas production. The US Energy Information Administration (EIA) expects that indigenous production will exceed consumption and that the US could become a liquefied natural gas (LNG) exporter by 2016. While US natural gas production has boomed, the EU has been increasingly dependent on natural gas imports mainly from Russia. In addition to rising dependency on Russian natural gas, the dispute between Russia and Ukraine has disrupted delivery of Russian gas and has threatened the security of natural gas supply to the EU. This situation has compelled the EU to seek different suppliers to reduce Russian dominance of Russia. Considering 30 percent of EU natural gas imports come from Russia an increase in EU concerns about disruption of the Russian supply has fueled a discussion of US LNG exports. As an alternative to Russian supply, US LNG exports are considered as a solution to mitigate the effects of supply interruptions and overdependence on Russia. Currently the most important question is whether US LNG exports will or will not be a panacea for the EU natural gas market. This study uses US LNG export scenarios to investigate the effects of US LNG exports on the EU natural gas market. Although I primarily expected that US LNG exports would not impact the EU natural gas market, the main findings are surprisingly different from the anticipation. The consequences are: 1. Although US LNG exports are not an elixir for the EU natural gas market to improve its security supply, they will reduce the dominance of certain exporting countries. 2. US LNG exports will not decrease the EU's dependence on its suppliers due to the EU's preference to import US LNG. This situation prevents any improvement of the security of natural gas supply in the EU. 3. US LNG exports will result in a slump in natural gas prices and a rise in natural gas demand in the EU.
The sharp drop in oil prices is one of the most important global economic developments over the past year. The SDN finds that (i) supply factors have played a somewhat larger role than demand factors in driving the oil price drop, (ii) a substantial part of the price decline is expected to persist into the medium term, although there is large uncertainty, (iii) lower oil prices will support global growth, (iv) the sharp oil price drop could still trigger financial strains, and (v) policy responses should depend on the terms-of-trade impact, fiscal and external vulnerabilities, and domestic cyclical position.
A volume on the pricing of gas in international trade. Gas accounts for around 25% of global energy demand and international gas trade is growing rapidly. The book covers the development of international gas pricing in all regions of the world where gas is traded, and considers whether gas could become a global market.
