By Simone Sebastian, Chronicle
Debate is brewing over whether to keep the nation’s glut of natural gas at home for cheap energy or export it at five times the price, possibly creating jobs and boosting the domestic economy.
Businesses that purchase natural gas for industrial and residential use have rallied against proposals to liquefy and export the fossil fuel to Asian and European nations willing to pay much higher prices.
Nine companies have sought federal approval to export about 10 billion cubic feet of liquefied natural gas per day, which would boost prices for U.S. customers.
Cheniere Energy’s Sabine Pass LNG plant in Louisiana already has won approval to ship out more than 2 billion cubic feet of liquefied natural gas a day.
In total, the proposed export volume equals about 14 percent of the natural gas produced in the United States — 26.8 trillion cubic feet in 2010, according to the U.S. Energy Information Administration. The U.S. consumed about 23.8 trillion cubic feet.
Rates versus jobs
There’s little doubt that exports will cause the price of natural gas to rise. The debate is whether the rise in gross domestic product and gas field employment might offset the negative effects of higher domestic energy prices.
“I don’t think anybody knows the answer to that question, which we think argues for slowing down these (export) facilities,” said Dave Schryver, executive vice president of the American Public Gas Association, a trade group for municipal gas utilities.
“Until you have a strong, accurate view of what the impact is going to have on consumers, it’s premature.”
The price of natural gas in the U.S. has plummeted as technology has made it economical to extract natural gas from dense shale rock.
Natural gas futures closed at $2.67 per million British thermal units in trading Friday on the New York Mercantile Exchange. The price was more than $15 in 2005.
“We have so much natural gas coming up that we don’t know what to do with it,” said Andrew Ware, spokesman for Houston-based Cheniere Energy.
Except, maybe, ship it overseas.
Natural gas is selling for as much as $12 per million Btu in Europe and as high as $18 in some Asian markets, said Ira Joseph, executive director for international gas at consulting firm PIRA Energy Group.
Cheniere and other LNG companies have said that allowing natural gas exports from the Gulf Coast would create jobs by encouraging more drilling.
The Energy Information Administration is expected to issue a report next week examining the price effects of exports.
A second report in March will examine how the proposed exports would affect the broader U.S. economy on job creation and gross domestic product, said Bob Corbin, director of the office reviewing the applications.
It’s not clear when the Energy Department will decide on the pending export permits, because the nation previously hasn’t had to contemplate exporting natural gas on this scale, Corbin said.
The U.S. has exported some gas since the 1960s, when Conoco’s Alaska LNG plant began shipments to Japan.
From the Lower 48
But the Sabine Pass terminal, along with other LNG facilities seeking federal approval, represents the first effort to export it from the Lower 48 states.
That worries companies that buy natural gas for home heating and factories.
“If you create this highway that makes it easy for natural gas to flow to where the price is highest, that would make natural gas prices higher here,” said Schryver, of the Public Gas Association.
Price is one factor in considering export permits, Corbin acknowledged, but the chief concern is supply.
“If there wasn’t enough gas to support both domestic demand and exports, that would be enough to disqualify the application,” Corbin said.
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This is really simple. If we don’t export 10 Billion CF then gas producers will cut the rig count in half to slash their production and prices will rise anyway.
If we do export 10 Billion CF annually then producers will maintain the current rate of drilling and prises will rise from the currently unsustainable $2.50 per thousand cubic feet to $5.00 per thousand cubic feet which is far below international prices.
There is no question that the gas is there it is just a maater of how many jobs we want to create in this country.
And why do we have to have the feds approve an export??
Fueling job growth by exporting is much more desirable than fueling job growth through internal consumption, just ask the germans. Although prices will definetely rise succesfully exporting gas might create further demand, relying on internal comsuption will at best maintain the status quo.
Gee. They are worried about the household natural gas bill rising? If they are so worried about rising energy prices…..WHY are they allowing the refiners to export gasoline and diesel?
The fact that there is so much fuel being exported now is the main reason gas and diesel is still as high as it is.
Export the NGL. It won’t hurt any worse than anything else.
Well, where’s all those PR types that were spinning that all these new gas wells will make the US energy independent? Exporting gas will NOT help US energy independence. More CNG vehicles will help the US to reduce crude oil imports, and will also increase natural gas demand.
I know there are such things as long term contracts, etc., but what I want to know is why if nat gas prices are so low, my electric and gas bills have not come down?
I don’t even see how this is a debate. Energy is sold on global markets to the highest bidder. How can you prevent a supplier from getting the best price?
Dumbest article I have ever read. We should absolutely export if it makes good business sense to do so. Manipulating the market by holding on to excess supply will only hurt in the long run and discourage further development. Hopefully the feds won’t step in and screw it up.
Geez.. listen to the North & North East utilities cry. Does anyone remember the wondrous 80′s when the FERC allowed all the utilities to walk away from contracts they made in good faith with the Interstate pipelines and left them holding the bag for Supplies the pipelines had to procure for them? Yes the FERC wouldn’t let the pipelines out of theirs.
Remember those artificially low prices they had to pay? Who is the federal gov’t going to screw this time? Bet it’s the entrepreneurs who were smart enough to figure this out. But they will wait until they the innovators have built the entire infrastructure, spending millions upon millions and are ready to go only to have some slack jawed drooler of a government beauracrat shut them down.
Gone are the days when taking risks and suceeding were rewarded in this country. Gone are the days of fair play. Gone are the days when success was cheered. Now all you hear are “where’s mine?”, “It’s not fair, he has more than me.”, “I’m entitled to my share.” The days are numbered until those calls turn into “Stone them”.
TANSTAAFL — There ain’t no such thing as a free lunch. Someone always pays and always will. Why shouldn’t the utilities have to bid for the gas? Enter into a Long-term supply agreement at a fair market price and hold up your end of the bargain.
As with most processes, there is an optimum level to achieve a given objective. Our economy, specifically our trade balance, should be our most pressing bottom line. Not energy independence or CO2 emissions.
$ influx from exporting LNG is a good thing. $ outflow for imported crude is bad. (Even from Canada, although that’s better than from other countries with a more lopsided trade balance.) But as another commenter suggested, if NG prices rise such that a shift to CNG vehicles is thwarted, it’s a bad thing. So the optimum LNG export level would be where it minimizes the overall net $ outflow.
We should export natural gas and stop exporting gasoline!
Burrito boy – the refiners have to export the gas and diesel to stay in business, what else would they do with excess capacity? Keeping the production here just depresses prices until refiners go out of business. Just look at the Northeast with 3 refineries shutting down.
Would you rather keep refining jobs here, or make all the refineries go broke and import all our gas?
The free market, which so many claim to favor, dictates that you sell to whoever returns you the highest profit. If that means exporting, then do so and the heck with consumers here. If they don’t like the higher gas prices, they can always go out and get a wood stove or something. Same with gasoline, diesel, or whatever. Can’t afford to run your car because the refiners shipped all the fuel to South America? Ride a bike. Right, free-marketers?
Greg has it right, when he said to enter into a long term contract. The gas producers my company works for can’t continue at sub $3 gas. If the end users are concerned about maintaining the price, either contract the next 5 years at a fair sustainable price, or buy out the producers and continue to operate the production at a loss, then make up the loss by operating there business at a greater profit due to rock bottom gas prices. Don’t expect us to operate our businesses at a loss, or go out of business, to allow the price to stay unsustainable…
Oh, and Paul, whatever you do or make or service you provide for a living, it would be a lot easier on me if you started doing, making, or providing this at half price. If you are not willing to cut your income in half so that I can enjoy your product, service or whatever at a cheaper rate, then you are a raving free-marketer.
While exporting domestic resources provides a short term economic boost, stockpiling it for the future makes sense as well.
Fracking can be used to find NG in Asia as well? Let them run out first and then export for 100x the price.
OMG, does the Navy have to keep the Straits of Sabine Pass open too? Convert power plants to gas. Use Nat Gas for transportation. Export Nat Gas. Let the economy roll!
Paul, I guess if you don’t like them exporting refined product to Central and South America ……… then you would be willing to do without all the gasoline imported from Europe ?
Is that not how free markets work ?
We still import more gasoline than is exported.
If we were talking about a manufacturer of widgets, and he imported all the raw matierial for his widgets, then exported his widgets …….you would not have any complaints. You would think that’s a good deal cause it keeps jobs in the USA and does not export jobs.
Refiners could just move the refineries to Central and South America and that would keep you happy huh ?
You Democrats were calling the refiners on the carpet a few years ago, had them before Congressional hearings, grilling them on why refining capacity was so low.
Now that they’ve expanded and demand has fallen due to high prices, you don’t want them using that capacity that you told them to build.
Make up your frickin minds .
Gas companies should be allowed to export their product. It is free trade, simple as that.