Deloitte report boosts natural gas exports

The Deloitte Center for Energy Solutions predicts exports of natural gas would boost domestic prices only slightly, while lowering them for several U.S. allies, according to a report released today.

“Our allies get help. The U.S. economy benefits. And some folks we have more strained relations with take a little bit of a hit, so it seems like a win all the way around,” said Peter Robertson, former vice chairman of Chevron’s board of directors and an independent senior advisor to the oil and gas group at Deloitte LLP.

The report, “Exporting the American Renaissance: Global impacts of LNG exports from the United States,” was released Tuesday, the third in a series of reports dealing with natural gas.

Federal regulators recently approved Houston-based Cheniere Energy’s plans to export liquefied natural gas from its Sabine Pass terminal in southwest Louisiana, but the Department of Energy has placed on hold other applications seeking to export more than 20 billion cubic feet per day.

That’s about one-third of the natural gas produced in the United States.

For the study, Deloitte assumed exports would reach about six billion cubic feet per day.

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Leaders of the petrochemical and manufacturing industries have lobbied hard against the plan, worried exports will push up natural gas prices after the industries committed $90 billion in planned capital spending, based in part on the availability of low-cost natural gas.

A report commissioned by DOE and released last month concluded the U.S. would benefit economically from the exports.

The Deloitte report agreed and found benefits for U.S. allies abroad, as well.

It found that natural gas prices would rise about 15 cents per million British thermal units if exports were allowed.

But U.S. exports would have a larger impact globally, according to the report, which projected prices in Europe could drop by about 69 cents per British thermal unit. Natural gas would still be more expensive there and elsewhere than in the United States.

U.S. exports would take market share from traditional gas-exporting countries including Russia, although Australia also could lose some market share, said Tom Choi, natural gas market leader for Deloitte MarketPoint.

Other factors will also affect global prices, regardless of whether U.S. exports are ultimately approved, including growing natural gas production around the world. But Choi said U.S. imports could displace some high-cost production in countries including China and India.

Choi and other Deloitte executives have been asked to present the report to the Energy Information Administration.

Robertson said their research suggests it isn’t necessary to limit how many permits are issued, because the market will naturally adjust.

“Nobody’s going to build an LNG plant until they have a customer,” he said. And customers won’t sign contracts if the prices aren’t satisfactory.

“The market’s going to work that out,” Robertson said.

The Deloitte executives also discounted the idea that natural gas will be governed by a global price.

“You’ll see more convergence,” said Roger Ihne, energy client portfolio leader for mid-America.

Prices will be “rational,” Robertson said, “but they’re not going to be the same.”