By Harry R. Weber
Energy executives and global industry officials are preparing to open an annual liquefied natural gas summit in Houston amid a growing push by producers for government permission to increase exports of the abundant American resource.
They’ll get to make their case to the right audience, since officials of the U.S. Energy Department, which issues export permits, will be among participants in the 17th International Conference & Exhibition on Liquefied Natural Gas. The four-day event starts Tuesday at the George R. Brown Convention Center.
LNG 17, as its planners call it, will include a strategy forum with senior decision-makers from major producing and importing countries. Key drivers for growth, including more U.S. exports, will be among the topics of discussion.
“We are pushing the issue just as hard as we can,” said Bill Cooper, president of the Center for Liquefied Natural Gas, a U.S. industry trade group. “However, there’s really no legal mandate to require DOE to act within a particular time-frame. So, persuasiveness is all we can bring to bear on the issue, and that we are doing.”
The matter is politically charged, because powerful manufacturing interests would prefer to keep domestic natural gas at home, and cheap.
Natural gas, chilled to liquid form, can be transported overseas in specialized tanker ships.
Billions at stake
Cooper said each export application that is approved stands to generate $5 billion to $10 billion for local economies and create thousands of construction jobs if projects to build liquefaction trains, as the production units are called, are completed. But the process has been slow-going, from the industry’s standpoint.
The Energy Department says it is reviewing public comments and processing permit applications expeditiously,Cooper noted. “But they haven’t given us any timelines when they think the consideration of those comments will be completed,” he said.
There is an automatic process for U.S. firms to obtain approval for exports to countries with which the United States has free trade agreements, but exporting to countries without such agreements is complicated and often takes longer.
More than a dozen companies have filed 20 applications pending before the Energy Department to export some 26 billion cubic feet per day of natural gas to countries that do not have free-trade agreements with the United States.
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Politics and public opinion are at play.
Chemical and manufacturing industry leaders are worried that if the Energy Department approves too many export licenses, natural gas prices will soar, jeopardizing the competitive advantage for U.S. companies that use the gas to power plants or make other materials.
Christopher Goncalves, an industry expert at the Berkeley Research Group consulting firm in Washington who will be speaking at the conference about the impact LNG exports could have on the global supply and demand balance, said the arguments on both sides are missing a key component – the effect more U.S. exports could have on prices overseas.
He said if increased exports from the U.S. are coupled with a lot of exports from Australia, East Africa and other places, excess supply could flood the global market, lowering prices overseas that now are much higher than U.S. prices and reducing the spread between U.S. and overseas prices. That could result in more of a buyer’s market than the seller’s market U.S. export proponents are seeking.
Therein lies “the true economic impact on the industrial community in North America,” Goncalves said.
U.S. natural gas closed at $4.22 per million British thermal units in trading Friday on the New York exchange. The price is several times that on some overseas markets.
Market the decider?
Achieving the right balance between the domestic and international markets for U.S. gas has led to discussion about what caps the government should impose on exports, said Marvin Odum, president of Shell Oil Co., the Houston-based North American arm of Royal Dutch Shell.
“I myself have talked about the fact that I thought a reasonable approach would be phased levels of export approval, to satisfy the concerns that are out there around natural gas prices and so forth,” Odum said. “I personally believe, for any reasonable level of exports, allowing any certain level of export, it’s going to be the market that limits that number.”
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Odum said getting a permit is just one of many steps in launching an export project.
President Barack Obama’s energy secretary nominee, Ernest Moniz, told a Senate panel earlier this month that he would review each proposal case-by-case but also would evaluate the “cumulative” price effects of selling more LNG overseas.
Talk of the town
A poll conducted last month for the University of Texas found Americans are divided about the merits of exporting the product. Twenty-eight percent of those surveyed agreed the U.S. should export natural gas to other countries, while 39 percent disagreed. The remaining 33 percent were neutral.
Against that backdrop, LNG will be the talk of the town at this week’s conference.
Tuesday will include speakers from Shell, an industry observer from Japan and U.S. and Australian government officials. The strategy forum will include officials from several major oil and gas firms, including Chevron, Exxon Mobil and Brazil’s Petrobras.
Energy expert Daniel Yergin will speak Wednesday about the global outlook for liquefied natural gas. On Thursday, Alexander Medvedev, the deputy chairman of the management committee at Gazprom, Russia’s natural-gas export monopoly, will highlight Russia’s role in the global LNG industry. Friday will close the conference with discussions on potential growth markets, technical innovation and infrastructure in the industry.
Jennifer A. Dlouhy contributed from Washington
Read FuelFix coverage of the debate over exporting U.S. fuel: