Report endorses expansion of U.S. LNG exports

6 December 2012
By Rachael Fergusson
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An LNG tanker

An LNG tanker

A U.S. government-sponsored report has endorsed expanding LNG exports.

Shipping the nation's surplus gas abroad would help the overall economy even though it would raise energy prices, the report, commissioned by the Energy Department said.

The study is expected to help shape the Obama administration's response to more than a dozen proposed export projects that have been put on hold over the past year, as a surge in shale gas production upended the market and depressed domestic prices.

NERA Economic Consulting said it examined the impact of LNG exports in 63 scenarios and found exports to be a net benefit for the economy under each of the conditions.

"Moreover, for every one of the market scenarios examined, net economic benefits increased as the level of LNG exports increased," said the study.

However, it also warned that the benefits would not be shared evenly. Although owners of natural gas resources and many downstream investors will benefit from the export boom, regular wage-earners will be hit with higher home heating costs, the report said.

"Households will be negatively affected by having to pay higher prices for the natural gas they use for heating and cooking," the study found.

Although energy costs would rise for some households, the report said the increase in export revenues would offset this and lead to increase real income for U.S. households.

Over the past year LNG exports have become an increasingly contentious issue, pitting manufacturers - concerned that exports will raise prices - against gas drillers who argue that exports are necessary to keep production going strongly.

The Obama administration has wrestled with how to walk the balance, deferring a decision on whether to permit any additional projects pending the NERA report.

The battle will drag into next year, as the Department of Energy sets aside more than two months to gather public input on the report and opponents line up to highlight its flaws - including the fact that the shale gas revolution is moving too quickly to anticipate its full effects.

Despite the high profile nature of the economic report, the administration has stressed it will be only one of the factors the department considers as it moves ahead with its review process. Various groups, from manufacturers to environmentalists, have attempted to make their views heard.

The report comes as the Energy Information Administration projected that U.S. natural gas production would grow faster over the next two decades than previously expected.

Natural gas output is seen rising to 31.41 trillion cubic feet in 2035 from 27.99 tcf forecast last year. Natural gas production is expected to hit 33.21 tcf by 2040, the EIA said in its annual energy outlook.

The surge in production would allow the country to be a net exporter of gas as early as 2016, the agency said, projecting 4.4 billion cubic feet a day in exports by 2027.

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