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February 26th, 2013:

Export Deals Could Drive Up U.S. Natural Gas Prices

American Energy Coalition - February 26th, 2013

While state governments in the U.S. Northeast are promoting natural gas heat as a cost-saving opportunity for heating oil customers, the United States and Japan are laying the groundwork for export agreements that could expose U.S. consumers to higher natural gas prices, according to published reports.

The Financial Times reports that Japanese Prime Minister Shinzo Abe last week asked President Barack Obama to permit exports of its gas to Japan. "That Japan is interested in U.S. gas should come as no surprise," The Times reported. "Japan is the world's largest buyer of liquefied natural gas, and later this decade the U.S. will start exporting some of its huge surfeit of domestically produced shale gas in the form of LNG. But the possibility of a new east-west trade axis has huge implications for the international gas market."

The Times reports that prices in Asia are now 300 percent higher than the price of $3 to $4 per million British thermal units that natural gas is now fetching in the U.S. If producers gain ready access to the high-priced international market via exports of liquefied natural gas (LNG), U.S. gas utilities could wind up paying more for gas and passing those increases on to gas heat customers. "Japanese, Korean and Chinese buyers have, understandably, been flocking to the U.S. in search of deals," The Times reported.

As its appetite for LNG grows due to a shift away from nuclear energy after the Fukushima nuclear disaster, Japan's interest in US exports has soared, according The Times. "So far, though, there are few potential suppliers," the article states. "Of the 17 projects that have applied for a permit to export LNG to countries without a free-trade agreement with the U.S., only one — Cheniere Energy's Sabine Pass venture in Louisiana — has been awarded one."

That could change soon if a group of U.S. Senators get their way, according to a recent report by The Energy Collective. The website reports that a bipartisan group of U.S. senators has written Energy Secretary Steven Chu, urging the government to support LNG exports. "Senators Jim Inhofe and Tom Coburn of Oklahoma, Mary Landrieu and David Vitter of Louisiana and Mark Begich of Alaska authored the letter to Chu, whose department currently is reviewing more than a dozen applications for federal licenses to build LNG export facilities," the report states. 

The Department of Energy (DOE) is also hearing from the governors of Virginia and Wyoming as well as energy giants ExxonMobil and Royal Dutch Shell, who are advocating for looser restrictions on LNG exports, according to a report by TheHill.com.

Chemical giant Dow is one of the companies speaking out against LNG exports as a threat to natural gas prices in the U.S. Dow has stated that the unfettered export of natural gas is "widely understood" to have serious implications for the cost and volatility of natural gas, according to an article on ChemistryWorld.com.

To read the Financial Times article, click here.

To read the Energy Collective article, click here.

To read the article on TheHill.com, click here.

To read the Chemistry World article, click here.

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