In a report published yesterday, America’s Natural Gas Alliance (ANGA) urged the federal government to fast-track its approvals of U.S. LNG export terminals such as Cove Point in Maryland — the closest to gas coming out of the Marcellus Shale — which is awaiting final approval by the U.S. Department of Energy.
ANGA’s new white paper, Carpe Diem: LNG Exports Are America’s Once-in-a-Generation Opportunity, paints a compelling picture of a US energy asset that is poised to transform global markets, increase geopolitical and strategic advantages for America and its allies, and reduce carbon emissions on a global scale.
Quoting a recent report from the Potential Gas Committee (PGC), ANGA argues that the unprecedented abundance of American natural gas could allow the U.S. to reap economic, environmental and geopolitical benefits but only if action is taken quickly and decisively.
The PGC’s assessment finds that the United States possesses a technically recoverable natural gas resource potential of 2,515 trillion cubic feet (Tcf). This is the highest resource evaluation in the PGC’s 50 year history – a 5.5 per cent increase of 131 Tcf from the previous record-high assessment from year-end 2012.
When the PGC’s results are combined with the U.S. Department of Energy’s latest available determination of proved dry-gas reserves – 338 Tcf as of year-end 2013 – the United States has a total available future supply that now exceeds 2,850 Tcf, an increase of 161 Tcf over the previous evaluation.
This abundance, the report argues, created an opportunity that can only be taken advantage of if the Energy Department moves forward with swift approval of all export terminals now in its queue and asks Congress to pass legislation that will help expedite the permitting process.
ANGA chief executive Marty Durbin told reporters on a conference call that there are about 30 applications pending for the terminals, which can cost $10 billion or more to build. There’s no chance that all 30 will be built, he said, but those that have the right capital and market openings deserve the chance to succeed. He declined to predict how many terminals will eventually be built.
Durbin welcomed last year’s DOE decision to scrap its “conditional approval” stage but urged it to speed the process further by allowing applications to be passed to FERC more quickly.
Not everybody agrees, though. The glut of cheap natural gas may be a nightmare for the exploration companies but it benefits the manufacturing industry, which thanks to the abundant American shale gas has been undergoing a sort of renaissance. There are fears that the flourishing of the American manufacturing may be curtailed once the possibility to export the gas drives the prices back up.
The Industrial Energy Consumers of America – representing manufacturers with some $1 trillion in sales – has warned that when the export routes are opened, the U.S. manufacturing will follow the downward path trodden by its Australian counterpart.
“The gas industry is promoting the same reckless anti-consumer policy that they did in Australia,” IECA President Paul Cicio told StateImpact in a statement. “Now, Australian consumers are being forced to buy the equivalent of higher LNG export prices and manufacturers are shutting their doors and power plants are taking action to convert back to coal.”
To avert this scenario, IECA has appealed to the Obama administration to avoid any further export terminal approvals until the DOE defines whether gas exports are in the public interest.
Shale gas explorers have long been pinning their hopes on LNG exports to shore up their margins, but low crude oil prices have put their hopes into question.
The plan to sell gas at a profit into high-value energy markets in Asia hinged on high oil prices for U.S. Henry Hub-indexed LNG to compete with traditional supply sources of Japanese Crude Cocktail (JCC) linked LNG, but JCC has hit lows of $10/MMBtu back when oil reached the $60/bbl level. This is a far cry from the winter peak of $20.50 reached in early February.
Meanwhile, a study by Columbia University’s Center on Global Energy Policy has found that in Europe, American LNG may not be able to displace Russian gas. The report has found that Russia is likely to remain Europe’s dominant gas supplier for the foreseeable future, due both to its ability to remain cost-competitive in the region and the fact that U.S. LNG will displace other high-cost sources of natural gas supply. In the report’s modeling the authors have found that 9 billion cubic feet per day (93 billion cubic meters per year) of gross U.S. LNG exports will result in only a 1.5 bcf/d (15 bcm) net addition in global natural gas production.
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