(Updates with comments from Asian buyers)
* Report says the greater the exports, the more benefits
* Export application decisions after comment period-DOE
* Report confirms prices will rise for consumers-lawmakers
* More than dozen companies waiting on export approval
By Ayesha Rascoe
WASHINGTON, Dec 6 A U.S. government-sponsored
report gave full-throated endorsement on Wednesday for the
expansion of liquefied natural gas exports, saying that shipping
surplus gas abroad would help the overall economy, despite
raising energy prices.
The report, commissioned by the Energy Department, is
expected to help shape the Obama administration's response to
more than a dozen proposed export projects 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.
"Moreover, for every one of the market scenarios examined,
net economic benefits increased as the level of LNG exports
increased," the study said.
But the benefits would not be shared evenly, it warned.
Although owners of natural gas resources and many downstream
investors will benefit from the export boom, regular
wage-earners will face higher home heating costs, the report
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 strong.
The Obama administration has wrestled with how to strike a
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 pace of the shale gas revolution is
too swift to anticipate its full effects.
Dow Chemical, one of several industrial firms expanding U.S.
operations in hopes of using cheap energy supplies, said the
report was based on "outdated and therefore inaccurate
estimates" of future gas demand, spokeswoman Nancy Lamb told
Reuters in an e-mail statement.
Asian LNG buyers, especially Japanese utilities, which have
been eagerly anticipating cheaper North American supplies, are
likely to applaud the report, which some see as signalling a
greater chance of exports.
"It's a very good news for Japan, though it's somehow
expected," said Akira Ishii, senior visiting researcher in oil
and gas business at state-backed Japan Oil, Gas and Metals
National Corp (JOGMEC).
"A political judgment has yet to be made. But I think the
report would make it difficult for President Obama to say no."
Japan, the world's largest importer of LNG, has been
increasingly reliant on LNG since the Fukushima disaster in 2011
knocked out much of its nuclear power capacity.
It is still unclear how much volume will be exported and
which proposed projects will eventually be approved, Ishii said,
One South Korean utility source said sourcing LNG from the
U.S. could cut costs as much as a quarter.
Asian LNG long term prices are typically oil-linked, making
them pricier than U.S. LNG prices, which have been pressured by
the country's shale gas boom. While Asian spot prices now hover
around the $15.50 per million British thermal unit (mmBtu)
level, U.S. gas prices are still under $4 per mmBtu.
REVIEW TO CONTINUE
Despite the high profile nature of the economic report, the
administration has stressed it will be only one factor
considered by the department in its review.
Various groups, from manufacturers to environmentalists,
have aired their views.
The report comes as the Energy Information Administration
projected Wednesday 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
exports of 4.4 billion cubic feet a day by 2027.
Following the end of the comment period, the department said
it would make case-by-case decisions on the 15 queued
Futures prices for 2015 delivery <0#NG:> had risen as much
as 14 cents per million British thermal units following the NERA
report, as the market factored in possible expanded exports,
said Teri Viswanath, an analyst at BNP Paribas.
"There's not going to be a large price impact, but it's
another source of demand growth for gas," she said.
While gas exports would have a positive effect on the U.S.
economy overall, selling gas to foreign countries will raise
prices for consumers, 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.
Leading U.S. lawmakers challenging gas exports homed in on
the report's findings that prices would rise.
An influential skeptic in Congress said the report did not
change his mind about the need to "look before we leap" to open
"If you say there's no shortage of gas and you decide you're
going to export an awful lot of it, that can raise prices here
at home," said Senator Ron Wyden, an Oregon Democrat and the
incoming chairman of the Senate energy committee.
"I've got an awful lot of American companies and American
manufacturers who are concerned that can hurt their ability to
grow in the United States, and hurt consumers," he said,
explaining that he was waiting to hear what factors Energy
Secretary Steven Chu will use to rule on applications.
Although energy costs will rise for some households, the
report said the increase in export revenues would offset this
and lead to increased in real income for U.S. households.
Congressman Edward Markey, the top Democrat on the House
Natural Resources committee, expressed concerns that the report
may be underestimating the negative impacts on American workers
and manufacturing due to old data.
COMPANIES SEEK APPROVAL
Drilling innovations have unlocked vast shale oil and gas
reserves, placing the United States in a position to be a major
exporter. Several years ago the United States was thought likely
to be more dependent on foreign gas.
Companies such as Dominion, Sempra and Exxon
Mobil have now lined up to get permission to sell the
country's cheap abundant natural gas overseas, where it can
fetch much higher prices.
The Energy Department's authorization is needed to export
natural gas to all but a handful of countries with free trade
Following its first and only approval of a gas export
terminal, Cheniere's Sabine Pass, the Energy Department
said it would delay decisions on projects while it commissioned
this study to help guide the review.
U.S. Senator Lisa Murkowski, the top Republican on the
Senate energy committee, applauded the report and said it may be
time to revisit the department's review process for exports.
"The conclusions in this report on the benefits to the
economy should inform the DOE approval process regarding
exports," Murkowski said.
Fred Upton, the Republican chairman of the House Energy and
Commerce committee, said the report should "pave the way" for
(Additional reporting by Roberta Rampton, Joe Silha, Edward
McAllister, Ernest Scheyder in NEW YORK, Risa Maeda and Osamu
Tsukimori in TOKYO, Jane Chung in SEOUL, Rebekah Kebede in
PERTH; Editing by Bernard Orr, Dale Hudson, Marguerita Choy,
M.D. Golan and Clarence Fernandez)