DOE report: US economy would benefit from exporting LNG

Posted on 12 December 2012

The US is projected to gain net economic benefits from allowing liquefied natural gas (LNG) exports, according to a report published on 5 December 2012 by the US Department of Energy (DOE). Moreover, for every market scenario examined, the report states that net economic benefits increased as the level of LNG exports increased, and, in particular, scenarios with unlimited exports always had higher net economic benefits than corresponding cases with limited exports.

At the request of the DOE’s Office of Fossil Energy, NERA Economic Consulting assessed the potential macroeconomic impact of LNG exports using its energy-economy model. The report contains an analysis of the impact of LNG exports on the US economy under a wide range of assumptions about levels of exports, global market conditions and the cost of producing natural gas in the US.

The report found that benefits that come from export expansion more than outweigh the losses from reduced capital and wage income to US consumers, and hence LNG exports have net economic benefits in spite of higher domestic natural gas prices.

According to the report, net benefits to the US would be highest if the US becomes able to produce large quantities of gas from shales at low cost, if world demand for natural gas increases rapidly, and if LNG supplies from other regions are limited. If the promise of shale gas is not fulfilled and costs of producing gas in the US rise substantially, or if there are ample supplies of LNG from other regions to satisfy world demand, the US would not export LNG. Under these conditions, allowing exports of LNG would cause no change in natural gas prices and do no harm to the overall economy.

Further, the report forecasts that US natural gas prices will increase when the US exports LNG. However, the global market limits how high US natural gas prices can rise under pressure of LNG exports because importers will not purchase US exports if US wellhead price rises above the cost of competing supplies. In particular, the US natural gas price does not become linked to oil prices in any of the cases examined.

Click here to read the full report.

Leave a Reply

*

FEATURED MICROSITES


Recent Drilling News

  • 22 October 2014

    Shell discovers gas in pre-salt reservoir offshore Gabon

    Shell announced a frontier exploration discovery offshore Gabon, West Africa. The well Leopard-1 encountered a substantial gas column with around 200 m net gas pay…

  • 22 October 2014

    Statoil proves new oil resources near Grane field in North Sea

    Well 25/8-18 S, drilled by the rig Transocean Leader, proved an oil column of 25 m in the Heimdal Formation. The estimated volume of the discovery…

  • 21 October 2014

    IADC Cybersecurity Task Group to provide industry guidance to assess risks

    The oil and gas industry is not immune to cybersecurity threats, from computer viruses and malware to targeted attacks. The IADC Advanced Rig Technology (ART) Committee…

  • 21 October 2014

    Check-6 launches RIGOR digital checklist and compliance system

    Check-6 has launched RIGOR, a checklist-based mobile app to help simplify complex procedures and mitigate human error on the rig. Taking lessons from the aviation industry…

  • 21 October 2014

    Video: Next IADC Land Contract update to start in 2016

    The latest version of the IADC Land Contract was released in November 2013. Various incidents, including Macondo, delayed the release. “It’s an industry contract…

  • Read more news