Natural Gas Prices Set to Jump with Exports

By Kilzer, Lou | Tribune-Review/Pittsburgh Tribune-Review, June 12, 2011 | Go to article overview

Natural Gas Prices Set to Jump with Exports


Kilzer, Lou, Tribune-Review/Pittsburgh Tribune-Review


Some companies that control America's natural gas are pushing for government approval to export gas overseas for higher profits on the international market, a move that will significantly drive up prices in the United States because this nation still imports more than 10 percent of its domestic needs.

Among the biggest expected customers for American gas exports: energy-thirsty China, other Asian nations and Europe.

Legendary Texas oilman, corporate raider and natural gas advocate T. Boone Pickens told the Tribune-Review that exporting large amounts of natural gas overseas is a mistake -- and a national security issue.

If we do it, Pickens said, "we're truly going to go down as the dumbest generation."

"It's bad public policy to export natural gas -- a cleaner, cheaper domestic resource -- and import more expensive, dirtier OPEC oil," he said.

The United States produced 61.83 billion cubic feet a day of natural gas last year, according to government figures, and that production continues to grow. Politicians and some companies have trumpeted that production as the key to the nation's energy independence.

On May 20, the Department of Energy quietly gave approval for Cheniere Energy Inc. to export 2.2 billion cubic feet of natural gas per day from its Sabine Pass, La., port terminal -- the first time the government granted permission to export American-produced gas overseas from the lower 48 states. The action allows exports to all countries except those to which the United States bans trade, such as North Korea.

No one knows for sure how much exporting will increase domestic prices for natural gas, which will also affect costs to heat American homes, fuel electric power, run manufacturing plants and even food. The amount of supply and exports affects that.

However, citing a consultant's report submitted with Cheniere's permit application, the DOE stated that natural gas prices in the United States will increase up to 11.6 percent when the Sabine terminal begins exports in 2015.

Republican Congressman Tim Murphy, who represents the Marcellus- rich 18th Congressional District in Western Pennsylvania and co- chairs the Congressional Natural Gas Caucus, questions the DOE decision.

"Sending natural gas overseas is the medical equivalent of bleeding a patient in order to cure him," said Murphy of Upper St. Clair. "I fear what this would do to prices."

Lining up

Cheniere told the DOE in its application that declining prices of U.S.-produced natural gas slowed drilling in American fields. Access to international markets, where prices for natural gas are as much as triple those in the United States, would induce more drilling and boost U.S. employment, the company said.

Early last week, U.S. gas futures were worth $4.80 per million British thermal units, compared to nearly $14 on the Asian spot market for liquefied natural gas (LNG).

Two other concerns have requests pending before the DOE to export American gas. Freeport LNG Expansion LP, together with Liquefaction LLC, applied on Dec. 17 to export 1.4 billion cubic feet of natural gas per day from a terminal port near Freeport, Texas. Lake Charles Exports LLC, a subsidiary of British-based BG Group and Houston- based Southern Union Company, applied to DOE on May 6 to export 2.0 billion cubic feet a day from its Lake Charles, La., facility.

If the DOE approves those requests, combined with the Sabine permit, the total 5.2 billion cubic feet a day proposed for export would represent 8.4 percent of U.S. production, a Tribune-Review analysis determined.

It might not end there. At least two other companies have publicly indicated they are mulling applications to export American natural gas.

On Tuesday, San Diego-based Sempra Energy, with terminals in Louisiana and Mexico, announced it might ask to export natural gas.

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