White House Signals Support for Natural Gas Exports

President Barack Obama said in a speech that the U.S. is likely to be a net exporter of natural gas by 2020, the Financial Times newspaper reported May 6. The newspaper said the president’s remarks, which were made in Costa Rica, are the strongest signal yet that the administration is leaning toward supporting export ventures.

Just a decade ago, conventional wisdom held that the U.S. would be a major importer of liquefied natural gas (LNG) supplied from outside North America. Recent domestic production increases stemming from hydraulic fracturing technology tapping tight sands and shale rock formations have ended those import scenarios and led instead to a surge of proposals to export natural gas. Global prices for LNG are around three times those at Louisiana’s Henry Hub, which sets the U.S. benchmark price for natural gas.

Tom Donilon, national security advisor to Obama last month said, "Many of our allies have expressed an interest in the potential of the U.S. as a global natural gas supplier." For example, Japan’s efforts to replace generation lost from nuclear power plants that were closed after the March 2011 Fukushima Daiichi accident have forced Japan to rely on imports of fossil fuels. This past January, Japan’s Finance Ministry posted a trade deficit of $1.74 billion, blaming the gap on the cost of importing LNG plus a weaker yen. Japan has become the world’s largest buyer of LNG since the Fukushima disaster. In 2012, it imported 87.3 million metric tons, up 11.2% year on year.

Japanese industrials are looking to partner with several proposed North American LNG export projects. Those Japanese firms aim to secure stable LNG supplies and possibly reduce import prices. Mitsubishi and Mitsui are involved in Sempra Energy’s proposed Cameron, La., export facility; Sumitomo and Tokyo Gas are involved in Dominion’s proposed Cove Point, Md., export project; and Osaka Gas and Chubu Electric Power are involved in the proposed Freeport, Texas, export facility. Other industrials are participating in shale gas fields in Canada as well as in the northeastern and south central United States.

Some industrial firms oppose LNG exports, citing the competitive advantage low-cost energy and feedstocks offer U.S.-based manufacturing. But the Obama administration might find it difficult to ban exports at a time when it is pressuring China, for example, to ease export restrictions of rare earth minerals.

"It is very difficult as a general principle to justify export restrictions on something like this, where there’s no proprietary national security technology concerns," the newspaper quoted Peter Orszag, former White House budget director, as saying.

Philip D. Moeller of the Federal Energy Regulatory Commission (FERC) is expected to address the natural gas/electric power generation nexus May 14 in remarks during the keynote session of the ELECTRIC POWER conference in Chicago. Commissioner Moeller has led much of FERC’s work aimed at ensuring that the natural gas and electric power generation industries communicate effectively. One concern for power generators is how increased LNG exports may affect prices for electric power generation. Something of a mini-boom of natural gas–fired power plant development is under way. Around 50 GW of new generating capacity is being built across the U.S. with in-service dates anywhere between 2013 and 2017.

Sources: Financial Times, POWER

—David Wagman, Executive Editor (@EPContentDirect)

NOTE: This story was originally published on May 6