|
EIA: prices to rise on LNG exports Report shows Lower 48 natural prices and production levels rising as LNG exports expand; Alaska not considered in modeling Eric Lidji For Petroleum News
While Alaska wonders if its liquefied natural gas export market will ever return, gas producers in the Lower 48 are wondering if their LNG export market will ever begin.
The U.S. Energy Information Administration has jumbled that question with a report suggesting that exports would drive up natural gas prices and increase demand for coal.
The U.S. Department of Energy requested the report to help it analyze a rush of export applications filed in the wake of rising domestic production from shale gas plays. The DOE is the agency responsible for deciding whether an LNG export proposal is in the public interest, a decision that largely comes down to questions of supply and pricing.
The DOE recently approved a request from Sabine Pass Liquefaction LLC to export LNG from a terminal in Cameron Parish, La., and is currently consider eight other applications from companies looking to export from the Gulf of Mexico and the Atlantic seaboard.
Those nine projects could export as much as 13.73 billion cubic feet per day.
The EIA considered the impact of four potential export scenarios: 6 bcf per day phased in over two years or six years and 12 bcf per day phased in over four years or 12 years.
Those volumes would represent between 9 and 18 percent of current production.
Under the model the EIA used, domestic gas prices rose in all four cases, but not in identical ways. While a rapid ramp up would cause a price spike that eventually calms, a slow ramp up led to gradual but ultimately higher prices between 2025 and 2035. The report also found that larger export volumes led to larger domestic price increases.
Even without exports, the EIA expects domestic gas prices to increase between 36 and more than 100 percent by 2035 depending on the economy and the productivity of shale resources. With exports, domestic gas prices could increase by an additional 14 to 36 percent over the coming decade, but would gradually decline between 2025 and 2035.
Alaska not considered In an attempt to isolate Lower 48 production, the report assumes that an Alaska natural gas pipeline of any kind will not be built during the study period, from 2015 to 2035.
While efforts to market North Slope natural gas in recent years have focused on an overland pipeline into Canada, a proposal that would link Alaska to the North American market, the rise of domestic production from shale is forcing state officials and company executives to consider an LNG venture that would presumably serve overseas markets.
Those shale resources are the guiding force behind other assumptions in the report, too.
The EIA expects increased domestic production, almost 75 percent of it from shale, to offset between 60 and 70 percent of the exported volumes. The remainder would come from a shift in the electric power sector to more coal and, to a lesser extent, renewable fuels, as well as “minor additional contribution from increased imports from Canada.”
While gas consumption should drop as prices rises, electricity bills would rise between 1 to 3 percent and gas bills would jump between 3 to 9 percent between 2015 and 2035.
| 