Paper: Exporting US natural gas will hike US price – WSJ.com

Paper: Exporting US natural gas will hike US price – WSJ.com.

Paper: Exporting US natural gas will hike US price

Associated Press

PITTSBURGH — Exporting natural gas overseas, as some companies are pushing for government approval to do, will significantly drive up prices in the United States, a newspaper reported Sunday.

The Pittsburgh Tribune-Review says prices of natural gas overseas are as much as triple those in the United States, and the largest expected customers for U.S. gas exports would include China and, other Asian nations as well as Europe.

On May 20, the Department of Energy 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 approval of overseas export of U.S.-produced gas from the lower 48 states. Cheniere said declining prices of U.S.-produced natural gas had slowed drilling, and access to international markets would induce more drilling and boost U.S. employment.

While no one knows the amount that such exports would increase domestic prices for natural gas, since that would be affected by supply and amount of exports, the department cited a consultant’s report submitted with Cheniere’s permit application in estimating that natural gas prices in the United States would increase up to 11.6 percent when the Sabine terminal begins exports in 2015.

Rep. Tim Murphy, R-Pa., who represents a western Pennsylvania district with Marcellus gas resources and co-chairs the congressional Natural Gas Caucus, questioned the department’s decision.

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

Two other concerns have requests pending before the energy department to export domestic 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.

The Tribune-Review said those requests, if approved, combined with the Sabine permit would represent 8.4 percent of U.S. production. And at least two other companies have indicated that they are considering similar applications.

San Diego-based Sempra Energy, with terminals in Louisiana and Mexico, announced last week that it might ask to export natural gas. Earlier this year, Dominion Resources, a Virginia-based energy company with transmission operations in Pennsylvania, told the paper that it is talking to customers about applying to turn its Cove Point importing terminal in Maryland into an LNG exporting facility to send gas from the Marcellus shale formation overseas.

The Tribune-Review said its analysis indicated if Sempra and Dominion Resources were allowed to export the average of the amount of natural gas requested by Sabine and the two pending applicants, that would mean that 13.9 percent of America’s annual natural gas production could be exported based on 2010 figures.

Paul Cicio, president of the Industrial Energy Consumers of America, which represents American manufacturers, called the prospect of four or more exporting facilities “absolutely frightening” in terms of its impact on manufacturers. David Schryver, executive vice president of the American Public Gas Association, which represents 700 public gas companies in 36 states, told the paper he thought it would be “bad policy.”

Texas billionaire T. Boone Pickens, an advocate of natural gas, told the paper that exporting large amounts of natural gas overseas would not only be a mistake but a security issue that would mean “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.

Stanford professor Jeremy Carl, who studies China and Indian energy issues, said he is not certain that the Cheniere approval would set off a chain reaction because of potential market price variability and the high cost of building export facilities. Equipment needed to convert natural gas to a liquefied form suitable to put into special tankers can cost billions of dollars, he said.

Still, Carl said, “the Pittsburgh story is particularly compelling. … First, Pittsburgh lost its steel industry to China. Now it’s going to export its natural gas there.”

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Information from: Pittsburgh Tribune-Review, http://pghtrib.com

—Copyright 2011 Associated Press