EIA Releases Second LNG Economic Study

The Oct. 29 EIA report: Effect of Increased Levels of Liquefied Natural Gas Exports on U.S. Energy Markets builds upon the earlier report issued by EIA which considered the market effects of LNG exports ranging up to 12 billion cubic feet per day (BCF). The second report considered the higher scenario of up 20 BCF. Attached to this newsletter are the two pages which contain the primary findings of the report. However, those of you who desire an even more abbreviated summary take heart. EIA finds that:

  • Producer Prices. “Projected average natural gas prices in the Lower 48 states received by producers in the export scenarios are 4% (12-BCF) to 11% (20-BCF) more than their base projection over the 2015-40 period.”
  • Consumer Prices. “Projected average Lower 48 states residential natural gas prices in the export scenarios are 2% (12-BCF) to 5% (20-BCF) above their base projection over the 2015-40 period.”
  • Domestic Gas Production. LNG exports will serve to bolster U. S. natural gas production and, in the process, generate significant domestic economic benefits: “Across the different export scenarios and baselines, higher natural gas production satisfies about 61% to 84% of the increase in natural gas demand from LNG exports, with a minor additional contribution from increased imports from Canada.”
  • Domestic End-Users. Slightly higher gas prices do effect domestic electrical generators and others, but these impacts are modest.
  • Primary Energy Use and CO2. Both rise slightly: “the 0.1% to 0.6% increase in total primary energy use and a -0.1% to 0.6% change in CO2 emissions relative to baseline over the 2015-40 period reflect both increased use of natural gas to fuel added liquefaction and fuel switching in the electric power sector.”
  • Consumer Expenditures. Natural gas bills paid by end-use consumers in the residential, commercial, and industrial sectors combined increase 1% to 8% over a comparable baseline case, depending on the export scenario and case, while increases in electricity bills paid by end-use customers range from 0% to 3%.
  • Economic Output (GDP). “Increased energy production spurs investment, which more than offsets the adverse impact of somewhat higher energy prices… Economic gains, measured as changes in the level of GDP relative to baseline, range from 0.05% to 0.17% and generally increase [as] LNG exports [rise].”
  • Growth of LNG Exports. The EIA’s Annual Energy Outlook 2014 (and not the “12 BCF by 2020” scenario specified in DOE’s instructions to EIA), “best reflects EIA’s view on LNG exports and U. S. natural gas markets more generally. […] A slower, more realistic, ramp-up in LNG export capability results in slightly lower price impacts in the early years of the projection and delays increases in domestic natural gas production that support higher LNG exports.

Responses to the EIA Report

  • America’s Natural Gas Alliance (ANGA). Erica Bowman, ANGA vice president of research and policy, said the EIA report backed up the “many benefits that our nation’s natural gas resource offers. Abundant supplies of natural gas are creating clean and affordable energy. Even under the most aggressive export scenarios the overwhelming majority of natural gas used to fill LNG export demand originates from additional production, not from existing domestic applications. In fact, domestic manufacturing consumption is projected to grow from current levels under all LNG export scenarios.”
  • American Petroleum Institute (API). The study confirms what past research has found, which is that higher levels of exports prompt more U. S. growth and increase investment in American energy security,” said API Vice President for Regulatory and Economic Policy Kyle Isakower. “Across the board, demand for exports was met with higher domestic production, showing that America has the resources to supply affordable energy here at home, while lowering the trade deficit, creating new jobs, and supporting our allies overseas. More than sixty competing LNG projects are planned or under construction on foreign shores. It’s time to lock-in America’s position as an energy superpower by speeding up the federal review process for dozens of projects still facing lengthy delays. We urge the administration to accelerate this process and work with leaders in Congress who have shown they are ready to act.”

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