Increased prices a concern with liquified natural gas exports
By Burton Speakman
Increased natural-gas exports could mean that consumers will pay nearly double for the resource, or it might not mean that much at all, according to the varying opinions of financial consultants.
There is no doubt why the industry wants to expand natural-gas exports. The companies involved in natural gas are “bleeding red on their balance sheets,” said Deborah Rogers, founder of the Energy Policy Forum and a former investment banker and financial consultant.
What’s more, she added, an increase in such exports will cause the consumer to pay more for electricity and heat if they rely on natural gas for their energy needs.
“The billion-dollar question is by how much?” Rogers wonders.
The natural-gas industry and the U.S. Department of Energy are relatively confident that natural-gas prices in the U.S. will not be affected by exporting, but Rogers believes the concept is “rubbish.”
In the U.S., companies are currently earning near $3.60 per thousand cubic feet of natural gas. Rogers estimates that they could get as much as $18 per mcf in China.
Natural-gas companies say it would cost them $9 per mcf to ship the product to China, and they would make about $12 per mcf, but that’s still a $3 per mcf spread, Rogers said. Profit in the China market is much higher than what they’re making domestically.
There is an expectation that increased exporting could raise domestic prices by as much as $3 per mcf, she said.
“Demand will be disrupted at some point,” Rogers said. “It will be too attractive to companies to export.”
The issue is, the industry does not want to acknowledge a potential price increase because then the public would not support more exports, she said.
Not everyone agrees with Rogers’ assessment.
Liquefied natural gas could be exported without having much of an impact on gas prices, said U.S. Rep. Bill Johnson of Marietta, R-6th, who represents Columbiana County. The increase would either be none or minimal.
There is enough production capability to increase exports without harming domestic prices, he said.
The idea that increasing natural-gas exports will cause American consumers to pay more for natural gas at their homes is “silly,” said Mike Halleck, Columbiana County commissioner
“Until I got the facts, I agreed with that view 120 percent,” he said.
The facts Halleck are referencing are the reports from the U.S. Department of Energy.
There could be some impact on the price the average consumer pays for natural gas, but it shouldn’t be enough to hurt manufacturing growth or create hardship, said Eric Planey, vice president of International Business Attraction for the Youngstown/Warren Regional Chamber.
There simply is not expected to be enough LNG export capability to overwhelm the available domestic supply, he said.
The expectation is that the price of natural gas in the U.S. will rise to $5 to $6 per mcf regardless if exporting occurs, said Dan Donovan, director of media relations for Dominion Gas Transmission.
“Nearly every study shows that increased exports will have a negligible impact on the price of natural gas,” he said. Donovan also does not believe the expected increases in natural-gas prices will have a negative impact on manufacturing costs due to increased costs for energy.
European companies pay an average $12 per mcf for natural gas, and Asian companies pay $17. Domestic natural gas at $5 to $6 per mcf still leaves American manufacturers with significant advantages in terms of energy costs, Donovan said.