U.S. likely to cap gas exports - analysts

Fri Jun 8, 2012 7:44pm IST

Related Topics

Stocks

   
Priyanka Gandhi Vadra, daughter of Congress party chief Sonia Gandhi, adjusts her flower garlands as she campaigns for her mother during an election meeting at Rae Bareli in Uttar Pradesh April 22, 2014. REUTERS/Pawan Kumar

Election 2014

More than 814 million people — a number larger than the population of Europe — are eligible to vote in the world’s biggest democratic exercise.  Full Coverage 

* Petrochemical, refinery sectors to gain from export caps

* U.S. still expected to export 40-80 bcm/year

* Most of U.S. exports to go to Europe

* Asia to benefit from ripple effect

By Henning Gloystein

LONDON, June 8 (Reuters) - Industrial lobbying in the United States is likely to put a cap on potentially huge natural gas exports, benefiting domestic industries such as petrochemicals and refining, but limiting export profits from gas-hungry Asia and Europe.

The U.S. has experienced a boom in shale gas exploration, which will potentially turn it from a net importer of natural gas into a gas exporter. Several companies have applied for licences to export excess domestic reserves to Europe and Asia.

Baringa, a London-based consultancy with a focus on energy, said that between 40 and 80 billion cubic metres (bcm) of liquefied natural gas (LNG) will be exported each year, starting from 2015.

These figures are below some estimates that expect U.S. LNG exports to rise above 110 bcm by 2020, but Baringa's Jayesh Parmar and other analysts have said that political pressure could limit export capacities.

"There is a lot of lobbying in the U.S. to limit LNG exports and to instead use the gas to allow the domestic industry to benefit from low energy prices," Parmar told Reuters.

"Petrochemicals and refined products, as well transportation industries that use natural gas, stand to gain from such a policy, and this could change the entire oil balance in the U.S. economy."

A report this week by Eurasia Group, the New York-based political risk consultancy, said: "Resource nationalism is the biggest political risk to U.S. LNG (exports), with many opponents to exports concerned about the impact on domestic natural gas prices."

SIGNIFICANT IMPACT IN EUROPE

While reduced LNG exports from the United States may mean that some of the proposed export terminals will not receive government approval, the volumes are expected to be sufficient to affect gas markets.

Baringa said that 40-80 bcm of annual export capacity "might not be massive on a global scale, but on a European scale it would have significant impact when compared with Britain's annual consumption of 100 bcm."

Parmar said that exports would begin around 2015 and gradually rise to their peak as new export licences for LNG terminals become available. "We expect around two or three (out of five) currently proposed U.S. LNG export terminals to go all the way to exporting gas," he said.

So far, only Cheniere Energy's LNG plant at Sabine Pass, Louisiana, has export approval from the Federal Energy Regulatory Commission, which will pave the way for construction of a shipping terminal as early as 2015. Customers from Europe, India and South Korea having signed long-term supply deals with Cheniere.

Since giving approval for Sabine Pass, the U.S. government has suspended decisions on expanding U.S. gas exports until a study on the price impact on domestic consumers is completed late summer.

Although Asia would be the most profitable LNG export market, Baringa said that the majority of U.S. tankers would end up in Europe because most of the export terminals will be in the Atlantic basin.

"Most LNG export terminals will be in the Gulf of Mexico or on the U.S. East Coast, so physically it is hard for that gas to be contracted with the most attractive market (Asia)," Parmar said.

"The contractual flow of the incremental LNG from the U.S. exports might head to Asia. Given the location of the export terminals, the physical flows may well stay in the North Atlantic but result in displacing other LNG flows so that the effect would be increased delivery into Asia."

Parmar also said that while U.S. gas exports would impact global prices, they would not entirely wipe out the massive price differentials between gas prices in North America, Europe and Asia.

U.S. natural gas prices currently trade at about $2.5 per million British thermal units (mmBtu), Europe's around $9 and Asia's above $18 per mmBtu.

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Oil Imports

Oil Imports

India to make May-July oil payments to Iran - sources.  Full Article 

DLF Shares

DLF Shares

DLF slides 3 percent, underperforms rivals.  Full Article 

Global Economy

Global Economy

Chinese factories stalling as euro zone business picks up  Full Article 

Rupee Falls

Rupee Falls

Rupee falls for third day; foreign fund inflows key.  Full Article 

Record High

Record High

BSE Sensex hits record high for third straight day.  Full Article 

M&M Upgraded

M&M Upgraded

Credit Suisse upgrades Mahindra & Mahindra to 'outperform'  Full Article 

Breakingviews

Breakingviews

Manchester United’s crisis has silver lining  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage