HOUSTON—Gas prices have been the talk of the town at a world energy conference here all week.
No, not the gas prices nearing $4 per gallon that are the concern of lawmakers on Capitol Hill, but natural-gas prices, which on Thursday were at worldwide lows of $2.30 per million British thermal units (down from nearly $14 per million Btu in 2008).
Top energy executives assembled for the IHS Cambridge Energy Research Associates conference offered varying perspectives about whether or how much the United States should export its overly abundant supply of natural gas. The export issue has dominated the conversations about natural gas that have been the focal point of this year's conference, which annually attracts hundreds of experts from all segments of the energy industry.
“I would see a certain amount of [natural gas] being exported over the next few years,” Royal Dutch Shell CEO Peter Voser told reporters this week at the conference. “Personally, I think in the longer term the gas in the United States has a great future to actually drive manufacturing industries within the states.”
The near record-low natural-gas prices are due largely to the vast reserves of shale natural gas recently discovered throughout the country, which is creating an oversupply of gas and causing prices to plummet. The unusual warm winter throughout the country has also lessened demand for natural gas for home heating.
Faced with a glut of the energy source, some companies are looking to export it to other parts of the world, namely Europe or Asia, where they can sell it for more because demand is higher.
Cheniere Energy, the first company to get approval from the Energy Department to export gas to countries that are not free-trade partners with the U.S., is expected to break ground as soon as April on the country’s first export terminal for natural gas since 1969. The terminal would be in Louisiana; the only other U.S. export terminal is in Alaska, but it is primarily used to send gas to the lower 48 states. Federal law requires the government to approve export plans to 15 nations that are trading partners, but companies seeking to export gas to other countries must get approval from DOE. There are several other companies also seeking DOE approval to export natural gas.
Virginia-based utility Dominion hopes to gain approval from DOE later this year to export natural gas from a facility in Maryland. Dominion CEO Thomas Farrell dismissed the concern that exporting natural gas—at least from his proposed facility—could substantially raise prices or inject volatility into the market, a problem the gas industry has had in the past.
“Even in the most extreme case going out 15 to 20 years, it’s a very modest impact on gas prices,” Farrell said in an interview on the sidelines of the conference. He noted that the economic benefits of the export facility, including job creation and tax revenues, would outweigh any potential detriments to the project, including the concern of any rise in natural-gas prices.
Experts agree that one export facility considered in isolation probably wouldn’t have much effect on prices, but the cumulative, longer-term effect of multiple export facilities is less certain. A recent Energy Information Administration report found that natural-gas exports could raise U.S. prices by as much as 9 percent over the next two decades.
“I assure you that we will review the data carefully as we consider U.S. policy moving forward,” Energy Deputy Secretary Daniel Poneman told conference attendees in a speech this week. “We will not take any actions on the pending export applications until our ongoing review of this issue is completed and we have had an opportunity to review the results.” DOE is expected to complete its study later this year.
Some industry executives in the manufacturing sector are more cautious about exporting natural gas because their companies benefit from low gas prices.
“We are for exporting natural gas, we just want to see it exported in solid form as opposed to liquid form,” Dow Chemical CEO Andrew Liveris said in a speech at the conference. He was referring to the liquefied form that gas is in directly after being extracted and before it is processed into another product. Liveris was asked about liquefied natural-gas exports during a panel discussion.
“Some exports will occur and I think that’s logical,” Liveris responded. “We got to be careful. Five percent of gas being exported — that would affect domestic gas prices. We have to be thoughtful and look to the government: What do you want to do with respect to job creation inside the country?”
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