Wednesday, December 5, 2012

Alaska LNG| An important development ...

The Department of Energy released this afternoon the long awaited and much anticipated two studies (one from the Energy Information Administration and the second from private consulting firm NERA Economic Consulting) it had commissioned on LNG exports.  The studies were commissioned to evaluate the potential impact on the US economy of permitting exports of LNG from the Lower 48.

Early news reports indicate that the studies conclude, on net, that LNG exports are good for the US economy.  According to an article this afternoon in the Oil & Gas Journal
In what is perceived as a victory for the oil and gas industry, the US Department of Energy has endorsed the idea of liquefied natural gas exports as good for the US economy. A just-released study commissioned by the DOE states that the net economic benefit of LNG exports outweighs the downside even though it may bring higher natural gas prices to American consumers and manufacturers, says the agency. 
North American natural gas producers and midstream companies hoping to begin the lengthy process of building new LNG export facilities and retrofitting import terminals have welcomed the Energy Department report. They hope it will help sway the Obama administration’s decision on whether to approve more than a dozen proposed LNG export projects. The decision had been put on hold until the report was completed. 
The study delivers a solid endorsement of natural-gas exports at a time when the issue is hotly debated.
Alaska gas is not mentioned in any significant way in the reports.  By potentially broadening the competition for Asian markets and introducing a new, much lower (at the moment) pricing structure than previously has prevailed in the Asian market, permitting broad scale LNG exports from the Lower 48 may actually serve to undermine the export of Alaska LNG.

We will write more on this development in the coming days.

The reports are available through links at from the DOE website at the bottom of the following page:  http://www.fossil.energy.gov/programs/gasregulation/LNGStudy.html.