Greater numbers of liquefied natural gas (LNG) exports could result in higher gas prices in the future, according to a recent report by the Energy Information Administration (EIA). The report, “Effect of Increased Levels of Liquefied Natural Gas Exports on U.S. Energy Markets,” considered several scenarios, including theoretical exports of 12 Bcf/d, 16 Bcf/d and 20 Bcf/d. EIA’s baseline cases from its 2014 Annual Energy Outlook were also used.
EIA found that exporting LNG could raise natural gas prices received by producers by between 4% and 11% by 2040, and markets could feel the effect as early as next year. “Generally, natural gas prices increase relative to their respective base cases, with the greatest impact during the 2015-25 timeframe when LNG exports are ramping up,” according to the report. Meanwhile, residential and commercial customers will see a significantly lower increase of 2% to 5%.
Exports will also result in increased production and a balancing of natural gas markets in the U.S., according to EIA. “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,” according to the report. “Across most cases, about three-quarters of this increased production comes from shale sources.”
Highlights from the report include:
- Responding to higher gas prices, the electric generation mix shifts toward other energy sources such as coal and renewables. “There is also a small reduction in natural gas use in all sectors from efficiency improvements and conservation.”
- Increased exports result in higher energy-related CO2 emissions in the United States. “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 that for some cases increases both fuel use and emissions intensity.”
- Higher levels of economic output in the U.S. “Economic gains, measured as changes in the level of GDP relative to baseline, range from 0.05% to 0.17% and generally increase with the amount of added LNG exports required to fulfill an export scenario for the applicable baseline.”
- Higher levels of domestic consumption expenditures for goods and services. “In most cases, U.S. consumers increase their consumption expenditures as the positive impacts of increased energy production outweigh energy price changes.”
- According to the report, “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.”
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