--U.S. natural gas exports would be a net benefit to U.S.
economy
--Cost to manufacturing not seen as serious
--Higher natural gas prices would erode worker's wages
(Adds details from report, comments from Dow Chemical CEO
earlier this week and analyst comments.)
By Tennille Tracy and Ben Lefebvre
WASHINGTON--A study commissioned by the U.S. Energy Department
says that natural gas exports would benefit the U.S. economy,
leading to net economic gains that would outweigh the downsides
resulting from higher natural gas prices.
The long-awaited study, twice delayed by the Energy Department,
will help the Obama administration decide whether to approve more
than a dozen proposals to export U.S. natural gas. Natural gas
producers and would-be exporters have been lobbying to ship more
gas overseas, where prices can be five time as high as that in the
U.S.
The Energy Department had delayed decisions on the pending
projects until the study was complete.
The study delivers a solid endorsement of natural-gas exports at
a time when the issue is hotly debated. Some manufacturers have
enjoyed rock-bottom prices for natural gas, thanks to the glut
unleashed by hydraulic fracturing in the U.S., and have said that
exporting too much gas could endanger their competitive
advantage.
Dow Chemical Co. (DOW) Chief Executive Andrew Liveris has been
one of the most vocal proponents of limiting LNG exports from the
U.S. to capture the benefits of cheap feedstock for the domestic
manufacturing sector.
"Let's not let the oil price bleed back into the domestic gas
market," he said this week, noting that the absence of a global gas
benchmark could result in prices for LNG exports, which are indexed
to oil prices, start to push up costs in the U.S.
Dow is one of the largest consumers of U.S. natural gas and
alongside peers is investing heavily to build new processing
facilities on the Gulf Coast to capture feedstocks that are
undercut in the world market only by gas produced in the Middle
East.
"Maybe we should be careful, permit a few [export facilities],
see how it goes," Mr. Liveris said. The company didn't immediately
reply to a request for comment on the DOE-commissioned study.
Study authors NERA Economic Consulting noted that exports would
have little impact on overall domestic manufacturing. "Serious
impact" would be limited to companies with a high exposure to
foreign competition and energy bills greater than 5% of their
output costs, the report said.
Meanwhile, higher energy costs would eat into workers' wages but
be offset by higher earnings from natural gas investments, the
report said.
"Benefits that come from export expansion more than outweigh the
losses ... and hence LNG exports have net economic benefits in
spite of higher domestic natural gas prices," the NERA study
authors said.
Nearly 20 LNG export projects have filed for Department of
Energy approval, totaling 23.71 billion cubic feet per day of
potential export capacity, roughly one third of the current U.S.
production of natural gas. So far only Cheniere Energy Inc. (LNG)
has received all the necessary permits to export from a terminal in
Louisiana to countries that do not have free-trade agreements with
the U.S., mostly in Asia, which are the biggest buyers of LNG. The
approved Cheniere terminal, dubbed Sabine Pass Liquefaction LLC,
has a projected capacity of 2.2 billion cubic feet a day.
Of the remaining proposals, only those that already have initial
agreements with buyers and existing facilities will most likely get
off the ground, said Bentek analyst Javier Diaz.
"Having a facility already in place really assures buyers," Mr.
Diaz said.
The list of potential winners include Freeport LNG in Freeport,
Texas, partly owned by ConocoPhillips (COP) and Dow Chemical;
Golden Pass LNG near Sabine Pass, Texas, a project backed by Exxon
Mobil Corp. (XOM) and Qatar Gas; and Cameron LNG in Cameron Parish,
La., owned by Sempra Energy (SRE), Mr. Diaz added.
--Doug Cameron in Chicago contributed to this article.
Write to Tennille Tracy at tennille.tracy@dowjones.com and Ben
Lefebvre at ben.lefebvre@dowjones.com
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