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Are There Really Benefits to U.S. LNG Exports?

By Daniel J. Graeber | Mon, 28 January 2013 23:11 | 0

Supermajor Royal Dutch Shell announced it landed a deal with Kinder Morgan to get liquefied natural gas out of a terminal in the southern United States. There's only one facility in the region that has the permits needed to get LNG out of the country, though that's still under construction. Last year, a report commissioned by the U.S. Energy Department touted the economic prospects of natural gas exports to the degree that trade groups embraced the resource as one of the future bright spots for the country. While Shell's deal is likely to give momentum to future LNG exports, the devil is in the details.

"This announcement underscores how the abundance of natural gas in the U.S. is changing the energy landscape," said Marvin Odum, president of Shell Oil Co., in a statement. "With a measured, phased approach, exports of cleaner burning natural gas can help meet the world’s rising energy needs while also giving a boost to the U.S. economy."

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Last year, a report commissioned by the U.S. Energy Department found that, for every market scenario examined, the greater the volume of LNG exports, the greater the economic gain.  Furthermore, capitalizing on the vast quantities of shale natural gas in the United States could yield even greater benefits for the emerging natural gas leader.

When the shale boom in the United States was in its infancy, U.S. billionaire T. Boon Pickens wrote that natural gas could help lead to a low-carbon revolution that "may be the greatest economic opportunity of the 21st century." Before then, it was thought that the United States would be a net importer of natural gas for years to come. Now, however, the United States is estimated to hold more energy in the form of natural gas than what Saudi Arabia holds in oil. And that gas needs to find a way into the export market.

John Felmy, chief economist for trade group American Petroleum Institute, said the Energy Department should quickly approve pending applications for LNG exports. Doing so, he said, would be a major win for the U.S. economy.

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"It would mean more jobs and growth and less debt – key priorities of the American people" he said in a statement.

The Energy Department report found that permitting LNG exports would result in major shifts in terms of which industries are hiring in the United States. "In no scenario," however, is that shift expected to actually create more jobs. Environmental advocacy group Sierra Club, meanwhile, said it was "baffling" that the report left out an assessment on the risks associated with hydraulic fracturing, which would likely increase once LNG exports get under way.

Shell and Kinder Morgan said they agreed to modify an existing LNG terminal near Savannah, Ga., so that it could accommodate future LNG exports. Last year, the project received the green light to export more than 500 million cubic feet of natural gas per day to countries with free-trade agreements with the United States. An August filing was for non-FTA countries. Kinder Morgan's CEO Richard Kinder said that, once finalized, the project would put even more momentum behind U.S. natural gas developments and help with the overall trade balance between the United States and other countries. Overall net benefits, however, remain to be seen, as the "impacts will not be positive for all groups in the economy."

By. Daniel J. Graeber of Oilprice.com

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