DOE Study: LNG Exports Will Boost U.S. Economy

Mark Green
Posted December 5, 2012

Big news in a just-released study conducted for the U.S. Energy Department, which finds that allowing U.S. liquid natural gas exports would help the economy – and increasingly so as LNG exports grow. NERA Economic Consulting analyzed 16 different export scenarios, incorporating different assumptions about U.S. natural gas supply and demand and different export levels:

"Across all these scenarios, the U.S. was projected to gain net economic benefits from allowing LNG exports. Moreover, for every one of the market scenarios examined, net economic benefits increased as the level of LNG exports increased. In particular, scenarios with unlimited exports always had higher net economic benefits than corresponding cases with limited exports."

Other key details:

• Economic benefits consistently increase as the volume of natural gas exports increases. Even though domestic natural gas prices are affected by exports, the value of those exports also increase so that there’s a net gain for the overall economy.
• Net benefits to the economy would be highest if the U.S. is able to produce large quantities of natural gas from shale at low cost, if world demand increases rapidly and if LNG supplies from other regions are limited.
• Natural gas price changes attributable to LNG exports stay in a relatively narrow range across all scenarios studied.
• LNG exports aren’t likely to affect overall U.S. employment. NERA projects some shifts in workers – to industries associated with natural gas production from other industries – but that in no scenario is the employment shift out of any industry to be larger than normal rates of turnover of employees in those industries.

This is good news and so timely as lawmakers consider LNG export policy. Currently, the Energy Department has a number of applications for export project licenses on hold while various issues are weighed.

The NERA study should help bring needed clarity – that the ongoing U.S. shale natural gas revolution, advanced by breakthroughs in hydraulic fracturing and horizontal drilling, can provide an even broader lift to our economy, if the right policies are put in place. API Upstream and Industry Operations Group Director Erik Milito:

“Today’s DOE report highlights the game-changing benefits of exporting energy. This is a big opportunity for the administration to bolster job creation and economic growth and to address the backlog of LNG export applications. The U.S. is at a historical turning point with energy due to the nation’s abundant natural gas resources. With the right policies, exports can help grow the country’s economy, help reverse our trade deficit and help bring back millions of U.S. jobs in engineering, manufacturing, construction and facility operations.”

Natural gas from shale is a big reason why America is energy rich. The U.S. Energy Information Administration’s just-released Annual Energy Outlook 2013 Reference case projects that the United States will become a larger exporter of natural gas than it forecast last year, with production outpacing domestic consumption by 2020.

Again, if policies allow, we could see big benefits for the U.S. in terms of energy, jobs and a boost for our country’s trade balance sheet and overall economy – thanks to fracking and shale gas development.