In a newly-released study, the U.S. Department of Energy predicted that natural gas prices for U.S. households will rise because of demand from buyers in Europe and Asia, who will be able to purchase more American gas as new LNG plants come online. The LNG and petroleum industries quickly pushed back on the report, and many energy-industry commentators have suggested that DOE's analysis is flawed or motivated by election-year politics.
American LNG export capacity is on track to double by 2028, from about 14 billion cubic feet per day (bcf/d) to 28 bcf/d, and DOE anticipates that it could double again to 56 bcf/d by midcentury. The study predicts that if not controlled, this expansion would raise Henry Hub gas wholesale prices by 30 percent and U.S. household electricity prices by four percent.
"DOE analysis exposes a triple-cost increase to U.S. consumers from increasing LNG exports – the increasing domestic price of the natural gas itself, increases in electricity prices (natural gas being a key input in many U.S. power markets), and the increased costs for consumers from the pass-through of higher costs to U.S. manufacturers," said Energy Secretary Jennifer Granholm. "Any sound and durable approach for considering additional [LNG plant] authorizations should consider where those LNG exports are headed, and whether targeted guardrails may be utilized to protect the public interest."
The department cautioned that unlimited exports of low-cost American LNG would benefit China, America's primary strategic competitor and the world's largest consumer of liquefied natural gas. Chinese buyers have signed offtake agreements with more than half a dozen American LNG plants, including Calcasieu Pass, Corpus Christi Stage III, Calcasieu Pass 2, Plaquemines LNG, Rio Grande LNG, Sabine Pass, and Mexico Pacific Limited.
Many industry experts were skeptical that increased LNG exports would impact American gas pricing. Jack Weixel, senior director at East Daley Analytics, told Hart Energy that more LNG export capacity would just absorb the existing, unrealized gas output from fields near the Gulf Coast. In the Permian Basin, natural gas has been priced below $0 for much of this year, and this underused volume is simply waiting for a new source of demand - like an LNG plant, Weixel suggested.
Dan Byers, VP of Policy at the U.S. Chamber of Commerce's Global Energy Institute, noted that predictions of extra-high gas prices had been made before and had not come to pass - because American gas producers have room to increase supply. "Just last week DOE itself published an analysis showing that U.S. natural gas prices reached all-time lows in November. This is thanks to America’s enormous natural gas resource base, wherein upstream producers anticipate future demand and respond with additional production," Byers said in a statement.
Byers noted a parallel Chamber of Commerce-backed study produced by S&P Global, which predicts a domestic gas price increase of 0.7 percent by 2040 if LNG exports grow without restrictions.
