Exporting Natural Gas Raises Worries

 

Creative Commons/ Loadmaster (David R. Tribble)

The upsurge in drilling has led to a boost for natural gas, with prices dropping to a record 10 year low. The US is still battling with the decision of whether it should and how much of this wealth it should split between the foreign countries.

The Energy Department has recently approved Cheniere Energy’s plans (Houston) to commence with exporting liquefied natural gas from its Sabina Pass terminal  in southwestern Louisiana. However, the energy department has not yet approved similar proposals from other companies.

A report has been commissioned by the Energy Department to study the consequences of exporting natural gas from the US and its effects on consumers in America. The administration would make their decisions only after studying this report. The report will probably be out late this summer.

Heather Zichal, the energy advisor for the White House, stated that their decisions will be based on a detailed analysis. While they are keen on domestic natural gas, they also want to protect the interests of the American consumers and send across a right message to the manufacturing sectors.

This is a hard decision to make with a struggling economy in an election year. Some natural gas is already exported to Mexico and Canada from the US, through pipelines. However, the recent proposals for tanker shipments of natural gas to foreign countries would make the exports climb very high.

If the applications are approved, US could be exporting about 16 billion cubic feet of liquefied natural gas every day. However, few people are optimistic about the proposals getting the go ahead. Even after the approval has been given, it would take years for the construction to be finished on these projects.

A report released last year, stated that exporting natural gas from the US would result in high gas prices in the US.

There is a huge price variation in natural gas depending upon the location unlike crude which is a globally traded commodity. The domestic producers in the US are happy at the chance of selling natural gas at two or three times its price in the Asian and European markets.

Energy companies and analysts state that at present gas prices in the US are unsustainable. While yet others believe that exporting natural gas will cause prices to soar that will shoot up electricity bills. Industries using natural gas to fuel their plant were hit badly for the last two decades by the fluctuating gas prices.

No matter what the decision, there is risk of alienation by important constituencies. For this reason few officials have opted to push the issue. Key stakeholders, industry groups, manufacturers are keeping low, wary of being accused as free trade foes. Yet other industries are torn as their foreign counterparts could greatly benefit from cheap US gas.

The right decision is to achieve a balance that will keep the prices low enough to be able to sustain production levels.

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