Dow-funded study says [LNG] prices triple with aggressive exports

by Jenny Mandel, E&E reporter

Tuesday, March 12, 2013 
Domestic natural gas prices could nearly triple by 2030 if high levels of exports are seen, according to a study paid for by Dow Chemical Co.
"If left unmonitored, high [liquefied natural gas] exports could prevail at the cost of the broader economy," the report warns.
A "likely" level of LNG exports of 20 billion cubic feet per day would send prices to $8.80 per million British thermal units in 2030, the analysis says, while a "high" export scenario of 35 bcf/day by that year would put them at $10.30/MMBtu. That is above the $6.30/MMBtu the study says would otherwise be seen in 2030, given what it describes as a "reasonable" demand forecast.
Consulting group Charles River Associates (CRA) released the study, carried out for Dow, yesterday. The analysis was commissioned to take into account a draft study of LNG exports published by the Energy Department in December and carried out by NERA Economic Consulting, as well as comments received by DOE in response to that study.
The Dow report was completed to inform the company's comments filed during a second round of feedback solicited on that study by DOE that wrapped up late last month (EnergyWire, Feb. 26).
NERA considered export scenarios with between 6 bcf/day and 12 bcf/day of exports, far less than the "likely" level reflected in CRA's assessment.
Dow did not directly publicize the study, though Charles River Associates issued a news release on it yesterday. A representative for the chemical company said it had no comment on its contents beyond the feedback submitted to DOE.
The wisdom and proper legal treatment of exporting LNG or keeping it in the United States to support domestic manufacturing and other uses have been hotly debated, and Dow has been among the loudest voices urging DOE to move slowly in approving export applications.
Some stakeholders in the debate have said Dow should provide analysis supporting its claims that energy-intensive manufacturers would be harmed by extensive exports, and the study responds to that argument. DOE is obliged to carefully consider comments received through the public comment process in deciding how to proceed on 18 projects currently awaiting broad export permits.
The analysis focuses on domestic price effects of higher LNG exports, rather than global price adjustments, and reflects announcements by manufacturing companies of "more than $90 billion" in new plants and other facilities that would, if built, consume natural gas.
It claims that the NERA study misrepresents the natural gas intensity of certain manufacturing segments and underestimates future demand from manufacturing, natural gas vehicles and the replacement of coal-fired electric power generation.
The result, CRA concluded, is an underestimate of the employment, trade balance and gross domestic product effects of expanded LNG exports.
"Current expectations for a low cost, gas-driven electricity economy and significant deployment of natural gas vehicles could be foregone due to LNG exports," the firm said.
Click here for the CRA study.