Allowing LNG exports would send positive signals, experts say

Authorizing US LNG exports would send positive signals not just to producers, but also to capital markets that would in turn finance new transportation systems, experts suggested at a conference on American energy exports.

Additional US gas resources are available, but aren’t necessarily being produced, said Kevin Book, managing director of research at ClearView Energy Partners LLC. That will require capital, which institutional and other major investors will hesitate to commit without more certain energy policies, he said on Jan. 16 at a conference cosponsored by Women in International Trade and the US Chamber of Commerce’s Institute for 21^st Century Energy.

“When you look at the Natural Gas Act, which allows exports, Congress has already said that it’s in the national interest,” added Erik Milito, the American Petroleum Institute’s upstream and industry operations group director. “We hope [the US Department of Energy] will proceed expeditiously and not apply a quasi-cap with delays.”

Federal LNG export authorization authority is divided between DOE, which determines whether a proposed project is in the national interest, and the US Federal Energy Regulatory Commission, which oversees transportation, terminal siting, and other physical matters. DOE has solicited public comments on whether LNG exports generally are in the nation’s interest.

Conference participants said that they are. “This country began when colonists protested British export taxes,” said John Murphy, vice-president for international policy at the US Chamber of Commerce. “The aversion to export restraints is part of our national DNA.”

The World Trade Organization prohibits export curbs, including for crude oil, except when readily exhaustible resources are involved, he continued. That’s clearly no longer the case with US gas, and export opponents are calling for restrictions primarily to keep prices down, which the WTO doesn’t allow, Murphy said.

Reexamine policies

Other conference speakers said federal energy policies based on growing US scarcity need to be reconsidered. Karen A. Harbert, director of the Institute for 21^st Century Energy, said when she was a DOE official in 2005, discussions about LNG terminals involved imports instead of exports. “We have to find jobs for 20 million people in the next 10 years,” she said. “Energy could provide a lot—if we let it. It’s the real engine of our economic recovery.”

Because the federal government controls so much of the nation’s energy resources, more access clearly is needed, Harbert maintained, adding, “We need to update our energy infrastructure, which has not been dramatically increased since World War II. We’re going to need more pipelines.”

Richard R. Hoffman, executive director of the INGAA Foundation at the Interstate Natural Gas Association, said the US interstate gas pipeline network already is extensive, but more is needed. Building extension lines to LNG export terminals could be easier than constructing other new oil and gas pipelines, he suggested. FERC, unlike some federal regulators, has a transparent and consistent permitting process, Hoffman said.

Kevin Jianjun Tu, a senior associate in the Carnegie Endowment for International Peace’s energy and climate program, said US attitudes toward foreign investment in domestic energy projects also need to be reexamined.

The US oil and gas outlook has changed significantly since 2005, when the Chinese National Offshore Oil Corp. expressed interest in buying Unocal Corp., he noted. US crude oil imports, which accounted for about 60% of total US consumption then, have fallen to about 40%, Tu said. Chinese investment in US projects now would be more efficient than trying to duplicate US shale production successes there, he indicated.

Temper enthusiasm

Other conference speakers warned against becoming too enthusiastic about US oil and gas development growth prospects. “Being an energy analyst in Washington these days is like being a central banker in Europe—having to pull the punch bowl back a little when folks start to get too excited,” said Robert McNally, president of the Rapidan Group.

McNally said when he was the top international and US White House energy advisor from 2001 to 2003, Alaska North Slope producers and the state’s congressional delegation unsuccessfully sought a $4.36/Mcf gas price floor to support construction of a pipeline to markets in the Lower 48 states.

“The mammoth oil fields from 20-30 years ago are tired and worn-out today,” McNally said. “When people talk about the US shale oil boom now, it’s wonderful. But we’ll need about six of those just to maintain the status quo.” Demand growth could be greater than expected, he added. “Even when there’s [gross domestic product] destruction, as in 2008-09, energy demand keeps growing in the rest of the world,” he said.

Simon Henderson, the Washington Institute for Near East Policy’s gulf and energy policy program director, added, “The world will continue to rely on the Middle East for crude oil, its primary energy, through 2035. Most of the world’s reserves—65%—are there, and many of those countries have Persian Gulf coastlines.” Shipments will increasingly head east instead of west, particularly to China and, increasingly, India, he said.

In the US, meanwhile, ASME (formerly the American Society of Mechanical Engineers), has said that transportation infrastructure improvement is badly needed—not just for pipelines, but also for roads, bridges, and railways, said Richard Myers, vice-president for policy development, planning, and supplier programs at the Nuclear Energy Institute. “Unless we dramatically improve it, we won’t have much exporting credibility,” he warned.

Contact Nick Snow at [email protected].