Quotes: US MENA   Enter Symbol: NewsLetter: Search: advanced

White House needs to lift barriers to gas exports  Join our daily free Newsletter

MENAFN - Arab News - 30/01/2013

No. of Ratings : 0
Add to Mixx!


(MENAFN - Arab News) The US Department of Energy must make a historic decision in the next few months: whether to allow large-scale natural gas exports from the US.

The issue is as much about philosophy and foreign relations as the practical impact on gas prices and big energy users such as the chemical, fertilizer and steel industries.

Both sides in the debate have intensified their lobbying to influence a decision that will in theory be taken by the assistant secretary for fossil fuels but will in practice involve substantial input from political advisers in the White House.

During an initial comment period, the department received more than 370 responses ranging from Alcoa to Japan's Keidanren business association, local communities in gas-producing areas to the Sierra Club. Petitioners now have a further 30 days to submit replies before the department moves toward making a final decision.

The law states that the burden of proof lies with anyone who opposes exports to prove that they are inconsistent with the public interest. However, the public interest test remains undefined.

Some export supporters suggest the department should permit free trade in gas and allow the market to allocate it between domestic and overseas customers based on who is prepared to pay the highest price. The problem with making the "public interest" identical with market pricing is that it would make the test redundant. It seems unlikely Congress intended the statute to be read in that way when it wrote the law.

The department cannot resolve the question on its own. The issues are too complicated. It cannot balance the competing interests of potential gas exporters against the dozens of energy-intensive businesses that could expand if domestic gas remained walled off from world markets, not to mention the impact on US foreign relations. It is essentially a political decision, rather than an economic one.

Only the president can make this sort of choice.
US gas exports would contribute significantly to a more stable energy world and are overwhelmingly in the national interest of the US. The president should direct the Energy Department to approve them.

Under current law, the Department has no real power to block gas exports to the 20 countries with which the US has a free trade agreement (FTA) including Mexico, Canada and Korea. For all other countries, the Department must approve requests for exports, unless they are "not consistent with the public interest" (15 USC 717b(a)).

The department has already received and in most cases granted automatic approval for projects to export up to 31.4 billion cubic feet per day (bcf/d) to FTA countries. In practice, FTA countries are not likely to absorb this amount.
The real prize is to export to much larger, non-FTA markets. The department has already granted one request to export up to 2.2 bcf/d to non-FTA countries, but requests for another 22.6 bcf/d have been put on hold while the Department studies the impact on domestic prices and the economy.
To put these numbers in context, the US gas industry delivered 61 bcf/d to residential and business customers, as well as electric power utilities, in 2011. If all the proposed projects are given the go-ahead, exports could reach 50 percent or more of domestic gas consumption.

Export supporters like to claim the impact would be modest. Price rises would be small. Natural gas would not become (fully) linked to oil prices as it is in other parts of the world. The actual volume of exports would remain low and there would be more than enough gas to maintain adequate supplies for domestic customers.

"To the extent that allowing exports leads to potentially worrisome rises in domestic natural gas prices, exports are likely to be self-limiting ... Strong increases in domestic prices will make exports less attractive overseas. Large export volumes would most likely close off additional exports before US prices could rise too far," according to Michael Levi of the Council on Foreign Relations ("A Strategy for Natural Gas Exports" June 2012).

But that understates the true impact that allowing all these projects would have. Approving one project might not have much effect on the availability of gas and its pricing. Approving them all would inevitably create much closer integration between the American and international markets.

Like any other commodity, gas prices are set at the margin. Even if the volume of gas that actually leaves the country stays comparatively low, the existence of a network of LNG terminals with permission to export large volumes will tend to force substantial price convergence. That is what makes them so attractive to gas marketing companies.

The power of LNG imports and exports to force convergence has already been visible in the US Northeast this winter. Since November, average prices in New England ( 6.40 per million British thermal units) have been almost double the level at Louisiana's Henry Hub ( 3.43) as a result of local shortages, according to the Energy Information Administration (EIA).

But deliveries of spot gas cargoes at the region's four LNG receiving terminals have fallen, because prices are still below levels prevailing in Europe. Prices must rise until they attract cargoes from the European Union. ("Constraints in New England likely to affect regional energy prices this winter" Jan 2013)

Export supporters insist any rise in prices will be limited. But no one can know for sure the impact over the 25 years that many projects have applied for permission to export.

Supporters insist there will be "net benefits" even if prices do rise: higher export earnings would offset losses from higher domestic prices for households and businesses. Harmful effects would be limited to a relatively narrow range of energy-intensive, trade-exposed (EITE) industries such as steel that account for less than one-half of one percent of all jobs in the US. ("Macroeconomic Impacts of LNG Exports from the US" Dec 2012)
But the Energy Department's consultancy study failed to examine the extra factories and jobs that would be created if exports were restricted and domestic gas prices remained low. Industrial Energy Consumers of America, the lobbying organization for many EITE firms, lists more than 95 billion worth of new capital projects such as chemical and fertilizer plants that have been announced because of low gas prices.

By attempting to minimize the impact on domestic gas markets, supporters have botched the case for allowing gas exports.

There is no question the US could derive significant advantages by keeping its gas at home and using it to build a comparative advantage for American manufacturers. But the US has always strongly criticized such resource protectionism by other countries.

For the last four decades, the US has depended heavily on oil exports from Saudi Arabia and other nations. If Saudi Arabia had banned exports and insisted on building up its own manufacturing industry, the US would have been plunged into crisis.

The US has already opened a case against China at the WTO for trying to restrict rare earth exports to confer a competitive advantage on China's own technology manufacturers. It has accused China of giving its domestic steelmakers unfair subsidies through access to cheap loans and electricity. It cannot ban natural gas exports without inviting a charge of rank hypocrisy.
More importantly, the US cannot achieve energy security in isolation while its allies and trading partners remain exposed to volatile prices and depend on unstable and unreliable sources of gas and oil from other parts of the globe. The world is far too interconnected for the United States to declare energy independence and retreat into autarky.

Security is actually the most important reason for the US to approve exports. By expanding the volume of competitively priced gas from a stable country, US exports would help lessen the world's dependence on gas from far less stable sources. Exports of cheap US gas (and ultimately oil) would reduce the power of monopoly suppliers and curb some of the volatility that has plagued the market over the last 40 years.

- John Kemp is a Reuters market analyst. The views expressed are his own.


  MENA News Headlines
Apr 24 2014Qatar- HH Sheikha Moza Meets Mayor of Kobe Visits RIKEN Research Institution ,Qatar News Agency
(MENAFN - Qatar News Agency) Kobe April 24 - Her Highness Sheikha Moza bint Nasser Chairperson of Qatar Foundation for Education Science and Community Development (QF) today held a meeting with the ...

Apr 24 2014Qatar- Sidra-BMC Event Boosts Biomedical Research Publishing ,Qatar News Agency
(MENAFN - Qatar News Agency) Doha April 24 - A symposium organised jointly by Sidra Medical Research Centre and BioMed Central (BMC) mulled trends in research and on open access publishing here ...

Apr 24 2014Qatar- Mannai Corp Q1 Net Profit up 73% to QR 150.1 Million ,Qatar News Agency
(MENAFN - Qatar News Agency) Doha April 24 - Qatar Exchange listed Mannai Corporation (QE: MCCS) net profit is up 73% to QR 150.1 Million for the first quarter of fiscal year 2014 ending March 31 ...

Apr 24 2014Bahraini firms forecasted to grow 10 pct ,MENAFN
(MENAFN) In a report based on a study of over 650 companies across GCC, Kuwait Financial Centre (Markaz) forecasts a growth of the Bahraini companies' earnings by 10 percent in 2014, Gulf Daily News ...

Apr 24 2014Israeli Army Storms Deir Samit Village West of Hebron ,Qatar News Agency
(MENAFN - Qatar News Agency) bron April 24 - Israeli army forces stormed at dawn Thursday Deir Samit village southwest of Hebron city in the West Bank. The Israeli forces conducted raid and search ...

Apr 24 2014Qatar Airways to add more seats on Doha-Vienna route ,MENAFN
(MENAFN) Qatar Airways plans to offer more 1.700 seats on its Doha-Vienna route beginning from September 2014, according to Gulf News. The company aims to expand the growing passenger demand from ...

Apr 24 2014Qatar- QFC Authority Five-a-Side Football Tournament Kicks Off ,Qatar News Agency
(MENAFN - Qatar News Agency) Doha April 24 - Qatar Financial Centre (QFC) Authority's first Five-a-side Football Tournament is displaying dribbling skills of executives from Doha's financial ...

Apr 24 2014Qatar Stock Exchange Down 0.05% ,Qatar News Agency
(MENAFN - Qatar News Agency) Doha April 24 - The Qatar Exchange ended in the red area when trading closed Thursday at 12954.93 points (0.05%) down 6.63 points from the previous closing of 12961.56 ...

Apr 24 2014Israeli Tanks Enter Gaza Border area ,Qatar News Agency
(MENAFN - Qatar News Agency) Gaza April 24 - Six Israeli military tanks on Thursday entered a border area in the southern Gaza Strip witnesses said. The tanks crossed into Gaza in an area called ...

Apr 24 2014President Salva Kiir Relieves his Chief of the General Staff ,Qatar News Agency
(MENAFN - Qatar News Agency) Juba April 24 -South Sudanese President Salva Kiir relieved Chief of the General Staff of south sudan army James Hoth Mai. This came in a presidential decree aired ...

Apr 24 2014Afghan Guard Shoots Dead 3 Foreigners in Hospital ,Qatar News Agency
(MENAFN - Qatar News Agency) Kabul April 24 - Three foreigners including a doctor were shot dead and their colleague wounded when a guard of a private Cure Hospital opened fire on them in the ...

Apr 24 2014Omani non-oil exports to enter African markets ,MENAFN
(MENAFN) A senior official at the Oman Chamber of Commerce and Industry (OCCI) said that the Sultanate is seeking expansion in new African markets, in a time it is looking forward to reduce its ...

Apr 24 2014Georgian Justice Minister Leaves Doha ,Qatar News Agency
(MENAFN - Qatar News Agency) Doha April 24 - HE Minister of Justice of Georgia Tia Tsulukiana left Doha on Thursday morning wrapping up a two-day official visit to the country. An agreement on ...

Apr 24 2014US Secretary of State Meets Egyptian Intelligence Chief ,Qatar News Agency
(MENAFN - Qatar News Agency) shington April 24 - US Secretary of State John Kerry has met with the Egyptian Intelligence Chief Major General Mohammed Ahmed Fareed al-Tohami who is currently ...

Apr 24 2014Egypt's Interim President Receives Phone Call from South African President ,Qatar News Agency
(MENAFN - Qatar News Agency) Cairo April 24 - Egypt's Interim President Adly Mansour has received a telephone call from President of the Republic of South Africa Jacob Zuma in which they discussed ...

Apr 24 2014Uruguay Public Health Minister Meets HE Qatari Ambassador ,Qatar News Agency
(MENAFN - Qatar News Agency) Montevideo April 24 -Minister of Public Health in Uruguay Maria Susana Mu?iz met here on Thursday with HE qatari ambassador to the republic of Uruguay mohamed hassan ...

Apr 24 2014Egyptian Premier Off to Chad ,Qatar News Agency
(MENAFN - Qatar News Agency) Cairo April 24 - Egyptian Prime Minister Ibrahim Mehlib left cairo on Thursday for Chad the first leg of a three-day two-state trip that will also take him to Tanzania ...

Apr 24 2014Australian Federal Parliament Deputy Speaker Meets HE Qatari Ambassador ,Qatar News Agency
(MENAFN - Qatar News Agency) Canberra April 24 - Australian Federal Parliament Deputy Speaker Bruce Scott met here Thursday with HE Qatar's Ambassador to Australia Yousef bin Ali Al ...

Apr 24 20143 GCC countries among top 30 on network readiness index ,MENAFN
(MENAFN) According to an annual global technology survey for network readiness index for 2014, three GCC countries have made it to the top 30 list for the third year in a row, Gulf Daily News ...

Apr 24 2014Morocco Admitted As Observer Member to SICA ,Qatar News Agency
(MENAFN - Qatar News Agency) La Romana Dominican April 24 - Morocco has been admitted as an observer member in the Central American Integration System (SICA) which also includes each of Belize ...


Click to Apply



Middle East North Africa - Financial Network

MENAFN News Market Data Countries Tools Section  

Middle East North Africa - Financial Network

Main News
News By Industry
News By Country
Marketwatch News
UPI News
Comtex News

IPO News
Islamic Finance News
Private Equity News

How-To Guides
Technology Section

Travel Section

Search News

Market Indices
Quotes & Charts

Global Indices
Arab Indices

US Markets Details


Oil & Energy

Currencies Cross Rates
Currencies Updates
Currency Converter

USA Stocks
Arab Stocks

Saudi Arabia 

Investment Game
Economic Calendar
Financial Glossary

Portfolio Tracker


Financial Calculators

RSS Feeds [XML]

Corporate Monitor


Real Estate
Submit Your Property

Arab Research
Buy a Research

Press Releases
Submit your PR

Join Newsletters

© 2000 menafn.com All Rights Reserved.  Terms of Service | Privacy Policy | Contact Us | Advertise | About MENAFN | Career Opportunities | Feedback | Help