US resumes exports of LNG

The Obama administration approved the export of liquefied natural gas by a Texas company, Freeport LNG. It is the first approval of LNG exports in almost two years. The Freeport facility is authorized to export 1.4 billion cubic feet of natural gas a day for the next twenty years.

ICF-LNG-exports-economic-impact-US-economy-EDIWeekly
Some US manufacturers, notably Dow Chemical, want LNG exports controlled so that the cost of natural gas will not rise. Exports of LNG, however, could have a big impact on US economy, as this ICF graph shows.

The decision has been called historic by some, saying that increased exports of LNG will put upward pressure on prices. However, future US exports of LNG are far from certain, and a consortium of industrial leaders headed by Dow Chemical has been opposed to unrestricted exports. They argue that opening the floodgates of LNG exports will put US projects at a disadvantage as the cost of the fuel will inevitably rise as a result. The group America’s Energy Advantage claims that US manufacturing depends on cheap natural gas. Dow uses natural gas to power its plants, which make a range of products including plastics and pharmaceuticals.

One US Congressman, Edward Markey, called the decision by the Obama administration uninformed, when the Department of Energy “doesn’t even know what the impact” of the exports will be on the domestic economy.

The move, however, is seen as further confirmation of the growing importance of the US as an exporter of energy, the result of the shale gas revolution.

Freeport has reportedly signed deals to sell its gas to Osaka Gas and Chubu Electric of Japan, and BP of the UK. Companies from Japan and Europe are also said to be proposing to invest billions of dollars in another LNG export facility in Louisiana. Japan is the world’s largest importer of LNG.

Apart from its uncertain impact on domestic manufacturing, the export of America’s huge LNG resources has the potential to create jobs and impact GDP. The consulting firm ICF International reports that the impact on GDP will range from $15.6 billion to $73.6 billion a year by 2035, depending on volumes. The number of jobs created, again depending on volumes, could range from 73,000 to 452,300 from 2016 to 2035.

In eastern Canada, meanwhile, an Indian firm, H-Energy,  is reported to be looking at the feasibility of building a $3 billion LNG terminal in Nova Scotia. The facility would have the capacity to export 1.5 billion cubic feet a day. A second company, Pieridae Energy, is also planning a $5 billion terminal in Nova Scotia.

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