When Will the US Export Natural Gas?

The United States has abundant natural gas reserves. The expanding overseas market could bring the it considerable profits. But, with cumbersome approval processes, obstructions from lobbyists, and up to four years of “construction to operation” time of terminals, perhaps exporting American natural gas cannot quench the thirst of European countries facing an energy crisis.

As Ukraine tensions escalate, there is more clamor for U.S. natural gas export. Poland, Hungary, the Czech Republic and Slovakia even urge the U.S. Congress to ease the export limit, allowing them to purchase U.S. natural gas. Will U.S. natural gas exports truly solve the energy crisis of those crying for food?

Abundant Reserves, Competence in Export

Data shows that the U.S. has abundant natural gas reserves. According to the U.S. Department of Energy, U.S. shale resources have been verified at 269.3 trillion cubic feet, with U.S. natural gas resources totaling 1,795.5 trillion cubic feet. With the development of shale gas, the U.S. beat Russia in 2012, becoming the country with the largest reserves and production of natural gas.

The booming shale gas releases abundant natural gas resources. The U.S. had only 2,900 shale gas wells in 2004, and that number rose to 98,590 in 2009. More than 10,000 shale oil and gas wells were newly built during 2011 and 2012. U.S. shale gas production accounted for 20 percent of total natural gas production in 2010, and the percentage increased to 40 percent in 2013.

Apart from abundant reserves, the production of natural gas surges every year. The Energy Information Administration released the 2013 U.S. natural gas market report, indicating that the average daily production in 2013 increased to 66.5 billion cubic feet, from 65.07 billion cubic feet in 2012.

President Obama said “the United States is likely to be a net natural gas exporter as soon as 2020” when he visited Costa Rica.

Considerable Profits, Motivation for Export

Despite a slight increase in the retail prices of American natural gas in 2013, the U.S. price has great advantages over the global natural gas market.

According to Reuters, the current natural gas price in Europe is double the U.S. price — $4.4/mmBtu — and the price in Asia is triple the U.S. price. The consulting firm RBN Energy said that the U.S. had great potential to replace most Russian natural gas export.

Surging demand in the Asian market externally stimulated U.S. natural gas export by a large scale. Jiahan Cao, associate researcher at the Shanghai Institutes for International Studies, said that China, Japan, Korea, and other traditional or potential natural gas consumers in Asia were all showing great interest in American natural gas export. By this action, these countries hope to achieve diversified sources of natural gas, and that could be used as a bargaining chip when they negotiate prices with general suppliers.

In fact, the U.S. has sped up natural gas exports. According to Caijing.com, up to now, American supervisors have approved exports of 9 billion cubic feet, with an additional 24 billion cubic feet waiting in line.

One week ago, information from Platts showed that the U.S. Department of Energy approved the first liquefied natural gas export terminal on the West Coast – the Jordan Cove Energy Project at Coos Bay, Oregon. This was the seventh LNG export terminal approved by the U.S. Department of Energy, which would increase the scale of American LNG export to 9.27 billion cubic feet per day.

Cumbersome Approvals, Obstruction in Exports

According to the British Financial Times, the U.S. Department of Energy must first approve the construction of LNG export facilities. Then, the Federal Energy Regulatory Commission will review the environmental and safety concerns of the proposed facilities. FERC will then approve the facilities meeting requirements. It is reported that the Obama administration has been striving for the approval of natural gas export plans since 2013, but FERC has not granted approval so far.

The U.S. exports natural gas to both free trade and non-free trade partners. According to the U.S. Natural Gas Act revised in 1992, the 20 free trade partners, including Canada, Australia, Singapore and Korea, can import natural gas from the U.S. through simple and fast approval processes. Before the U.S. exports natural gas to them, non-free trade partners must pass a strict U.S. Energy Department “public interest review,” which gives estimates on various aspects of energy in the United States, including safety, economics, trading, consumers, industry and environment.

There are quite a few voices against natural gas export in the United States. The manufacturing industries, which rely on natural gas and electricity, are worried that exporting natural gas would change its price, and thus enterprises would be less competitive in the global market. Environmentalists think that exporting natural gas goes against current environmental policies. Residents also cast doubt on exporting natural gas, for it may increase domestic retail prices.

Furthermore, the construction of natural gas export terminals cannot be accomplished overnight. Generally, it is estimated to take more than one year and cost no less than $100 million to find an appropriate construction site. It would cost at least $7 billion to complete an LNG export terminal, and it would take at least four years from beginning to operation. The Financial Times reported that the first natural gas export terminal in the U.S. would not be put into operation until the second half of 2015.

With cumbersome approval processes, obstructions from lobbyists, and up to four years of “construction to operation” time for terminals, perhaps, exporting American natural gas cannot quench the thirst of European countries facing an energy crisis.