EIA Data Show Exports Pose Little Threat to Cheap Natural Gas

U.S. natural gas production will outpace domestic demand for at least the next two years, U.S. Energy Information Administration data show, leaving room for more liquefied natural gas exports. As a result, and with greater production easily possible, rising natural gas exports pose little threat to abundant, affordable natural gas.

U.S. natural gas power is currently less expensive than coal power. Moreover, natural gas power likely to remain less expensive than coal power. Natural gas prices have remained consistently low since technological advances revolutionized the industry a decade ago. As the chart below shows, even Hurricane Harvey’s direct hit on the heart of natural gas infrastructure along the Texas Gulf Coast in August 2017 barely made a dent in natural gas prices.

Natural gas price history April 20 2018With coal power losing market share, the coal industry and its supporters claim natural gas prices will soon rise higher than coal power. A primary factor, they argue, is the imminent completion of natural gas export terminals will increase demand for U.S. natural gas. Higher demand will lead to higher prices, they claim, and therefore policymakers should protect coal power even though coal power remains more expensive than natural gas power.

Large domestic manufacturers similarly raise concerns about natural gas markets. With only a single U.S. natural gas export terminal in operation, American natural gas producers have much more supply than customers. Domestic manufacturers have expressed concern that allowing natural gas producers to export their product overseas will eliminate their captive market and result in rising domestic natural gas prices.

EIA data, however, show that supply will likely continue to outpace supply even with increasing natural gas exports. Jude Clemente summarized the data and their implications in an excellent article published last week at Forbes.com.

“EIA has gas production outpacing domestic demand over each of the next two years by about 3 Bcf/d [billion cubic feet per day],” Clemente observes.

“We probably have the largest lowest cost gas resource in the world,” Clemente adds. If the United States emulates Saudi Arabian oil exports and recognizes the economic benefits of natural gas exports, American energy producers can readily increase production to meet this demand.

“The ongoing pipeline build-out will be strong enough to outweigh new demand and exports, and limit the price increase of rising gas-on-gas competition,” notes Clemente.

The Appalachian states of Ohio, Pennsylvania, and West Virginia hold “massive” amounts of low-cost natural gas, Clemente observes, and Texas has even larger, readily accessible reserves than the Appalachian states.

“Indeed: be careful listening to those telling you about ‘the end of shale,” write Clement. “Remember that these are the very same people that never saw the revolution coming in the first place.”

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