The New U.S. Energy Era Will Be a Gas
For the first time since Ike was in the White House and lead was in gasoline, exports of U.S. natural gas
will outstrip imports in a shift that could occur as soon as the end of this year, the head of the U.S.
Energy Information Administration said last week.
The change will mark a significant milestone – the latest in America’s transformation into the world’s
biggest oil and gas producer and one long-awaited by policymakers who hope it will drive U.S. job
growth and expand American influence abroad, even in the face of a global gas market slowed by
anemic demand and excess supply.
As imports plummeted 40 percent last year from their peak in 2007, American gas exports soared 116
percent during the same period, buoyed by a flood of natural gas unleashed by fracking and horizontal
drilling, according to the EIA.
The trends are on a collision course, with exports set to plow past imports in roughly a year’s time,
leading to potential ramifications beyond simply the energy sphere.
“This pickup in growth in the United States leads to the U.S., in the very near future – later this year,
next year – becoming a net exporter of natural gas,” EIA Administrator Adam Sieminski said of surging
gas exports Wednesday, while presenting the EIA’s International Energy Outlook at a think tank in the
nation’s capital. “That was something that most people would’ve thought impossible just 10 years ago.”
As recently as 2005 – if not even later – analysts expected U.S. expected to remain a net importer of
natural gas. It had a single export terminal – in oil- and gas-rich Alaska – compared with a dozen import
facilities along the East and Gulf coasts. A decades-old law still requires many foreign countries to
submit to a lengthy review by the Energy Department to import U.S. gas, the better to protect domestic
supply.
However, a handful of export terminals to chill and liquefy natural gas, then send it abroad on tankers,
are on the way. Production operations reportedly began last year at a facility in Louisiana, the first to be
approved for the work since Alaska’s Kenai terminal entered service in 1969. Four other terminal
facilities are under construction.
The terminals will deal with just a fraction of U.S. natural gas exports, as virtually all the gas imported
and exported travels by pipeline: exported by American gas drillers to Mexico and imported from
producers in Canada to networks supplying power plants, plastics companies, factories and homes.
But the new terminals along the coast will vastly expand the country’s reach, and should play a role in
causing U.S. exports to eclipse imports for the first time since 1957. They’ll allow gas to sail to fresh
markets and needy allies overseas, providing what policymakers hope will be a new muscle for flexing
U.S. power.
“It’s huge,” says Sam Andrus, senior director for North American Natural Gas for the consulting firm IHS
Energy. “It’s changed a lot of the competitiveness and economic activity for the U.S.”
And yet the timing is far from optimal. Natural gas prices in Asia, once a hoped-for savior for American
oil and gas companies saddled by slumping prices, have cratered amid a region-wide economic
slowdown. Firms in Australia, meanwhile, have ramped up their export capacity to hold sway over Asia,
and U.S. natural gas prices have slowly risen since March, eating at margins that had made them more
competitive.
“The timing has certainly shifted,” says Charles Ebinger, a senior fellow in the Energy Security and
Climate Initiative at the Brookings Institution. “They can’t find a market. Right now everybody’s just in
survival mode.”
The foreign policy impact of the shift may be stunted, too, also a victim of market forces.
Russia’s invasion of Ukraine in 2014, combined with the sudden surplus of gas captured from U.S. shale
production, fanned efforts on Capitol Hill to speed up the Energy Department’s export review process –
a bid to ease Europe’s dependence on Russian gas by replacing it with U.S. supplies.
But exports of liquefied natural gas, or LNG, are not solely dictated by government regulation. Like any
other commodity, they’re subject to contracts and market prices – and gas that’s liquefied and then
transported by ship from the U.S. is likely to fetch a higher price than gas simply piped from Russia.
“If the prices, net of transport costs, are higher in Asia, then more [gas] will go there. If prices, net of
transport costs, are higher in Europe, then they will go there,” says Paul Sullivan, an economics
professor at National Defense University and an adjunct professor at Georgetown University. “LNG is a
market. It is not done by government edict based on alliances.”
Despite the market challenges, investors so far have reacted positively to rising gas imports: This year,
four of the top nine companies in the Standard & Poor’s 500 index are gas producers.
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