At the moment the hot topic in the natural gas world seems to be US exports. Everyone in the industry is aware of the shale gas boom and therefore the dramatic increase in supply of natural gas to the US market. However, there appears to be a big question mark hovering over whether exporting some of these newfound assets is a good idea.
Register for a free trial »
Get started absolutely FREE in 2 minutes, no credit card required.
The natural gas in question would most easily be exported as LNG. At the moment, the US significantly lacks the infrastructure to export large quantities of LNG around the world and this creates the first hurdle. The US will have to invest vast sums of money into constructing the required links to the global supply chain. The benefits of this construction work would be domestic jobs, yet many argue that these benefits are only short term. Also, those opposing increased exports also make a case that the US economy lacks the capital and human resources for such work at the moment and question the return on investment.
Environmental effects also come into the discussion and are presented by many as another reason not to increase export capacity. I will not disagree that there will be some negative social and environmental impacts surrounding the increased production of natural gas to fulfil demand. However, I do believe that the benefits of increased use of natural gas outweigh them. The amplified global usage of natural gas will curb the use of more harmful fossil fuels such as coal, initial construction work will be relatively short lived in the grand scheme of things and with environmental regulations becoming ever stricter, the impacts on the environment may not be as dramatic as people expect.
Natural gas prices and financial implications are, of course, two of the biggest areas of contention within this debate. Adding more natural gas to the market and increasing its use will have an impact on prices. The opposition say that it will increase the domestic price with negative impacts on the domestic economy, as there will be greater competition from the global market. This is understandable as natural gas accounts for 25% of the US energy mix. However, the increased use of natural gas will lessen the demand for oil and possibly lower the price per barrel. Also, the domestic Asian market has a high pricing structure that is linked to oil, so there is ample opportunity to sell cheaper exported gas to the region, benefitting the US immensely. Those who are pro exports believe that the increased capacity will not only help job creation, increase economic growth and help narrow the US current account deficit by selling to global markets, but will also help foreign exchange and relations in the long run.
It does appear to be the case that increasing US exports of natural gas to the global market has many pros and cons. Yet, in the long term, it looks like the increase will benefit the US economy more than negatively impact it.