UPDATE 3-US study says the more LNG exported the better

Wed Dec 5, 2012 7:29pm EST

* Report says the greater the exports, the more benefits

* Export application decisions after comment period-DOE

* Report confirms prices will rise for consumers-lawmakers

* More than dozen companies waiting on export approval

By Ayesha Rascoe

WASHINGTON, Dec 5 (Reuters) - A U.S. government-sponsored report offered a full-throated endorsement on Wednesday for expanding liquefied natural gas exports, saying that shipping the nation's surplus gas abroad would clearly help the overall economy even though it will raise energy prices.

The report, commissioned by the Energy Department, is expected to help shape the Obama administration's response to more than a dozen proposed export projects that have been put on hold over the past year, as a surge in shale gas production upended the market and depressed domestic prices.

NERA Economic Consulting said it examined the impact of LNG exports in 63 scenarios and found exports to a net benefit for the economy under each of the conditions.

"Moreover, for every one of the market scenarios examined, net economic benefits increased as the level of LNG exports increased," said the study.

However it also warned that the benefits would not be shared evenly. Although owners of natural gas resources and many downstream investors will benefit from the export boom, regular wage-earners will be hit with higher home heating costs, the report said.

Over the past year LNG exports have become an increasingly contentious issue, pitting manufacturers -- concerned that exports will raise prices -- against gas drillers who argue that exports are necessary to keep production going strongly.

The Obama administration has wrestled with how to walk the balance, deferring a decision on whether to permit any additional projects pending the NERA report.

The battle will drag into next year, as the Department of Energy sets aside more than two months to gather public input on the report and opponents line up to highlight its flaws -- including the fact that the shale gas revolution is moving too quickly to anticipate its full effects.

Dow Chemical, one of several major industrial firms that is expanding its U.S. operations in hopes of taking advantage of cheap energy supplies, said the report was based on "outdated and therefore inaccurate estimates" of future gas demand, spokeswoman Nancy Lamb said in an e-mailed statement to Reuters.

REVIEW TO CONTINUE

Despite the high profile nature of the economic report, the administration has stressed it will be only one of the factors the department considers as it moves ahead with its review process. Various groups, from manufacturers to environmentalists, have attempted to make their views heard.

The report comes as the Energy Information Administration projected Wednesday that U.S. natural gas production would grow faster over the next two decades than previously expected.

Natural gas output is seen rising to 31.41 trillion cubic feet in 2035 from 27.99 tcf forecast last year. Natural gas production is expected to hit 33.21 tcf by 2040, the EIA said in its annual energy outlook.

The surge in production would allow the country to be a net exporter of gas as early as 2016, the agency said, projecting 4.4 billion cubic feet a day in exports by 2027.

Following the end of the comment period, the department said it would begin to make decisions on the 15 queued applications on a case-by-case basis.

Teri Viswanath, an analyst at BNP Paribas, said futures prices for 2015 delivery had risen as much as 14 cents per million British thermal units following the NERA report, as the market factored in possible expanded exports.

"There's not going to be a large price impact, but it's another source of demand growth for gas," she said.

UNDERSTATING IMPACTS?

While gas exports would have a positive effect on the economy overall, selling gas to foreign countries will raise prices for consumers, the report said.

"Households will be negatively affected by having to pay higher prices for the natural gas they use for heating and cooking," the study found.

Leading U.S. lawmakers challenging gas exports homed in on the report's findings that prices would rise.

An influential skeptic in Congress said the report did not change his mind about the need to "look before we leap" to open up exports.

"If you say there's no shortage of gas and you decide you're going to export an awful lot of it, that can raise prices here at home," said Senator Ron Wyden, an Oregon Democrat and the incoming chairman of the Senate energy committee.

"I've got an awful lot of American companies and American manufacturers who are concerned that can hurt their ability to grow in the United States, and hurt consumers," he said, explaining he is waiting to hear what factors Energy Secretary Steven Chu will use to rule on applications.

Although energy costs will rise for some households, the report said the increase in export revenues would offset this and lead to increase real income for U.S. households.

Congressman Edward Markey, the top Democrat on the House Natural Resources committee, expressed concerns that the report may be underestimating the negative impacts on American workers and manufacturing due to old data.

COMPANIES SEEK APPROVAL

Recent drilling innovations have unlocked vast shale oil and gas reserves, placing the United States in a position to be a major exporter. Several years ago the United States was thought likely to be more dependent on foreign gas.

Companies such as Dominion, Sempra and Exxon Mobil have now lined up to get permission to sell the country's cheap abundant natural gas overseas, where it can fetch much higher prices.

The Energy Department's authorization is needed to export natural gas to all but a handful of countries with free trade agreements.

Following its first and only approval of a gas export terminal, Cheniere's Sabine Pass, the Energy Department said it would hold off on making any more decisions on projects while it commissioned this study to help guide the review.

U.S. Senator Lisa Murkowski, the top Republican on the Senate energy committee, applauded the report and said it may be time to revisit the department's review process for exports.

"The conclusions in this report on the benefits to the economy should inform the DOE approval process regarding exports," Murkowski said.

Fred Upton, the Republican chairman of the House Energy and Commerce committee, said the report should "pave the way" for export approvals.

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