Trade group wants restrictions on U.S. natural gas exports

Snow covered transfer lines leading to storage tanks at the Dominion Cove Point Liquefied Natural Gas (LNG) terminal in Lusby, Maryland, March 18, 2014. REUTERS/Gary Cameron/File Photo

Sept 17 (Reuters) - A manufacturers trade group on Friday urged the Department of Energy to order U.S. liquefied natural gas (LNG) producers to reduce exports, warning of price increases and supply shortages this winter.

Natural gas prices have surged this year on strong global demand and modest production increases in the first half. The call for U.S. natural gas has more than doubled prices, with exports up 41% from a year ago. U.S. gas was trading around $5.22 per million British thermal units (mmBtu) on Friday, up from $2.54 mmBtu in January.

Industrial Energy Consumers of America (IECA), a trade group representing chemical, food and materials manufacturers, said U.S. prices would have to increase to $10 per mmBtu to provide incentive to producers to pump more gas and bring stocks back to historic levels.

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U.S. utilities have stored less gas than normal for the winter heating season, when demand for the fuel peaks. U.S. stockpiles are 7% below the five-year average for this time of year.

However, an LNG trade advocate said gas exports do not hurt U.S. consumers and the majority of buyers have fixed contracts with prices much lower than the spot rate.

"What we seen and proven repeatedly time and time again is that the price of natural gas has not been negatively impacted by LNG exports," said Charlie Riedl, executive director of Center for Liquefied Natural Gas.

ICEA asked the Energy Department to freeze permitting for new LNG export plants and to order producers to reduce shipments until U.S. inventories increase.

“Buyers of LNG who compete for natural gas with U.S. consumers are state-owned enterprises and foreign government-controlled utilities with automatic cost pass through," said Paul Cicio, president of IECA. "U.S. manufacturers cannot compete with them on prices.”

Surging natural gas prices have forced one of the world's biggest fertilizer producers, CF Industries (CF.N), to shut down two factories in the UK and Norway's Yara (YAR.OL) to curtail its European ammonia output.

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Reporting by Rithika Krishna in Bengaluru

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