WASHINGTON, Dec 18: The US stands to benefit immensely from export of LNG, particularly to the Indian and Chinese markets, where demand for the clean fuel is growing rapidly, according to a report by NERA Economic Consulting.
At a time when the Indian government is seeking permission to import shale gas from the US, the report recommends that allowing exports of LNG would cause no change in natural gas prices and do no harm to the overall economy.
The report, ‘Macroeconomic Impacts of LNG Exports from the United States’, which was submitted to the US Department of Energy recently, added that liquefied natural gas (LNG) exports would cause no change in natural gas prices and would no harm to the overall economy in US.
It stressed that the overall employment level in the country will not suffer as a result of the policy.
The gains to US would be maximum if it is able to produce large quantities of shale gas at low prices and the world demand rises rapidly.
“The benefits that come from export expansion more than outweigh the losses from reduced capital and wage income to US consumers, and hence LNG exports have net economic benefits in spite of higher domestic natural gas prices,” the report said.
Both India and China have some indigenous natural gas resources, but these alone are insufficient to meet the domestic demand.
“Natural gas demand in these countries is growing rapidly as a result of expanding economies, improving wealth and a desire to use cleaner burning fuels. LNG will be an important component of their natural gas supply portfolio. These countries demand more than they can produce and the pricing mechanism for their LNG purchases reflects this,” it said.
US currently has allowed only Cheniere Energy to export LNG to countries that have not signed an free-trade agreement.
The report contains an analysis of the impact of exports of LNG on the US economy under a wide range of different assumptions about levels of exports, global market conditions, and the cost of producing natural gas in the US.
“Across all these scenarios, the US was projected to gain net economic benefits from allowing LNG exports. Moreover, for every one of the market scenarios examined, net economic benefits increased as the level of LNG exports increased,” it said.
Explaining the scenario where the exports would not be desirable, the report said, “If the promise of shale gas is not fulfilled and costs of producing gas in the US rise substantially, or if there are ample supplies of LNG from other regions to satisfy world demand, the US would not export LNG.” (PTI)
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