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EIA - Effect of Increased Levels of Liquefied Natural Gas Exports on U.S. Energy Markets


Source: Energy Information Agency

Date: October 2014

From the Document:

This report responds to a May 29, 2014 request from the U.S. Department of Energy’s Office of FossilEnergy (DOE/FE) for an update of the Energy Information Administration’s (EIA) January 2012 study of liquefied natural gas (LNG) export scenarios. This updated study, like the prior one, is intended to serve as an input to be considered in the evaluation of applications to export LNG from the United States under Section 3 of the Natural Gas Act, which requires DOE to grant a permit to export domestically produced natural gas unless it finds that such action is not consistent with the public interest. Appendix A provides a copy of the DOE/FE request letter.

DOE/FE asked EIA to assess how specified scenarios of increased exports of LNG from the Lower 48 states could affect domestic energy markets, focusing on consumption, production, and prices. The DOE/FE scenarios posit total LNG exports sourced from the Lower 48 states of 12 billion standard cubic feet per day (Bcf/d), 16 Bcf/d, and 20 Bcf/d, with these exports phased in at a rate of 2 Bcf/d each year beginning in 2015. DOE/FE requested that EIA consider the specified Lower 48 states LNG export scenarios in the context of baseline cases from EIA’s 2014 Annual Energy Outlook (AEO2014) that reflect varying perspectives on the domestic natural gas supply situation, the growth rate of the U.S. economy, and natural gas use for electricity generation. The AEO2014 cases considered in this report include:

  • The AEO2014 Reference case
  • The High Oil and Gas Resource (HOGR) case, which reflects more optimistic assumptions about domestic natural gas supply prospects than the Reference case
  • The Low Oil and Gas Resource (LOGR) case, which reflects less optimistic assumptions about domestic oil and natural gas supply prospects than the Reference case
  • The High Economic Growth (HEG) case, in which the U.S. gross domestic product grows at an average annual rate 0.4 percentage points higher than in the Reference case, resulting in higher domestic energy demand
  • The Accelerated Coal and Nuclear Retirements (ACNR) case, in which higher costs for running existing coal and nuclear plants result in accelerated capacity retirements, resulting in more reliance on natural gas to fuel electricity generation than in the Reference case.

EIA recognizes that the ramp-up specified by DOE/FE for the scenarios analyzed in this report, under which total Lower 48 states LNG exports reach 12 Bcf/d in 2020, is extremely aggressive, indeed almost impossible, and that the ultimate LNG export levels specified by DOE/FE are also very unlikely for some of the baselines. EIA understood that the DOE/FE scenarios were intended to provide results that show an outer envelope of domestic production and consumption responses that might follow from the approval of export licenses beyond 12 Bcf/d. Accordingly, EIA also included a 20 Bcf/d export scenario, applied to the Reference case, with a delayed ramp-up to identify the impact of higher LNG exports implemented at a more credible pace.