The U.S. House of Representatives approved legislation that would set a deadline for the Energy Department reviewing liquefied natural gas (LNG) export applications , a move aimed at securing swifter approvals for shipping gas overseas.
The Republicans made the case that U.S. LNG exports would help U.S. allies reduce their dependence on Russian gas. The bill “would send an immediate signal to our allies and our enemies that the United States is serious about energy security,” said Cory Gardner, the Republican sponsor of the legislation.
U.S. LNG exports are projected to provide an economic benefit to gas importing countries. Because of the embedded take-or-pay volumes in long-term gas supply contracts and limited regional production in many parts of the world, U.S. LNG exports could reduce global prices and costs of supplies for gas importers.
U.S. LNG exports could accelerate the transition away from oil price indexation of gas supply contracts. Since supplies for U.S. LNG exports are expected to be pegged to U.S. gas prices (e.g. Henry Hub), rather than oil prices, this will create “gas-on-gas” market competition. Furthermore, LNG could replace oil fired electricity generation in certain nations who wish to switch to gas.
Gas exporting countries could suffer a decline in revenue due to price erosion and/or supply displacement. Entry of new supply clearly benefits consumers, but negatively impacts suppliers through price reductions.
Russia, the leading gas exporter to Europe, appears to be especially vulnerable to U.S. LNG exports. Because of its huge volumes of gas exports, primarily to Europe, and their high cost to markets, makes Russia vulnerable to additional supply competition and price reductions.
There are very valid concerns that increasing gas exports will force the price of U.S domestic gas up. Either way, political involvement in controlling commodities is always a double edged sword, what can be granted today, can easily be taken away tomorrow.
