Large-scale liquefied natural gas (LNG) exports from the lower 48 states began in February 2016 with a shipment from the Sabine Pass Liquefaction facility in Louisiana (see Table 1). For additional information on U.S. natural gas exports see CRS Report R42074, U.S. Natural Gas Exports: New Opportunities, Uncertain Outcomes, by [author name scrubbed] et al. The Sabine Pass facility is currently the only operating LNG export terminal in the lower 48 states, with an initial capacity of 2.2 billion cubic feet per day (bcf/d). Other LNG export projects in the United States are under construction or in the development stage. So far in 2016, Sabine Pass has exported 16 shipments of LNG totaling almost 52 bcf (0.14 bcf/d) of natural gas. The majority of exports have gone to South America, with additional shipments sent to Kuwait, the United Arab Emirates (UAE), Portugal, Spain, and India. The average export price for the first seven shipments was $3.69 per million British thermal units (MBtus).
Source: Department of Energy LNG Export data and Cheniere Energy. DOE data are based on monthly reports from exporting companies.
Notes: bcf = billion cubic feet.
Also in February, the United States began shipping quantities of LNG to Barbados from Miami, FL. The LNG was shipped in cryogenic containers instead of a specialized tanker ship. Cryogenic containers are comparable to shipping containers and can be transported over land and loaded onto ships. The price of natural gas from these shipments has been between $10 per MBtus and $16 per MBtus. Starting in 2014, this method of shipping has also been used to send natural gas to Hawaii.
Source: Energy Information Agency, Gas Price data, http://www.eia.gov/dnav/ng/hist/rngwhhdm.htm, June 29, 2016.
Notes: Prices based on the monthly average Henry Hub price.
The way in which increased LNG exports may affect the domestic price of gas has been one of the most controversial issues surrounding new natural gas export capacity. Proponents of LNG exports argue that projected increases in production will raise domestic supply enough to offset exports and prevent domestic prices from significantly rising. They claim that the numerous economic benefits, including new jobs, improved trade balance, and increased Gross Domestic Product, would outweigh even the worst case estimates of increased prices. Critics counter that domestic production will not be sufficient to make up for LNG exports, resulting in significantly higher gas prices for U.S. consumers. Environmentalists have also raised concerns that allowing for increased LNG exports would cause environmental damage by encouraging more hydraulic fracturing.
So far, exports seem to have had no observable impact on domestic prices (see Figure 2). The domestic price for natural gas was $1.99/MBtus in February when exports began, and had fallen to $1.92/MBtus by May. During this period, LNG exported from Sabine Pass was sold above the domestic price.
There are several reasons why the negligible effect of LNG exports on domestic gas prices to date may not be indicative of how future exports could influence domestic prices. The available data cover only five months, which is too short a timespan to rule out other factors potentially affecting prices. It is possible that the unusually warm winter or high reserves of stored gas drove prices down and counteracted any possible upward pressure on prices from LNG exports. The 52 bcf of gas exported could also represent too small a proportion of total gas production to make a significant impact on prices.
The United States began exporting LNG in 1969 from Alaska to Japan. While LNG exports are set to increase, they represent only a small fraction of total gas exports. Including pipeline imports and exports, the United States remains a net importer of gas. This is projected to change by 2018, according to the U.S. Energy Information Administration (EIA).
Figure 3. U.S. Natural Gas Imports and Exports
Source: EIA, Natural Gas data, http://www.eia.gov/naturalgas/data.cfm#imports.
Notes: Data for 2016 only covers January through April.
Pipeline exports from the United States to Canada and Mexico, which have been going on for decades, accounted for 98% of 2015 total gas exports. It is worth noting that in some areas, it is cheaper to ship natural gas produced in Canada through pipelines in the United States and then back over the border into Canada.
Between March 2010 and March 2016, U.S. pipeline exports to Mexico increased almost threefold. Future increases are probable. Pipeline gas from the United States is significantly cheaper than LNG, which Mexico also imports. The construction of additional pipelines and the expansion of several existing pipelines are planned.
In 2015, the United States produced a record amount of natural gas, 27.03 tcf, despite relatively low domestic prices. Production in the first quarter of 2016 has reached another new historical high, rising 2.5% over 2015, while prices again dropped. The EIA projects that production will rise every year through 2040. Future surpluses in production create an opportunity for increased exports. The Department of Energy has received 45 applications to export LNG to non-Free Trade Agreement countries, totaling 49.36 billion cubic feet per day in exports. The DOE has already issued final permits for 11.03 bcf/d of exports and given conditional permits to an additional 2.8 bcf/d. The remaining 35.5 bcf/d in requests is pending approval.
Recently completed renovations to the Panama Canal will facilitate LNG exports to Asia. Previously, only the smallest LNG tankers could pass through the canal. Now, 90% of LNG tankers can use the canal. Allowing larger tankers to pass through the canal will decrease the voyage time from the U.S. Gulf and East Coasts to Asia, making U.S. LNG exports more competitive in that market.
Approved export terminals are expected to gradually come online during the next several years. According to FERC data, five more terminals and expansions may begin operations by the end of the decade.