Egypt a reminder for U.S. to hang onto its gas

February 8, 2011

By Christopher Swann
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

With foreign prices twice their level in the United States, gas producers are raring to export a good chunk of America’s natural gas bounty. But it’s a risky bet for builders of pricey shipping terminals. And unrest in the Middle East should ram home to policymakers the wisdom of using natural resources at home to reduce foreign energy dependence.

It’s easy to see why gas producers are hankering to get a global price for their quarry. A glut in the United States as vast new shale plays come on-stream has kept prices at around $4.50 per million British thermal units. Across the Atlantic producers can expect to get $8.50 or higher while long-term contracts in Asia can reach as high as $15.

So at first blush the commercial logic for exporting looks unassailable. Several pioneers, such as Cheniere Energy and Freeport LNG, plan to set up the infrastructure to make this possible. Dominion Resources said last week it may build an LNG export plant on the site of its existing import terminal in Maryland.

Companies do so at their peril. Erecting the facilities to cool natural gas to minus 260 degrees Fahrenheit requires multibillion-dollar investments. By the time construction is completed it’s possible that Europe and Asia will have joined the shale revolution — driving down prices in these markets too.

It would not be the first time that Cheniere and its ilk have been badly wrong footed. Hugely expensive LNG import facilities — built in expectation that the United States would become more dependent on foreign sources — now lie idle. Such terminals operate at below 10 percent capacity, according to consultancy Wood Mackenzie. Cheniere shares have lost 80 percent of their value since peaking in 2006.

Building export capacity would get natural gas explorers out of a bind. But the gas could be better used at home. Turmoil in the Middle East provides Congress a reminder of the dangers of relying on energy resources in unstable places. That’s especially true when boosting the use of natural gas in the transport sector — as the state of California is doing — offers a relatively low-cost way of cutting back on imported crude.

The fact that America has so much gas to spare is a sign that the country has not done enough to exploit the shale windfall. Until America has done more to liberate itself from an addiction to foreign oil, exporting hydrocarbons looks plain loopy.

Comments

Given the environmental contamination that is a huge part of doing shale fields, I don’t think massive exploitation of such things is a good idea for the country, and exporting such would only make things worse. New York basically outlawed shale digging in much of the upriver country because of the horrible amount of groundwater contamination associated with the drilling. The only reason Shale drilling is viable is if you hand-wave away the pollution that comes hand in hand with it. Add that cost in for drillers to pay, as opposed to the local population and the taxpayers, and shale fields aren’t so great after all.

==RED

Posted by REDruin | Report as abusive
 

Hang onto our energy sources. The gov should not allow exporting of unrenewable natural resource fuels, when we have a shortage already. Even if (companies in the private sector) profit on the sale and our economy sees a short term lift, we will end up paying 10X the cost when we run out and start importing.

Posted by SeaWa | Report as abusive
 

Our massive proven reserves of natural gas is a national blessing.

We currently import about a billion dollars worth of crude oil each day. Economically that represents a so-called, “single use” economic benefit. Those approximate 350 billion dollars that wind up on the world crude market tightly controlled and manipulated by OPEC’s national oil companies each year circulate and multiply throughout OPEC economies not ours. Reputable economists tell us that if we used a domestic commodity rather than a foreign energy source, it would have the economic effect of keeping that money here to multiply into virtually every aspect of the American economy. We presently lose that “multiplier effect”. When its considered that this could be 2, 3, 4, 5 or more times that “lost” 350 billion dollars it’s not difficult to see it will bring a relative quick return to American prosperity.

Buying OPEC-controlled crude sends our money to fund Islamic terrorism which in turn requires us to spend more dollars in national defense to protect the nation from that terrorism. What an insane “policy” that represents. Additionally, virtually any unrest in the middle east, Nigeria, Venezuela,etc that can be considered to be a threat to worldwide crude production or shipments causes price escalations that can devastate our economy. That is what America’s addiction to crude oil does…it fouls our environment, destroys our economy and threatens our national security.

For almost 40 years we have talked about energy independence, it’s past time that we begin action to actually do it. Providentially, natural gas gives us the means to do so.

Posted by alang36 | Report as abusive
 

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