{"id":557,"date":"2013-01-08T07:35:15","date_gmt":"2013-01-08T13:35:15","guid":{"rendered":"https:\/\/allenergyconsulting.com\/blog\/?p=557"},"modified":"2014-06-19T10:12:48","modified_gmt":"2014-06-19T15:12:48","slug":"macroeconomic-impacts-of-lng-exports-from-the-united-states-review","status":"publish","type":"post","link":"https:\/\/allenergyconsulting.com\/blog\/2013\/01\/08\/macroeconomic-impacts-of-lng-exports-from-the-united-states-review\/","title":{"rendered":"Macroeconomic Impacts of LNG Exports from the United States – Review"},"content":{"rendered":"

Macroeconomic Impacts of LNG Exports from the United States<\/a>\u00a0report done by NERA for the EIA brings to mind my saying-\u00a0It is better to know what questions to ask than to have all the answers.\u00a0<\/em><\/strong>\u00a0There are many wise sayings that are\u00a0very similar<\/a>.\u00a0 One missing from that list is \u201cIt is better to ask some of the questions than to know all of the answers.<\/em>\u201d James Thurber.<\/p>\n

There are several issues I could comment on in the report, but many are already discussed by the\u00a0several commentators<\/a>\u00a0.\u00a0 A good acquaintance of mine, Carlton Buford, does a fine job highlighting\u00a0his concerns<\/a>\u00a0with point 4 resonating with my response.\u00a0 However, as I discussed above, the report should have asked a bigger question beyond energy markets impact.<\/p>\n

I will agree with the overall conclusions of the report \u2013 exporting LNG will benefit the country to some extent.\u00a0\u00a0 However, this should never have been the goal or the premise of the report. NERA cannot be faulted in terms of answering the question. However, as a consultants, there is somewhat a responsibility to address the clients\u2019 real concerns.<\/p>\n

I directly addressed this issue with another consultant’s report done on renewables about green jobs, where I discussed with the author about not addressing net jobs.\u00a0 The author told me they did not do it, because they were not asked to. In both of these reports, someone at the consulting companies should have brought up the real issue to each of these clients.\u00a0 A true consultant will make sure their client is asking the right question before setting out and answering the question asked.\u00a0 The real concern for LNG is whether exporting LNG is the BEST option for the country in terms of maximizing the economic potential for the US. \u00a0This question is not just an economic study to impact the energy markets, but it should be about getting the US back onto the path of economic prosperity.<\/p>\n

Even if natural gas prices were to minimally changed, as the report indicated, the next question should be:” Will the US be better benefited from consuming its own resources knowing it is a net consumer of most products?”. \u00a0This question was not addressed in the report.\u00a0\u00a0 It is the crucial benchmark of deciding to export.\u00a0\u00a0 It does not take a massive model to understand the holistic value of using your own resource. \u00a0If you know you will have to consume products which are made from the natural resources that you have available; could you not economically increase the internal value of your system by using the resource to produce what you plan to consume?\u00a0 Perhaps if the outside system can more effectively produce a good above and beyond the cost of shipping both the goods and resources to make it \u2013the outside system could be a better option economically.<\/p>\n

This then leads to the question:” why can they produce\/manufactures goods\u00a0we need with our resources more effectively? labor policies, subsidies, etc..\u00a0“. Is there a better way for us to produce and manufacture products in this country versus outsourcing?\u00a0 In addition, simple economics typically do not cover the social economic issues at hand.\u00a0 As I mentioned in my previous blog –\u00a0Energy Independence Misguided Focus<\/a>\u00a0\u2013 the value of manufacturing a good goes beyond the simple economics of making the product.\u00a0 Manufacturing offers a level of social economic stability while still giving people the opportunity to aspire if they so wish.\u00a0 We need to make sure we take this into account.\u00a0 Many countries do value being able to keep their people at work.\u00a0\u00a0 They know social unrest is likely when mass amounts of people sit around. \u00a0I will further address this issue in my next blog.<\/p>\n

The report fails to address the root of the issue which the leaders of this country should be asking and thinking about \u2013\u00a0how best to maximize the US economic well-being using the resources available<\/strong>.\u00a0\u00a0 I will contend we should do what we can to offer incentives to use our resource locally first and foremost.\u00a0\u00a0 If our ineptness to do the right thing by restructuring our society to allow for manufacturing continues, I would then support the exportation of LNG through a strategic approach.\u00a0 First, there is an obvious US outlet for LNG.\u00a0\u00a0 Right now Puerto Rico \u2013 one of the poorest regions in the US \u2013 has to purchase LNG at oil related prices.\u00a0 This brings to mind the technical concerns of LNG vessel.\u00a0 Will the LNG vessels be US flagged vessels – none so far?\u00a0 If not given the Jones Act, the US territories could not even benefit from the liquefaction facilities.<\/p>\n

The largest deficiency in the report, as many of the others have commentated, is not considering the chess move made by the largest exporter of LNG \u2013 Qatar.\u00a0\u00a0 This would be akin to forecasting oil markets with no consideration of Saudi Arabia \u2013 do we not remember the 70\u2019s oil crisis or 1998 when Saudi Arabia showed the rest of OPEC what it meant to take market share?\u00a0 The plain fact is the cost of natural gas in Qatar is likely below or near $0.50\/mmbtu.\u00a0\u00a0 In the US, even with greater shale development, the cost will still be greater than $2\/mmbtu. \u00a0Even if we subtract some value for liquids, development cost may approach $1\/mmbtu, still twice as large as Qatar.\u00a0 Who in their right mind can see grounds to compete with Qatar without some internal subsidy\/incentive or it being a niche play?\u00a0 Unless foreign money is financing the projects, I would be skeptical on the\u00a0extent\u00a0<\/strong>of LNG exports vs. the report\u2019s conclusions in terms of the economic value to the US.<\/p>\n

It is not an either\/or issue in terms of export LNG versus using it domestically, but the report was done as if LNG exporting was the only issue.\u00a0\u00a0 Ultimately a portfolio option with more of the portfolio balance to what will add value is the best approach. If the goal is to maximize the US economy, domestic uses of resources should be the number one priority, LNG exports should be examined in the context of first supporting the US territories, and only after those issues are resolved we should examine the exportation of our resources.\u00a0 I am optimistic that our consumption levels are high enough to support the use of all our domestic resources.\u00a0 Plus, I anticipate that we can become a net exporter of products, keeping further margins in supplying products to the world.<\/p>\n

As with everything I put out, this analysis was done given the current construct that exist today.\u00a0 There are many levers that could change my mind to believe LNG exportation is the BEST path for this country; but at this time I believe it is best to maximize our natural gas resources first.\u00a0\u00a0 States in the US will also benefit from this message \u2013 e.g. Ohio.\u00a0\u00a0 I would not let your resources easily leave the boundaries of your system if you are to maximize your potential economic value.\u00a0\u00a0 Whoever advised the Houston Mayor, Anise Parker, was wrong in\u00a0her response<\/a>.\u00a0 Houston could significantly gain more, if more industrial and manufacturing complexes were built near and around Houston than a few liquefaction facilities.\u00a0 The same can be said for comments made by\u00a0Senator Jake Corman\u00a0<\/a>and\u00a0State Representative Matthew E. Baker<\/a>.<\/p>\n

In order to right the economic ship of the United States, we must find better ways to use our resources be it fossil, renewables, or human capital.\u00a0\u00a0 Perhaps beyond the scope of the Department of Energy, but the real issue at hand is to transform our economy back into a balance economy with a strong producing\/manufacturing sector.\u00a0 The DOE does have the capability to jump start the sector by continuing to signal there will be cost effective resources for some time to come and support the use of our resources domestically.\u00a0 A strong and vibrate manufacturing sector will go a long way in creating a more stable and prosperous society.\u00a0\u00a0 It will not make everyone wealthy, but it will allow those who are willing and capable the pursuit of happiness.<\/p>\n

 <\/p>\n

We really need to apply some common sense when dealing with complicated issues.\u00a0 Huge models allow one to bias and obfuscate the truth through manipulation of inputs and relationships.\u00a0 Models do have value \u2013 being a modeler myself \u2013 but the models should never drive the outcome; they are there to enhance the understanding.\u00a0\u00a0 Ultimately, someone needs to be accountable for the decision and not use models as their excuse for making a decision.<\/p>\n

Please do consider All Energy Consulting for your energy consulting needs.\u00a0\u00a0 We\u00a0ALWAYS<\/strong>\u00a0have our client\u2019s best interest in mind.\u00a0\u00a0 We know the questions to ask and can help find the right answers to them.<\/p>\n

Your Energy Analyst,<\/p>\n

David K. Bellman<\/a><\/p>\n

614-356-0484<\/p>\n","protected":false},"excerpt":{"rendered":"

Macroeconomic Impacts of LNG Exports from the United States\u00a0report done by NERA for the EIA brings to mind my saying-\u00a0It is better to know what questions to ask than to have all the answers.\u00a0\u00a0There are many wise sayings that are\u00a0very similar.\u00a0 One missing from that list is \u201cIt is better to ask some of the […]<\/p>\n","protected":false},"author":1,"featured_media":14,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,3,4,26],"tags":[34,189,41,14],"class_list":["post-557","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-market-insights","category-natural-gas","category-ngls","category-oil-petroleum-products","tag-economy","tag-export-lng","tag-lng","tag-natural-gas-2"],"_links":{"self":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts\/557","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/comments?post=557"}],"version-history":[{"count":20,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts\/557\/revisions"}],"predecessor-version":[{"id":559,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/posts\/557\/revisions\/559"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/media\/14"}],"wp:attachment":[{"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/media?parent=557"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/categories?post=557"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/allenergyconsulting.com\/blog\/wp-json\/wp\/v2\/tags?post=557"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}