Economics of U.S. natural gas exports: Should regulators limit U.S. LNG exports?

Abstract

This study assesses the level and destination of U.S. LNG exports, using a global natural market model under a wide range of EMF 31 scenarios. The scenarios reflect different U.S. natural gas resource outlooks, market conditions, changing U.S. environmental regulations, and possible changes in geopolitical conditions that affect the global natural gas demand and supply. U.S. LNG exports respond to market conditions under each scenario and are free from any artificial limits. In the near-term, U.S. LNG exports are uncompetitive in the Reference case and in the long-run U.S. LNG exports are significant when U.S. natural gas resources are plentiful. However under demand shocks (increase demand in Asia) or supply shocks (reduction in Russian supplies) or persistence of oil-indexed pricing cases, U.S. LNG exports become competitive to varying degrees. U.S. exports depend not only on U.S. economics but also on how U.S. prices change relative to price changes in other regions of the world. We conclude that limiting U.S. LNG exports is inconsistent with simulated uncertainties, and it should be left to the market to determine the levels and destination of exports.