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Exporting the American renaissance
Global impacts of LNG exports from the United States
This report describes an objective, economic-based analysis of the potential impact of liquefied natural gas (LNG) exports from the United States on domestic and global markets. While much attention has focused on the impact of US LNG exports on the US market, this study from Deloitte MarketPoint LLC and the Deloitte Center for Energy Solutions analyzes the potential economic consequences of those exports on global markets. It attempts to estimate the potential price impacts, gas supply changes, and flow displacements if the US exported a given volume of LNG to either Asia or Europe.
In a startling about-face, natural gas market forces have reversed course over the past several years. Expectations that the US would become a major importer of LNG have been replaced by the possibility of the US becoming a major LNG exporter. As a result of a largely unforeseen surge in shale production, North American natural gas prices collapsed from over $10/MMBtu in 2008 to under $3/MMBtu at times during 2012. However, gas prices in Asia and Europe remain high, creating huge price spreads from the US. Large price spreads between the US and other regions have enticed foreign buyers seeking lower cost gas to consider US supplies, while US producers yearn for higher prices seen in foreign markets.
- How could US LNG exports affect prices in the US and global markets?
- How much could price spreads narrow as a result of US LNG exports and other market developments?
- Which countries might benefit from US LNG exports and which ones might be disadvantaged?
- What future natural gas projects might be displaced?
- How could a more competitive global LNG market that is less dependent on oil-indexed gas prices affect projected results?
Although these highly speculative questions depend in part on actions of parties that do not always act according to free market principles, we developed market scenarios and tested alternative market behaviors to understand key drivers and obtain a sense of the magnitude of potential outcomes. We do not present our results as predictions of market outcomes or actions of particular parties, but rather as a study of how exports might alter the economic balance in global natural gas markets.
Highlights from this report include: