In rebuttal comments filed at the Department of Energy (DOE), producers have called on the department to proceed with review and approval of liquefied natural gas (LNG) export applications expeditiously, saying the nation has more than enough natural gas to meet domestic demand and supply exports.While producers favor exports, large gas users and environmentalists are mostly opposed to them.

Energy-intensive companies are being “short-sighted” by claiming that the domestic gas demand projections cited in the DOE study on LNG exports were too low, while failing to recognize that the gas production numbers were underestimated as well, said an official with the Western Energy Alliance Monday.

The Energy Intensive, Trade Exposed (EITE) industry (industrial consumers, manufacturers, and chemical companies) contends that the demand projections in the DOE-commissioned NERA Economic Consulting study, which were from the Energy Information Administration’s (EIA) Annual Energy Outlook (AEO) 2011, were “too low,” said Kathleen M. Sgamma, vice president of government and public affairs with the Denver-based producer group (see Daily GPI, Dec. 7, 2012).

“While that may be true, it is certain that EIA’s natural gas production numbers were greatly underestimated in the AEO 2011…EITE companies are being shortsighted in their emphasis only on the underestimate of demand without acknowledging the greater underestimation of production,” she said in reply comments rebutting the original comments on the study, which were filed in January.

“The United States cannot expect to maintain its first-mover advantage forever. Other nations are starting to invest in American-developed horizontal drilling and hydraulic fracturing technology to develop their own reserves. Calls for ‘four or five more studies,’ or rulemaking will only take more time and further erode our advantage. No study is perfect…However DOE’s LNG export studies have clearly shown an overall benefit to the country,” Sgamma said.

She noted that producers have responded to the oversupply of natural gas rationally by shifting production away from gas to oil. Between January 2012 and 2013, active rigs drilling in both dry and wet gas fields fell by 287, a drop of 13.6%. “A shift back to natural gas could likewise occur with increased demand arising from [LNG] exports,” she said.

“Analysts at Deutsche Bank, Ernst & Young’s Oil and Gas Center, and Deloitte’s Center for Energy Solutions all see lower natural gas prices in the next few years, indicating that proved natural gas reserves will continue to remain untapped without an increase in demand. With an increase in demand from [LNG] exports, accompanied by minor price increases as NERA has projected, many fields would become profitable for production again. At only $5/MMBtu, 10 fields in Wyoming, Colorado, Texas, Utah, Pennsylvania and other states would likely become profitable and begin producing natural gas. Tapping into that spare capacity will likewise maintain downward pressure on price.”

She quoted Deloitte analyst Jon England: “The market should prepare for produced volumes [of natural gas] to rise even higher. The majority of the 19 recognized basins are still in early exploratory or development states. Moreover, production is still ramping up in Marcellus, the largest U.S. shale gas basin.” The United States has not begun to hit the limit on proved reserves or production potential, according to Sgamma. The high costs associated with transporting LNG provide a “built-in incentive to service domestic customers first.”

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