There are more problems with the NERA analysis. It assumes all liquefaction plants are owned by Americans, which is patently untrue. Because of the immense sums involved, plant after plant has substantial foreign ownership, often Asian, which has the most intense interest in U.S. gas.
Golden Pass LLC, for example, ranks high on the early-approval queue. It is a U.S. limited liability company jointly owned by that leading funder of global jihad, Qatar, and its long-term partner Exxon.
Another myth, which economists at Brookings seem much enamored of, is that exporting inexpensive U.S. gas will reduce global price gouging and increase global efficiency. That is a wan hope, indeed. Roughly half the gas, on current records, will be going to global trading companies — Exxon, Shell, British Petroleum, BG Group, Sempra, Centrica and others.
Exxon, to take just one example, is a partner in gas fields throughout the world. It now sells very expensive gas from Australia and Papua New Guinea to Asian customers at prices up to three times more than U.S. gas. At the same time, its partner Qatar, which is blessed with the cheapest gas in the world, also sells its gas to Asia at the same high price that Exxon does. As long as the global supply of natural gas runs below demand, which will be far into the future, international gas will be selling at the “marginal” price, or at whatever is the highest price that some customer is willing to pay. Consumers will be paying top dollar while the prime beneficiaries are going to be the shareholders of the global energy companies.
The clinching argument from Brookings and other economists is that U.S. liquefied-natural-gas exports will necessarily be small. If they’re right, top global businessmen have collectively blown far more than $1 billion in pointless export- approval proceedings. But the energy companies could instead be gambling on China.
Shale gas has long been a major component of China’s energy forecasts. The country may indeed have the greatest gas reserves in the world, but it now seems to have conceded that, primarily for geologic reasons, very little of it may be recoverable in the foreseeable future, as many in the industry suspected. But since natural gas is the ideal substitute for industrial coal, the sheer toxicity of China’s coal-generated air pollution will drive a massive expansion of gas imports. Recent pipeline contracts with Russia will help but will not come close to closing the gap.
China also has a long record of destabilizing world commodity markets. During its 2000s drive to dominate global steel markets, it drove a tenfold jump in iron ore prices.
Washington may also be far too complacent about the U.S. supply. NERA, for example, assumes that within the medium term, all U.S. gas is equally accessible. That is far from certain. Gas from the Marcellus shale wafts up the wellpipe almost ready to be piped to customers. Other shale deposits may resist giving up their treasures so easily. Consider: Glowing prospects in California’s Monterey shale were recently downgraded by 96 percent, and the estimate of recoverable gas in the Marcellus was reduced by two-thirds in 2012.
The estimates of recoverable U.S. natural gas so casually tossed around now are virtually all based on projections from models — not from extensive drilling. Like the original Marcellus projections, there could be nasty surprises ahead.
The danger for the United States is that it will drift into the position of a raw- material supplier to an East Asian economic juggernaut. The Energy Department has commissioned a new economic analysis of the impact of exporting — and maybe this one will be from a firm with a broader perspective than NERA’s. It should suspend further approvals until that report is finished and properly vetted.
Meanwhile, for the sake of the public, the Energy Department should try to understand why its forecasting and policy staffs are marching to such different drummers.