Australian Natural Gas Exports Face Threat from US

From The Australian

By Paul Garvey

AS Chevron was trying to gently break the news of a $9 billion cost blowout at its Gorgon liquefied natural gas project in Western Australia, the US Department of Energy was releasing a new report that challenges the business case being pursued not just by Chevron but all the companies behind Australia’s $200bn LNG investment boom.

The Department of Energy’s release of the study from NERA Economic Consulting, titled Macroeconomic Impacts of LNG Exports from the United States, appears to offer overwhelming support for the country to begin exporting LNG.

The US has been debating whether it should begin exporting some of the vast shale gas and coal-seam gas reserves that have been identified in recent years, or preserve its new bounty – and the incredibly low gas prices they have spawned – for internal consumption only.

The report will add significant weight to calls that the US should allow companies to take that cheap gas, convert it into LNG and sell it into considerably higher-priced Asian gas markets.

Such a move would directly threaten Australia’s LNG projects, potentially undermining the prices they can fetch for their output.

The findings of the report, which examined a range of different LNG export scenarios, were emphatic.

“Across all these scenarios, the US was projected to gain net economic benefits from allowing LNG exports. Moreover, for every one of the market scenarios examined, net economic benefits increased as the level of LNG exports increased,” the study found.

The rise in US domestic gas prices as a result of increased exports would be more than offset by the benefits exports would generate, the report says.

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