Analysis Shows LNG Exports Drive Natural Gas Production Growth, Which Drive Prices Down
Texas Insider Report: AUSTIN, Texas – U.S. Liquified Natural Gas (LNG) exports have not had any sustained and significant direct impact on U.S. natural gas prices – and have, in fact, spurred production and productivity gains, which contribute to downward pressure on domestic prices, according to an analysis prepared by Dr. Dean Foreman, chief economist for the Texas Oil & Gas Association (TXOGA).
“Data confirm LNG exports have had no impact on domestic natural gas prices. In fact, the real price of natural gas in America hit its lowest point in 30 years in mid-February – while our LNG exports have neared record highs,” said TXOGA President Todd Staples (right.)
“The Administration’s decision to pause approvals of new LNG export facilities, citing potential to raise domestic energy prices, is baseless and another ploy to ultimately end American energy production."These decisions squander the American energy leadership that starts in Texas – and puts energy security worldwide at risk,” Staples said.
“Our research confirms that expanded LNG exports actually spur production and productivity gains, which help to drive prices down,” said Dr. Foreman.
“Attributing higher U.S. natural gas prices to LNG exports is inaccurate and risks misguided energy policies that run contrary to the interests of U.S. and especially Texas,” Foreman said.
Other conclusions from the analysis include:
- Amid tumultuous and uncertain times, U.S. LNG exports have remained near record-high levels but natural gas prices at Henry Hub, Louisiana, fell as low as $1.52 per million btu (mmbtu) in mid-February 2024, marking the lowest real prices for the month on record since 1994.
- Nonetheless, in their decision on January 26, 2024 to pause all pending approvals of new LNG export facilities, the Biden Administration has continued to point to U.S. LNG exports, which tripled in volume since 2019, for the potential to raise domestic energy costs.
- This decision neglects the evidence that U.S. LNG exports have actually motivated U.S. natural gas production growth and productivity, which in turn have exerted downward price pressures to the benefit of American consumers.
- By limiting the growth for U.S. LNG exports, the Administration’s intervention runs afoul of basic market principles as well as the demonstrated progress that has underpinned economic and energy security for American and global consumers.
- U.S. LNG exports have spurred incremental new U.S. production and led to improvements in technology and resource recoveries, which in turn have generally added to estimated domestic recoverable gas resources.
- The U.S. Potential Gas Committee’s most recent estimates (YE-2022) suggest the resource base could enable future U.S. gas supply of 3,978 trillion cubic feet — equivalent to 100 years of production at 2022 levels.
- The U.S. became a net exporter of LNG for the first time in February 2016.
- As of January 2024, U.S. LNG net exports increased by a multiple of over 40 compared with the average in 2016, while domestic real natural gas prices remained at record low levels for the month.
- Historically, there has been little to no evidence of a direct or causal relationship between U.S. LNG exports and domestic natural gas prices.
- Natural gas prices remained subject to seasonal variation but generally declined in 2019 through mid-2020 — and again beginning in late 2022 — despite increased U.S. LNG net exports.
The research demonstrates that U.S. LNG exports have not exerted any significant and sustained impact on domestic prices. Whether examining correlation analyses between domestic natural gas prices and U.S. LNG exports or employing robust modeling based on fundamental market drivers, it becomes evident that attributing higher U.S. natural gas prices to LNG exports would be inaccurate.
On the contrary, U.S. LNG exports have spurred production and fostered productivity gains, thus contributing to sustained downward pressure on domestic prices.
- Read the full report here.
