Source: U.S. Energy Information Administration

TheU.S. Energy Information Administration (EIA) has released its study, Effect of Increased Natural Gas Exports on Domestic Energy Markets, which was requested by the Department of Energy’s Office of Fossil Energy in August of 2011.

The report concludes increased natural gas exports lead to higher domesticnatural gas prices, increased domestic natural gas production, reduced domestic natural gas consumption, and increased natural gas imports from Canada via pipeline. As a result the EIA predicts an increase in domestic electricity costs between 2 and 9 percent.

Impacts overview 

• Increased natural gas exports lead to increased natural gas prices. Larger export levels lead to larger domestic price increases, while rapid increases in export levels lead to large initial price increases that moderate somewhat in a few years. Slower increases in export levels lead to more gradual price increases but eventually produce higher average prices during the decade between 2025 and 2035.

• Natural gas markets in the United States balance in response to increased natural gas exports largely through increased natural gas production. Increased natural gas production satisfies about 60 to 70 percent of the increase in natural gas exports, with a minor additional contribution from increased imports from Canada. Across most cases, about three-quarters of this increased production is from shale sources.

• The remaining portion is supplied by natural gas that would have been consumed domestically if not for the higher prices. The electric power sector accounts for the majority of the decrease in delivered natural gas. Due to higher prices, the electric power sector primarily shifts to coal-fired generation, and secondarily to renewable sources, though there is some decrease in total generation due to the higher price of natural gas. There is also a small reduction in natural gas use in all sectors from efficiency improvements and conservation.

• Even while consuming less, on average, consumers will see an increase in their natural gas and electricity expenditures. On average, from 2015 to 2035, natural gas bills paid by end-use consumers in the residential, commercial, and industrial sectors combined increase 3 to 9 percent over a comparable baseline case with no exports, depending on the export scenario and case, while increases in electricity bills paid by end-use customers range from 1 to 3 percent. In the rapid growth cases, the increase is notably greater in the early years relative to the later years. The slower export growth cases tend to show natural gas bills increasing more towards the end of the projection period. 

Read the full report here: Effect of Increased Natural Gas Exports on Domestic Energy Markets