Frank Verrastro

Senior Vice President & James R. Schlesinger Chair

for Energy and Geopolitics

March 2013

Prospects for US LNG Exports

U.S. Shale Gas Resources

Unconventional Gas

U.S. shale gas production from the major plays has increased dramatically

Unconventional Gas

2%

Projected Contribution of Shale Gas to Total US SupplyU.S. dry gas production, trillion cubic feet per year

Non-associated offshore

ProjectionsHistory

Associated with oil

Coalbed methane

Non-associated onshore

Shale gas

2010

10%

9%

21%

23%

9%

Tight gas26%

Source: EIA, Annual Energy Outlook 2013 Early Release

Unconventional Gas

Source: Department of Energy

- Spot cargoes – Alaskan LNG- Pipeline gas to Mexico and Canada- Re-exports of imported LNG from the

Freeport terminal in Texas, and the Sabine Pass & Cameron terminals in Louisiana

US has been exporting natural gas (in limited quantities) for years

Increased Production Could Allow U.S. to Become a Net Exporter of Natural Gas by 2020

Source: U.S. Energy Information Administration, Annual Energy Outlook 2012, June 25, 2012

Unconventional Gas

Potential Gas Pathways

Gas

Crude Oil

Pipeline

Asso

ciat

ed g

as

Non-Associated gas

Liquefaction

SyngasGas To Liquids (GTL)

Refined Oil Products

Chemical Reaction

Gas to Power/ Residential & Commercial

LNG for Export

LNG for Transport

Gas to Chemicals

Source: Royal Dutch Shell

Unconventional Gas

US Export Application Process• Federal law requires that the Department of Energy approve

natural gas exports to countries that have a free trade agreement (FTA) with the US

• For all other countries, the Department of Energy is required to grant applications for export authorizations unless the Department finds that the proposed exports are inconsistent with the public interest. “Public interest” determination considers economic, energy security, and environmental impacts

• FERC must also approve export facilities• Open issues: WTO compliance? Applicability of other trade

agreements/preferences relative to FTA equivalent status?

Proponents and Opponents of LNG Exports

• Proponents of LNG exports are drawn from the “free trade” and gas producer communities, the latter based on concerns over limited growth domestic markets and depressed prices;

• Opponents are mostly industrial consumers, who want to use the newfound abundance of natural gas to fuel a domestic “manufacturing renaissance”…as part of a new industrial policy

• Politicians can be found on both sides of the argument (pro-jobs growth vs. higher consumer prices); environmental issues surrounding gas development are also prevalent.

• Economics of liquefaction & export as well as market opportunities, competition, politics and foreign policy considerations will likely limit export volumes.

So, Where are We?• At the end of 2012, DOE released a commissioned study on the economic impact

of LNG exports. The report (supportive of exports on economic grounds) provoked controversy, and was open for public comment

• The public comment period is now over, but when a decision will be made is uncertain. Probably this year.

• One export facility has already been approved (Sabine Pass, 2.2 bcf/d)• There are currently 18 LNG export project applications under review (combined

export capacity of 28.02bcf/d) and awaiting permit approval from DOE• Timing of the DOE approval(s) is uncertain: policy statement or “slow walk?”• Congressional intervention could impede the export process, but is unlikely in

the short term. However, in the longer term, Congress may look to address broader questions about energy policy provoked by the LNG debate, reassessing policy in light of abundance (whereas previous policies were based on the notion of scarcity) and/or environmental impacts (beyond traditional siting considerations)