Robert Hubbell PETE 2031 Dr.

Kam 11/27/2012

Should the United States export natural gas? The United States natural gas production has been increasing very strongly for the past few years. With this strong increase in production the cost of natural gas in the United States has decreased. This brings up the topic of whether or not the United States should export this natural gas. It is a topic still being debated today and people have very strong opinions on both sides of this issue. On January 10, 1901 Lucas #1 well struck oil in Texas. This well produced 100000 barrels per day. This was more than all the other wells in the United States combined. People started drilling wells all over the area and it became known as Spindletop. Due to the abundance of oil the price per barrel dropped to down to only three cents a barrel. The first liquefied natural gas plant was built in West Virginia in 1912. In January 1959, the world's first LNG tanker, the Methane Pioneer carried liquefied natural gas from Lake Charles, LA., to Canvey Island, United Kingdom. In 1964 the British Gas Council began importing LNG from Algeria. This made the United Kingdom the worlds first LNG imported and Algeria the first LNG exporter. In 2006 the United States exported 723,958 million cubic feet of natural gas at an average price of $6.83 per thousand cubic feet. In the United States at that time natural gas sold for $6.39 per thousand cubic feet at wellhead price. This trend continued to grow as the United States exported 1,072,357 million cubic feet of natural gas in 2009 for an average price of $4.47 per thousand cubic feet. The United States wellhead price was only $3.67 per thousand cubic feet. Natural gas was selling for 80 cents more expensive if it was being exported. Most recently in 2011 the United States exported 1,507,058 million cubic feet of natural gas at a price average of $4.65 per thousand cubic feet, while domestically well head price was only $3.95 per thousand cubic feet. It has been a trend for the past 5 years that the United States exports more natural gas annually. This trend is most likely going to continue with the recent discoveries of shale drilling and horizontal drilling.

New oil is being discovered all over America with the new drilling technique. Recently there have been 20 plus shale fields discovered that each have over 20 billion barrels of recoverable oil. There is 24 billion barrels of oil in the North Dakota Bakken formation. The Eagle Ford oil formation had produced only 4.3 million barrels in 2010 and it was able to increase its production to 36.6 million barrels in 2011. The American reserve will increase from approximately 21 billion to over 100 billion with all the new discoveries and technology to recover this oil and natural gas. Goldman Sachs predicted that the United States will be the Worlds leading oil producer by the year 2017. Recently the United States has started exporting more petroleum products than it has been importing. In 2011 petroleum products accounted for 44% of the United States trade deficit. The United States has more oil rigs right now than it does natural gas rigs. In 2015 is the first large scale natural gas export facilities are scheduled to open on the Texas coast. As of right now the United States has zero LNG export terminals. The United States will have to grant permits to companies wishing to export natural gas. These LNG export terminals are being created mainly by transforming preexisting import terminals into export terminals. Only one permit has been granted to Cheniere Energy last year by the Department of Engery. There are approximately another 15 permits waiting to be approved by the Obama administration, but he is currently waiting to see what the Department of Energys study shows related to the economic implications of exporting. Some companies are trying to build an 800 mile pipeline from Alaska to China. Here the LNG could potentially sell at a higher price. This pipeline will cost approximately 65 billion dollars to construct. Some of the down falls of exporting LNG is that the process to convert the LNG import facilities to export facilities will take a few years. Also there are many expensive transport ships that need to be built to transport the LNG overseas. Also, many of these companies are still waiting on the permits to be able to export the LNG legally. Exporting the LNG will most likely cause the price of LNG in the United States to increase because the companies will be getting a higher price for it out of the country. Also building theses large LGN exporting facilities brings the risk of spillage of the LGN into the water and ground. Environmentalists are worried about this possibility and since not sure research has been done on the subject, there is no sure answer as to how this will end up effecting the environment

I believe the United States should however continue to export LNG. I think this is the future of the country and cannot be avoided. The number of LNG exported has been increasing annually for the past 6 years and I believe it will continue in this trend. With all the new discoveries of shale drilling, fracking, and horizontal drilling the United States has just found an abundance of LNG right here below our feet. China has a very high demand for the LNG and we can charge them much more for it than if we sell it domestically. Also I believe that if we continue to export the LNG we will be able to create many new jobs for people operating these ports and building them. Many companies will get business from building the ports or ships used to transport the LNG. Many companies are now starting to change their fuel sources from diesel to LNG because of the abundance of it and cost of it. LNG burns very cleanly and I believe is what most of the country will be very dependent on in the next 15 years. I also think that many people are sitting on LNG and do not realize it. These people would benefit greatly from companies paying them commission to get the LNG from their land. In conclusion I believe that the benefits of exporting liquefied natural gas are too great to pass up. Exporting LNG will create many jobs throughout the country and possibly make up for the large deficit the country is facing. China has such a high demand for LNG right now I think it is a dumb economical decision to not export them our LNG. We have found huge deposits of natural gas throughout the United States and they have only recently become available through the new drilling techniques developed. The government will need to issues the other companies the licenses to export LGN and build the facilities. Also I think that there will be more natural gas rigs built in the upcoming years. Natural gas is in such abundance and availability that many cars and companies will change from using diesel to natural gas. The possibility of the pipeline being built from Alaska to China to transport LNG and sell it for a higher price would also help boost the economy. There are some environmental and economic uncertainties that people are skeptical about, but I still believe for the time being it is the best decision for the United States to continue to export LNG and to give permits to more companies to export the LNG with their new exporting facilities.