Need to improve LNG imports, study shows

04/07/2006


The growing cost of energy is one of a host of current challenges facing U.S. manufacturers, but the ability to expand imports of liquefied natural gas (LNG) at reasonable cost would help rebuild the global competitiveness of the sector, according to a new report.

The report from the Manufacturers Alliance/MAPI, U.S. Manufacturing and the Evolving Global LNG Market: Prospects for Lower Energy Costs, finds that absent new sources of natural gas supply, the price of this crucial energy resource is almost certain to climb steeply. The paper details the impact on U.S. manufacturing, highlights the measurable effects on economic activity, and heightens awareness of the developing global market for LNG.

“It is imperative that we take all available measures, including acceleration of domestic production, conservation, and expansion of LNG imports, to offset the competitive disadvantage faced by U.S. manufacturers because of record high natural gas prices,” said Thomas J. Duesterberg, president and chief executive officer of the Manufacturers Alliance/MAPI.

Economist Donald A. Norman’s report indicates that the price of U.S. natural gas remains about three times higher than its average level in the 1980s and has hit the U.S. manufacturing sector especially hard. Norman estimates that despite reduced gas consumption between 2002 and 2004, aggregate expenditures by manufacturers for natural gas increased by 59%. The Great Lakes region, which accounts for a greater share of total economic activity than the rest of the country, was affected even more adversely, paying 27% more than the average price paid by manufacturers nationwide.

The Alliance believes the United States should construct LNG terminals if it is to benefit from expanded LNG trade. For example, in 2005 the U.S. imports of LNG totaled 631 billion cubic feet (Bcf). Norman estimates that U.S. LNG imports could total as much as 4,900 Bcf by 2010 if the three terminals that are under construction and the nine that have been approved by the Federal Energy Regulatory Commission (FERC) are completed. The long-term effect of such an increase in gas supplies would be to reduce the price of gas by an estimated 21%.

“Energy use will expand as the economy and our population grows,” Norman said. “The United States needs a comprehensive approach to expand energy supplies and to encourage improvements in energy efficiency. Every stage of the LNG‘chain’—liquefaction, shipping, and LNG terminals—is expanding worldwide. The United States needs to construct LNG terminals if it is to benefit in expanded LNG trade lest it remain insulated from the world market.”





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