Can Liquefied Natural Gas Solve the Trade Deficit?
https://www.realclearenergy.org/articles/2018/05/30/liquefied_natural_gas_and_the_us_trade_deficit_110295.htmlMay 30, 2018
Both sides of the longstanding trade dispute between the United States and China suggested recently that sales of U.S. liquefied natural gas (LNG) could be a large part of an eventual resolution. News out of Europe and Japan also features a prominent role for LNG exports to reduce trade deficits with these two allies, and potentially spurring the Trump administration to back down on the steel and aluminum tariffs that have roiled relations. The question left unasked is whether the American LNG industry can shoulder such a heavy burden. A closer look at the trajectory of this sector suggests a mixed answer, at best.
Growth in LNG exports would help the U.S. economy and the environment by reducing greenhouse gases. Germany and, to a lesser extent, Japan, have been importing more U.S. coal as they phase out nuclear generating capacity. China remains the world’s largest user of CO2 rich coal. Substituting natural gas for coal would cut CO2 emissions relative to coal by at least one-half. Producing more natural gas would also be a boon for the U.S. economy, especially its industrial sector. Developing more natural gas fields and building infrastructure to get it to end users would boost not only the energy sector, but also the steel, construction machinery, and other heavy equipment industries.
The problem is that the United States does not presently have sufficient capacity to meet anything near the potential demands from the world’s next three biggest economies. Existing U.S. capacity for exporting LNG is about 3.8 billion cubic feet per day (Bcf/day). Japan alone imports an average of around 12.7 Bcf/day; global imports are around 45 Bcf/day. As Germany, Japan, and perhaps Korea decrease their reliance on nuclear power, and China, India, the United States, and others continue to shift from coal to natural gas, demand is expected to grow steadily. The Energy Information Administration (EIA) expects global LNG demand to triple by 2040....
...Assuming average existing export prices of $5.62 per million British Thermal Units, exports would be worth about $24.4 billion if the 11.9 Bcf/day capacity is achieved. Current capacity utilization is closer to 80 percent, so the real export figure would be closer to $19.3 billion. The combined trade deficit in goods with China, Japan, and the E.U. was $595 billion in 2017. Based on our calculations, even if all prospective LNG facilities — including some permitted but not yet under construction — were to be completed, the total capacity of around 18.7 Bcf/day would only generate $38.4 billion in exports and reduce the trade deficit in goods up to 6.5 percent. And this is presuming, probably erroneously, that coal exports would not be displaced....
