Companies investing in North American shale gas export projects

A new report by Lux Research has revealed that as the production of natural gas increases in the US, companies are investing $120bn in North American liquefied natural gas (LNG) export projects that could raise domestic gas prices.

According to the report, the export infrastructure that is currently under construction may increase domestic costs as the global market balances, even though the shale gas revolution that resulted in very cheap gas for the US companies and consumers.

The global LNG trade has increased seven-fold since 2002 to $170bn in 2012.

The report says that Australia is set to pose the largest threat to US exports as the country already has $180bn in current investments to add 3 trillion cubic feet a year of natural gas liquefaction capacity until 2017.

Lux Research analyst and one of the lead authors of the report Daniel Choi said that the US could export around 30% of the gas it produces by 2020 if all the existing approved and proposed projects started operating at full capacity.

"This would eliminate extremely low North American gas prices, hurting some domestic users, but would benefit the international economy overall," Choi added.

The report claims that North America enjoys huge reserves of shale gas and a head start in its development but several other countries are also making rapid progress. Argentina currently has technically recoverable shale gas reserves of 161 billion barrels of oil equivalent while China has 32 billion.

Lux Research said that LNG aims to replace diesel for a range of applications, mainly as a transportation fuel and also for off-grid power generation. LNG prices are up to 25% lower than diesel prices in several countries, but it requires additional storage as well as distribution costs.