Moody’s: Modest amount of controversial natural gas exports will get approval

The DOE must determine deals to non-free trade countries are in the national interest under federal law, meaning they must clear a more stringent standard than contracts with free-trade nations.

Given the process at the DOE and the time it takes to build export facilities, Moody’s said the United States won’t be a major player in the international market until 2020.

Republicans and some Democrats want to send more natural gas to non-free trade nations, arguing doing so would add jobs and generate revenues. But several Democrats worry that too rapid an increase would drive domestic energy prices upward.

The report comes as House lawmakers are preparing to dive into the geopolitical implications of exporting natural gas. The Senate Energy and Natural Resources Committee will also hold a series of natural gas “roundtables” this month, one of which will focus on exports.

A bulk of the liquefied natural gas shipped from the United States will likely head to Asia and will help other nations secure lower-cost contracts, Moody’s said.

While the United States doesn’t figure to become a player in the global natural gas trade until the next decade, its expected emergence already is having an impact, the credit-rating agency said.

Moody’s explains the additional U.S. exports gives European and Asian customers leverage when negotiating long-term contracts with suppliers. Those export deals peg natural gas prices to oil rates, which keep prices high.

“The U.S.’s more pervasive impact on the industry is the influence of U.S. gas prices as major buyers seek to break away from the traditional, currently more expensive, oil-linked pricing of LNG [liquefied natural gas] contracts. Buyers benefit from more choices in supply, while LNG suppliers face more competition and the prospect of lower gas-linked sales in the future,” Moody’s said.

Moody’s predicted that export capacity to non-free trade nations would reach 6 billion cubic feet of natural gas per day. That’s about 9 percent of the 73 billion cubic feet produced domestically each day in 2020, as forecast by the U.S. Energy Information Administration.

Those exports to non-free trade countries would likely head to China, Japan and South Korea, Moody’s said — though it noted projects coming online in Australia, Canada and Mozambique would provide hefty competition to U.S. exporters.

“For longer-term supplies, which is the way the majority of LNG supply is procured, it is now a buyers’ market in Asia,” Moody’s said.

Japan is starved of energy, as 30 percent of its power supply went offline when the country turned off 48 of its 50 nuclear reactors following the March 2011 Fukushima Dai-ichi meltdown.

And China’s vast economy also needs a shot of energy.

While the country has sizable shale gas reserves, it suffers from a water shortage that has restricted hydraulic fracturing, or fracking. That drilling method injects a high-pressure mixture of water, sand and chemicals into tight-rock formations to tap hydrocarbons, and has been credited with driving the U.S. energy boom.

— This story was updated at 12:37 p.m.