52
scenarios of increased exports of LNG from the lower-48 states could affect domestic
energy
markets, focusing on consumption, production, and prices. At DOE/FE’s request, EIA assumed
three LNG export scenarios, including exports of:
•
12 Bcf/d, phased in at a rate of 2 Bcf/d each year beginning in 2015;
•
16 Bcf/d, phased in at a rate of 2 Bcf/d each year beginning in 2015; and
•
20 Bcf/d, phased in at a rate of 2 Bcf/d each year beginning in 2015.
EIA noted that the ramp-up specified by DOE/FE for these scenarios is extremely aggressive and
intended to provide results that show an outer envelope of domestic production
and consumption
responses that might follow from the approval of exports beyond 12 Bcf/d. Accordingly, EIA
also included a 20 Bcf/d export scenario, applied to the AEO 2014
Reference case, with a
delayed ramp-up to identify the impact of higher LNG exports implemented at a slower pace,
referred to as the “Alt 20 Bcf/d scenario.”
DOE/FE requested that EIA consider the above scenarios in the context of baseline cases
from EIA’s AEO 2014. These five cases are:
•
The AEO 2014 Reference case;
•
The High Oil and Gas Resource (HOGR) case, which reflects more optimistic
assumptions about domestic natural gas supply than
the Reference case;
•
The Low Oil and Gas Resource (LOGR) case, which reflects less optimistic
assumptions about domestic oil and natural gas supply than the Reference case;
•
The High Economic Growth (HEG) case, in which the U.S. gross domestic
product grows at an average annual rate 0.4 percentage points higher than in the
Reference case, resulting in higher domestic energy demand; and
•
The Accelerated Coal and Nuclear Retirements (ACNR) case, in which higher
costs for running existing coal and nuclear plants result in accelerated capacity
retirements and greater reliance on natural gas to fuel electricity generation than
in the Reference case.
Taken together, the four scenarios and five cases presented 16 case scenarios:
53
Table 1: Case Scenarios Considered By EIA in Analyzing Impacts of LNG Exports
AEO 2014 Cases
Export Scenarios
1
Reference
12 Bcf/d
2
Reference
16 Bcf/d
3
Reference
20 Bcf/d
4
Reference
Alt 20 Bcf/d
5
HOGR
12 Bcf/d
6
HOGR
16 Bcf/d
7
HOGR
20 Bcf/d
8
LOGR
12 Bcf/d
9
LOGR
16 Bcf/d
10
LOGR
20 Bcf/d
11
HEG
12 Bcf/d
12
HEG
16 Bcf/d
13
HEG
20 Bcf/d
14
ACNR
12 Bcf/d
15
ACNR
16 Bcf/d
16
ACNR
20 Bcf/d
EIA used the five AEO 2014 cases described above as the starting point for its analysis
and made several changes to represent the export scenarios specified in the study request. EIA
exogenously added LNG exports from the lower-48
states in its model runs, using the NEMS
model, to reach the targeted LNG export levels.
The Mid
‐Atlantic and South Atlantic regions were each assumed to host 1 Bcf/d of LNG
export capacity, the Pacific region was assumed to host 2 Bcf/d, with all of the remaining Lower
48 states’ export capacity hosted along the Gulf Coast in the West South
Central Census
division. In addition to the volume of natural gas needed to satisfy the levels of LNG exports
defined in the scenarios, a supplemental volume of gas is required in order to liquefy natural gas
for export as LNG. EIA assumed that this volume would equal 10 percent of the LNG export
volume. The additional natural gas consumed during the liquefaction
process is counted as fuel
use within the U.S. region where liquefaction occurs.
54
As in AEO 2014, U.S. natural gas pipeline imports and exports and U.S. LNG imports
are endogenously determined in the model. However, LNG exports out of Alaska were set
exogenously to the projected level from the corresponding baseline cases.
One further modeling change was applied only in export scenario runs using the
Accelerated Coal and Nuclear Retirements case. This case was included in the
Study to reflect a
baseline with high use of natural gas and low use of coal for electricity generation that is driven
by factors other than favorable natural gas supply conditions and low natural gas prices, which
are considered in the High Oil and Gas Resource case. In order to represent a situation in which
increased coal generation is not an available response to higher domestic natural gas prices, coal-
fired generation was not allowed to rise above the Accelerated Coal and Nuclear Retirements
baseline level when the DOE/FE export scenarios were implemented.
2.
Scope of EIA Study
The EIA Study recognizes that projections of energy markets over a 25-year period are
highly uncertain, and that many events—such
as supply disruptions, policy changes, and
technological breakthroughs—cannot be foreseen. Other acknowledged limitations on the scope
of the EIA Study include:
•
NEMS is not a world energy model and does not address the interaction between
the potential for additional U.S. natural gas exports and developments in world
natural gas markets;
•
Global natural gas markets are not fully integrated, and
their nature could change
substantially in response to significant changes in natural gas trading patterns.
Future opportunities to profitably export natural gas from the United States
depend on the future of global natural gas markets, the inclusion of relevant terms
in specific contracts to export natural gas, and the assumptions in the various
cases analyzed;
•
Given its focus on
the domestic energy system, NEMS does not fully account for
interactions between energy prices and the global economy that could benefit the
U.S. economy; and