Your editorial on exporting U.S. natural gas as (liquefied natural gas) fails to account for market reality worldwide. The United States has an over-supply of natural gas and consequently prices per thousand cubic feet have fallen to low ranges not seen in decades. Shale gas is now at 39 percent of total U.S. production. Low cost producers in the East have margins that will keep shale gas volumes at high levels.

Do LNG exports change this to the extent that New Mexico will benefit "immediately?"

The answer is not found in the Department of Energy long term authorizations or export permits and changing the status of potential importing countries. It is in the global marketplace for LNG. Because the United States has a natural gas surplus, it does not follow that American LNG will automatically discover a world ready to buy it.

The LNG solution is one-sided: the U.S. government approval of export permits will deplete the over-supply, raise natural gas prices, create jobs and expand revenues. The other side is either not understood or ignored.

The global LNG market is highly competitive with the Middle East well- established. Can U.S. liquefied natural gas export terminals with new permits to export compete?

Is the current U.S. natural gas low price advantage a temporary condition which will vanish when Russia and China produce shale gas and in turn become LNG exporters? While Russia supplies the EU with 25 percent of its natural gas requirements, this is still conventional gas. With shale gas production, Moscow would have an LNG export platform within six or seven years.

Potential importing nations of U.S. LNG will assess prices and contract terms. There is no reason Japan would exempt itself from the market to buy U.S. imports at higher prices than the competition.

There is also market-risk for the investors: the companies that receive LNG permits and trading liberalization must also obtain global LNG market share.

Billions of dollars are required to build and retrofit facilities to convert natural gas to liquids for LNG transport and then process back to gas. How will permits and

country import status changes overcome market risk?

LNG should make only a small and limited-time demand shift in the U.S. natural gas consumption. The San Juan Basin would be well-advised not to bet the farm on LNG as a solution to low natural gas prices.



New Mexico Center for Energy Policy