Downeast LNG commissioned an independent economic analysis of the impact of the terminal as a bi-directional facility. The study indicated during the three-year construction period of the project, the statewide economic impact (not including labor income) would be an estimated $970 million in output and the impact on Washington County would be $440 million. During operations, the annual statewide economic impact would be an estimated $68 million and the annual impact for Washington County would be $46.4 million. For labor income during the three-year construction period, the statewide impact would be a total of $375 million and the impact for Washington County would be $177 million. For the annual labor income once the facility becomes operational, the statewide impact would be $21.6 million and the impact for Washington County would be $14.0 million.
Presently, about 94% of the natural gas that is consumed in the US is from domestic production sources. The remaining amount of natural gas is imported from Canada and an even smaller portion from imported LNG. While supplies from Canada have always been a significant percentage of the natural gas supplies to the Northeast US, the level of imports from Canada have declined by about 50% from 2009 to 2012.
The reason for the decline in imports is the development of the natural gas supplies from the shale gas reservoirs in the Mid-Atlantic states. Natural gas derived from these sources have increased from 2 Bcfd in 2008 to 13 Bcfd in 2013. Current estimates of the natural gas held in shale gas reservoirs are estimated to be in excess of 500 trillion cubic feet. As the production increases, the level of imports will subsequently decrease and likely cease.
The Energy Information Administration (EIA) projects that the production of domestic natural gas supplies will grow at an average rate of 1.6% per year from 2012 through 2040. Over that same period, the consumption of natural gas in the US will experience an annual growth rate of 0.8%, with the annual growth rate of consumption in New England at approximately 0.5%. The doubling of the production growth rate over that of consumption means supply exceeds demand, which in turn means that the US transitions from a net importer of natural gas to a net exporter of natural gas. The EIA expects this to happen before 2020, most likely in 2018. By 2040, the EIA estimates that the US will be exporting 3.5 trillion cubic feet of natural gas onto the world market.
Internationally, natural gas will be favored as an environmentally attractive fuel compared with other hydrocarbon fuels. It is the fuel of choice for the electric power and industrial sectors in many of the world’s regions, in part because of its lower carbon content compared with coal and oil, which makes it an attractive fuel source in countries where governments are implementing policies to reduce greenhouse gas emissions. In addition, it is an attractive alternative fuel for new power generation plants because of relatively low capital costs and the favorable heat rates for natural gas generation. Although projections vary, there is general consensus that global growth rate if natural gas consumption is in the range of 1.5% to 2.5% per year through 2040.
While the majority of the new natural gas supplies will be delivered via pipelines, significant portions of the globe will experience increased demand but will not have the benefit of pipeline availability. These areas will be served by imported LNG. By 2040, the EIA expects that the global LNG market will more than double, exceeding 20 trillion cubic feet. The Downeast LNG terminal is ideally suited to become an integral partner of the global LNG market.