Crude exports could put Louisiana at center of trade hub _lowres

Associated Press file photo -- An oil tanker enters a channel near Port Aransas, Texas, heading for the Port of Corpus Christi. A federal ban prevents U.S. producers from exporting oil, an issue that has been before Congress.

Lifting the export ban on U.S. crude could put Louisiana at the center of an emerging global trade hub for liquefied natural gas and oil, an LSU researcher said Wednesday.

“If we have confidence in our state and our nation’s energy economy, we can decide to take these risks, and the potential upsides are big,” said Gregory Upton Jr., an assistant professor with the LSU Center for Energy Studies. “I think, for Louisiana in particular and the Gulf Coast region in general, those potential upsides are very big.”

Upton said lifting the ban could someday be seen as a structural shift, when natural gas became traded globally and when the global oil price moved from the focus on Brent crude to the Gulf Coast.

Upton was one of the speakers at the LSU Center for Energy Studies’ Energy Summit 2015. The topics included how advances in battery technology could make solar and wind power more practical, and a new design for smaller, less expensive and more efficient nuclear reactors.

Upton said neither he nor the Center for Energy Studies is taking a position on whether the export ban should be lifted.

However, his research shows both the benefits and drawbacks of lifting the ban on U.S. crude exports likely have been overblown by supporters and opponents.

Looking at the issue based on purely economic principles and the data results in “a very hum-drum picture” for both sides, “I think this is good news,” Upton said. “Proponents have argued that the removal of the export ban will create large increases in production and create all these jobs. Opponents have argued the repeal of the law will significantly increase oil and gas production, thus exacerbating CO2 emissions and climate change.”

Upton’s research shows that neither is likely.

His research also shows that the gap between U.S. and global benchmark prices have more to do with capacity constraints within the United States than the export ban. U.S. Energy Information Administration reports show the price gap between West Texas Intermediate and Brent crude would need to be $6 to $8 per barrel to offset the cost to ship U.S. crude overseas, Upton said. But the historical prices for Louisiana’s light sweet crude show the gap has never been more than $5, and it’s currently 86 cents. It’s $1.66 for West Texas Intermediate.

The policy debate shouldn’t be about whether one industry benefits more than another, or protecting one industry or even environmental concerns, Upton said. All those benefits and costs are “highly speculative” and based on assumptions about the future that are hard to corroborate.

The debate should be about whether the federal government should be in the business of implementing protectionist policies that create numerous frictions whose impacts are impossible to quantify, he said.

Upton said he’s not qualified to discuss whether the policy actually contributes to national security.

Meanwhile, other speakers said technical advances in batteries and nuclear power design also could be game-changing developments.

Battery systems capable of storing megawatts of power could allow Louisiana to capitalize on its wind and solar power potential, said Stefanie Goldman, research and development manager for battery maker Eos Energy Storage.

Battery storage would allow utilities to smooth out the spikes in power production common to solar and wind, which peak at midday and at night.

“There’s no reason it couldn’t be used for Louisiana,” Goldman said.

Solar power also could help meet Louisiana’s power needs, even if there are a lot of cloudy days, Goldman said. If Germany can use solar for 6 percent of its power, so can Louisiana.

Mike McGough, chief commercial officer of NuScale Power, said the company’s small modular reactors — cheaper, smaller, more efficient and safer than existing designs — also could change the nuclear power industry.

Each reactor is 76 feet tall, 15 feet in diameter and produces 50 megawatts of power, McGough said. To put that into perspective, 126 of the NuScale devices would fit inside the standard AP1000 nuclear reactor.

The prototype is being built in Idaho for Utah Associated Municipal Power Systems and is expected to be in operation in 2025.

Follow Ted Griggs on Twitter, @tedgriggsbr.