North America consumes about 6 trillion cubic feet (Tcf) of natural gas annually, but it produces 7 Tcf from conventional and unconventional sources, thereby setting the stage for the opportunity to export LNG.

But the amount exported, the costs of that supply, the exporters’ netbacks, are all questions still to be answered. Until that time, first-mover projects with cost advantages will win—and natural gas prices may be “messy.” This analysis comes from Brian Forbes, partner at consulting firm A.T. Kearney, who spoke at Hart Energy’s recent North American LNG Exports conference in Houston.

At some point in the future, companies will trade LNG cargos globally and a vibrant spot market will develop, he said. Asian buyers might buy North American LNG and swap it for African or Middle Eastern cargos.

The price spread between supply and the cost of shipping to global markets is the key. “If you do the analysis, the landed cost of U.S. LNG compares favorably to Australia and Africa in most cases; with Russia we are pretty close. This opens up quite a bit if you allow global trading,” he said.

However, it’s not as important how much LNG you sell, as it is where you sell it, Forbes said, although the best markets are to Asian buyers. For example, shipping LNG from the proposed Kitimat project in British Columbia to South Korea costs $1.05 per thousand cubic feet (Mcf), whereas from Sabine Pass on the Louisiana coast, shipping cost rises to $2.41/Mcf. Liquefaction costs depend heavily on how much infrastructure exists at a site and the cost and extent of power generation needed on site.

A big question for U.S. producers is the effect of exports on domestic gas prices. Forbes said he expects U.S. prices to rise once LNG exports start but markets will be “messy” until price equilibrium is reached.

“You could end up with $6 or $7 gas but it might take a year, or maybe six months,” he said. “It’s hard to predict. If more shale fields are in the money and thus have access to more capital, you will see us over drill for gas. This will contribute to that messy equilibrium. The U.S. stays competitive if it stays closer to 6 Tcf of exports, so you want to be one of the first projects built and with fully committed demand.”

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