Now it's LNG's Turn for a Shake Up

Started April 6, 2017 at 03:46 pm by in Marcellus Shale

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04/06/17 03:46:09PM

Liquefied natural gas sellers from Qatar to Malaysia, that dominated gas sales to Asia for years, are facing the prospect of rising American exports. While less than 30 U.S. cargoes have landed in Asia, their effect was felt even before they arrived. LNG trade in 2016 jumped the most in five years, contract lengths were sliced in half in the past decade, and spot prices slumped more than 60% in the past three years.

That means the global LNG titans gathering in Tokyo this week for Gastech are in the midst of the biggest shakeup since the industry was founded in the 1960s. Just as American crude is increasingly making its way to Asia, the world’s biggest oil market, the burgeoning armada of gas cargoes from the U.S. and elsewhere are poking holes in the financial system on which the industry’s multi-billion plants are funded.

“As U.S. exports ramp up, we’re going to see even more flexibility with more people trying to buy and trade volumes. The old models of stable long-term contracts will really have to change,” said Zhi Xin Chong, a gas analyst for Wood Mackenzie in Singapore. “We’ve already seen the impact of U.S. LNG on contract trends, with more destination flexibility coming into play.”

Since the 1960s, when projects in Algeria and Alaska started chilling natural gas to temperatures colder than the dark side of the moon, the LNG trade was as simple as the industry’s engineering was complex. Energy companies borrowed heavily to develop gas fields and build liquefaction plants, and to pay off the debt they signed decades-long contracts with electric utilities to buy the fuel at a fraction of the price of oil.

Now, with hydraulic fracturing lowering production costs, U.S. exporters are setting the price of LNG based on natural gas trades at Henry Hub in Louisiana. They’re also eliminating destination restrictions that require ships arrive at a specific port, which most previous contracts included, meaning traders can buy cargoes and flip them to whatever market needs them the most.

Skip Peel - Independent Landman
04/06/17 03:55:54PM @skip-peel-independent-landman:

Rising Australian LNG supply will have a significant impact on prices in the Asian markets.

Australian LNG exports to rise 63 pct in 2017, report says

January 17, 2017

Australia’s liquefied natural gas (LNG) exports are expected to reach almost 60 million tonnes in 2017, up by 63% year-on-year, according to a monthly report by energy analyst, EnergyQuest. 

LNG exports will rise as the Australia Pacific LNG project and Gorgon LNG project continue to ramp up and new projects such as Wheatstone and Ichthys come into production.

In 2016, LNG exports rose by 37.7% to 36.8 million tonnes as the plethora of new projects triggered a flood of new shipments to global markets, the report said. Total exports were 10.1Mt above the 26.7Mt shipped in 2015.

Double value

Notwithstanding the lower oil price environment present through much of last year, EnergyQuest estimates the total value of Australian LNG exports as $17.9 billion in 2016.

This is an 8.6% dollar increase over the previous year, the report said.

Oil prices, to which LNG prices are linked, are now around 25% higher than the 2016 average, reflecting recent decisions by the Organization of the Petroleum Exporting Countries (OPEC) to cut production.

If current oil prices are maintained, EnergyQuest estimates that the value of Australian LNG exports will double to around A$36 billion in 2017.

“The growth of LNG exports is a massive benefit to the Australian economy,” EnergyQuest CEO, Graeme Bethune, said in the report.

Australia’s newest LNG hub – the three new plants on Curtis Island of Gladstone – saw Queensland LNG exports nearly triple to 17.5 million tonnes in 2016. West coast exports were down
slightly at 19.3 million tonnes for the period.

Most Australian LNG exports continued to go to established customers with long-term contracts during the year.

Japan remains the largest customer for Australian LNG, taking 48% of 2016 cargoes. China is now the second-biggest customer, taking 30% of cargoes. Korea is an emerging buyer with 53 cargoes and 16 Australian cargoes went to India, the report said.

Winter demand

There has been particularly strong demand for LNG in North Asia during the current winter.

North Asian LNG spot prices are now the highest in two years. The Platts JKM marker was US$9.75/MMBtu early in January, well above LNG contract prices of around $7.00/MMBtu, the report noted.

High spot prices are also attracting US LNG cargoes into North Asia.

“Shipments from the Sabine Pass project on the US Gulf Coast, which were mostly going to South America, are now overwhelmingly heading to North Asia with nine of the twelve December loadings heading there,” Bethune said.

“However this does not appear to be adversely affecting Australian exports, which are also mwell positioned to take advantage of high spot prices,” Bethune added.

Barry D
04/06/17 08:35:35PM @barry-d:

Much of the undeveloped world does not have access to fossil fuel. LNG offers these areas a reliable source.

Most people in our country take for granted the blessing of abundant inexpensive energy we have in this country. Most of the world still rely on fuel sources such as wood and animal dung. This is the market for LNG produced in the U.S.

However, due to the lack of infrastructure in those areas even LNG was not an option. Lower LNG costs may make it feasible to develop projects in these areas.

As these areas come on line as consumers, the need for LNG will increase. Which will be good for shale development in the U.S..

Simple economics, supply and demand.

The future is so bright we'll all have ta wear shades.




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