PNG LNG doesn't need gas

[Tree]

PNG LNG doesn't need gas for expansion, they need inexpensive gas for expansion.

How does E/A gas cost stack up against Hides again???

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LNG from US to cost GAIL India USD 10.5 per mmBtu

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By PTI | 22 Jul, 2013, 05.24PM IST

NEW DELHI: Liquefied natural gas (LNG) from the US will cost around USD 10.5 per million British thermal unit and will be the cheapest LNG to have been contracted ever by India. 



State-owned gas utility GAIL India LtdBSE -0.77 % had in December 2011 contracted to buy 3.5 million tonnes a year of super-cooled gas (LNG) from Cheniere Energy Partners LP for 20 years. The LNG price will be linked to a benchmark US price and included a fixed component. 



"Based on today's Henry Hub price, the landed cost of this gas will be around USD 10.5 per mmBtu," a top Oil Ministry official said. 



Gas at US Henry, LA is currently traded at around USD 3.78 per mmBtu. 



The LNG deliveries are expected to start in late 2016 or mid 2017 from Houston-based Cheniere's Sabine Pass LNG terminal in western Cameron Parish, Louisiana. GAIL's pact has an option to extend the agreement by 10 years. 



The price of gas compares to close to USD 13 per mmBtu that India will pay to RasGas of Qatar for buying 7.5 million tons per annum of LNG at oil price of USD 100. LNG on a similar long-term contract with Gorgon project of Australia will cost USD 16 when at Indian port. 



With domestic demand outstripping supplies by a wide margin, India's reliance on LNG, super-chilled for shipping by tanker, is bound to increase. 



Currently, domestic supplies of 105 million standard cubic metres per day will be able to meet just two-thirds of the demand, the official said. 



The domestic shortfall is forcing the state-owned firm and Petronet LNG LtdBSE 0.84 %, in which GAIL has a 12.5 per cent stake, to buy a larger volume of gas from overseas and increase capacity and terminals used to import the fuel. 



GAIL, the first Asian company to buy liquefied natural gas from the US, is taking advantage of the lowest prices in 13 years to tie up LNG supplies from US. Gas prices in US reached a record high of USD 15.378 per mmBtu in December 2005. 



Houston-based Cheniere Energy Partners LP's Sabine Pass terminal is the only one with approval to export the LNG to nations that don't have a free-trade agreement with the US. 



The official said while the deal with Cheniere uses Henry Hub, the main US gas benchmark traded on the New York Mercantile Exchange, as the pricing index, LNG sellers in Australia and Qatar use oil to set the price. 



GAIL, which has also bought a 20 per cent stake in shale gas areas of the Eagle Ford region in Texas from Carizzo Oil & Gas Inc for USD 95 million, is building a floating LNG receipt facility off Kakinada in Andhra Pradesh and is exploring options to build a permanent one in West Bengal, he said. 



Besides having a stake in Petronet, it currently operates a 5 million tonne Dabhol LNG terminal in Maharashtra.

[Palm]

The key; there is a fixed portion and a variable indexed to Henry Hub. Now, I just saw this weekend where an IB said something like "US natural gas prices are way too low". So if GS can control things like aluminum by shifting stock around in warehouses in Detroit, do you suppose it will be much longer before IBs and hedge funds start working the NG prices up. Tomorrow congress starts some hearings on these commodity "situations" being controlled by "big banks". Will be worth following.

[admin]

I think the rig count is falling, that might also contribute upward pressure to Henry Hub, but I have to admit it's not something I check daily.

Read about GS and aluminium.. Fun and games in these banks galore, what will they think of next.

[bam]

rig count is sort of meaningless now with all of the pad/horizontal drilling, as well as all of the bi-product nat gas coming off the shale oil plays. looking at rig counts today vs 5yrs ago is not apples to apples.

[trans]

Rig count has already fallen out of bed. What's coming on in now is the backlog of wells drilled and capped imo for various reasons, such as lease timing. When this surplus of already drilled wells is tapped, prices should firm. Analyst opinions say around end of 2013. They see increases form then on to higher prices
. fwiw

[bam]

you can make a lot of money if that's your view because the futures curve is basically flat out as far as the eye can see. i think the argument for cheap natural gas altering the worldwide LNG market doesn't make any sense. Cheniere's capacity is going to be the same as PNG LNG, that's it. No other north american project is even close to having permits/construction completed anytime soon. North american nat gas is not going to save Asia from high LNG costs.

[trans]

you can make a lot of money if that's your view because the futures curve is basically flat out as far as the eye can see. i think the argument for cheap natural gas altering the worldwide LNG market doesn't make any sense. Cheniere's capacity is going to be the same as PNG LNG, that's it. No other north american project is even close to having permits/construction completed anytime soon. North american nat gas is not going to save Asia from high LNG costs.

Bam, I agree with everything you say, except whether wrong or right, I believe nat gas prices in the U.S. are going to move higher up to prices that give a more equitable rate of return for producers.  I believe that is in the area of $5 or so eventually.  I'm also in the camp that frack/horizontal wells  depreciate in a geometric fashion, meaning future drilling costs are likely to rise also. Appreciate your comments...I listen

[admin]

And I appreciate the comments of both of you. Does any of you have an idea how many of these wells are not profitable at present Henry Hub prices?

[sydbod]

  Does any of you have an idea how many of these wells are not profitable at present Henry Hub prices?

That becomes hard to determine.

One has to look at what type of drilling is now being carried out.

The number of rigs that are targeting gas plays are decreasing and the number of rigs targeting tight oil plays are increasing.

One also has to remember that a significant amount of the gas is coming from the tight oil plays, with the gas being considered a $0 value byproduct. (it is not a factor in deciding to drill these plays).

The real problem is that the pure gas wells have production decline of around 50% to 60% per year so they are basically worthless after around 4 years.

To keep gas production at its current level, they have to drill roughly 16,000 new gas wells every year just to combat this high production decline to keep gas production at the current level.

The numbers floating around from various sites suggest that US$5 is what is required to make a worthwhile profit for gas plays.

[admin]

Yes, thanks sydbod. I have published articles here which confirmed these steep decline rates from historical well production data, but technology is likely to have improved in the meantime so it's basically difficult to determine, I guess.