09-26-2015, 03:38 PM
You're right Putz
The typical oil-linked LNG price has been an S-shape curve where the straight-line diagonal portion goes by the formula:
$(Japan Crude Cocktail Price) x (0.1485) + $0.50
So at $60 oil, LNG comes to ($60) x (0.1485) + $0.50 = $ 9.41 ===> Not a natural (healthy) price, as you say.
There were a lot of gesticulations in the past, of course, by BUYERS who were paying $14+ when Oil was over $90.
Now, SELLERS are whining that their sunk investment costs are not being covered.
SO ... now there are on-going LNG price negotiations to modify the price-setting formulas with higher floors and lower ceilings to enable all parties to share the risks and benefits equally.
AND ... if Oil price stays below $60, we'll see Oil Supply stop growing due to lack of E&P spending in high-cost areas around the world. If we see Shell pull out of Alaska, we'll know they bit the bullet and concluded that Oil price will not rebound this decade.
The typical oil-linked LNG price has been an S-shape curve where the straight-line diagonal portion goes by the formula:
$(Japan Crude Cocktail Price) x (0.1485) + $0.50
So at $60 oil, LNG comes to ($60) x (0.1485) + $0.50 = $ 9.41 ===> Not a natural (healthy) price, as you say.
There were a lot of gesticulations in the past, of course, by BUYERS who were paying $14+ when Oil was over $90.
Now, SELLERS are whining that their sunk investment costs are not being covered.
SO ... now there are on-going LNG price negotiations to modify the price-setting formulas with higher floors and lower ceilings to enable all parties to share the risks and benefits equally.
AND ... if Oil price stays below $60, we'll see Oil Supply stop growing due to lack of E&P spending in high-cost areas around the world. If we see Shell pull out of Alaska, we'll know they bit the bullet and concluded that Oil price will not rebound this decade.
Drivel Maven with Personality