The U.S. Natural Gas Story in 15 Charts

[admin]

The U.S. Natural Gas Story in 15 Charts

[Stavros]

Two important things to note when looking at this FOOLISH set of Charts:

1. InterOil has based all of their project economics on $85 per barrel Oil price and about $12.75 per MMBtu LNG price. That's far lower than the current LNG price in Asia ... lot's of cushion room to cover fluctuations.

2. In my "Humble" opinion (and many others in the industry) very few of the US LNG export projects will ever see the light of day. Natural Gas will stay in the US for use in many MANY places such as;

+ Inter-state truck fleets - as LNG
+ Car fleets (Taxi's; rentals; etc) - as CNG
+ Power Plants - as pipeline gas replacing coal
+ Trains - as LNG

John Q American Public will NEVER tolerate higher domestic gas prices ($8+ per MMBtu) that would come from exporting a large amount of the Natural Gas!

Would you????

November 16, 2011:

* Chesapeake CEO says hopes US will not export LNG

* McClendon would rather use natgas for transportation

* Chesapeake has supply agreement to export natgas abroad

By Edward McAllister

NEW YORK, Nov 16 (Reuters) - The head of Chesapeake Energy , one of the biggest U.S. natural gas drillers, does not want the country to ship its huge gas reserves overseas, despite agreeing to supply fuel for a proposed export project.

Record U.S. natural gas production has sparked a debate about whether the resource should be used more at home, potentially for wider use in transportation, or shipped abroad to fetch higher prices on the global market.

"I want the right to export natural gas, but I am really hopeful that we never do," said Chesapeake chief executive Aubrey McClendon during a panel discussion on natural gas vehicles in New York on Wednesday.

A string of rival liquefied natural gas (LNG) export projects have been proposed in the United States over the past year as unconventional gas production has left the country with a century's worth of cheap supply, evaporating import needs and thinning producers' profit margins.

Together, the proposed export plants could export the equivalent of more than 10 percent of U.S. gas needs by the end of the decade.

Chesapeake has pledged to supply U.S.-produced gas for the most advanced U.S. project at Sabine Pass in Louisiana, run by Cheniere Energy , which could be online by 2015, pending regulatory approval. Last month Cheniere signed an agreement with LNG shipper BG Group to supply U.S. shale gas to the world.

"When we first announced the Sabine Pass Liquefaction project, Chesapeake stated publicly that they would provide half a billion cubic feet per day of gas to the Sabine Pass facility," a Cheniere spokeswoman said.

Still, McClendon hopes that there will be enough demand at home for that not to be necessary.

"An LNG export facility wouldn't be ready for another four years or so," McClendon said. "I really hope in the next four years that we embrace natural gas for transportation so we don't need to export it outside the country."

Despite massive reserves and nascent efforts, the United States is yet to make widespread progress to turn diesel and gasoline engines over to natural gas.

Much depends on legislation in Washington. There is some optimism surrounding the Nat Gas Act, introduced in the Senate on Tuesday, which provides tax incentives to buy natural gas engines, though past efforts of this kind have been slowed and halted by political wrangling.

In the meantime, McClendon is hedging his bets.

"If for some reason this country refuses to use this wonderful fuel...I have to put my gas up for sale to somebody," he said.

[Ass0ciatedPress]

Stravos,

you bring up some strong points but using an article from mclenndon was not the best idea. Chesapeake has been in disarray from both a pr stand point and financial. I agree with you that only a handful of us projects will go forth. I see our Canadian brethren as a much more likely option. Mexico entering the equation wouldn't not surprise me either. That being said operators will not tolerate sub 4 dollar nat gas prices and will continue to find ways to help increase demand.

In the long run iocs economics win out,however competition is about to get very fierce that's why I have stressed a sooner rather than later methodology for getting agreements done.

[Putncalls]

I would like to point out that the current proposals for US LNG export terminal are all on the East cost Europe would then make much more sense than using the Panama canal.

[Putncalls]

I would also like to point another couple of things. MF information sucks!! It's either deliberate deception or very shallow research. For EX: I am not aware of NG being delivered from the Baken. It' s still being flared as far a I know. The other thing is that there is a good reason for the NG produces choose to "feed the glut". They might be getting a meager 3 bucks/MCF but they make money on the liquids.

[Stavros]

Here are some more tid bits on why measurable LNG Exports won't happen; so don't fret about a few more weeks.

From LNG World News:

“At $4 per million Btu, it would cost $9.15 to deliver U.S. gas cargoes to Japan, when taking liquefaction and transportation costs into account, according to Barclays. Delivery to Europe would cost $7.15 because of the shorter voyage, the bank said in the report. European importers currently pay about $10 per million Btu.”Tricky LNG Economics

Moreover, for U.S. LNG exports to make economic sense, domestic gas price would need to stay low, with high enough international LNG prices, and if the LNG prices are still tied to crude oil (which could change depending on market development), then crude oil prices would have to remain elevated. That’s a lot of tricky variables clouding the seemingly rosy LNG export picture.




Gas glut benefits US economy but will LNG exports push up prices?
By Garry White & Emma Rowley | Telegraph – Sun, Nov 25, 2012 21:47

SHORT ANSWER .... NO BECAUSE THE AMOUNT EXPORTED WILL BE MINIMAL

The US could become a net gas exporter by 2022, according to the Energy Information Administration but is this a sensible move?

The glut of gas in the US has benefited the American economy at a time of economic crisis, giving industry access to cheap energy. Manufacturers have not been able to compete in the global market on labour costs or taxation but subdued power costs have made them more competitive and the US economy has been performing better than anyone could have expected.

However, building liquefied natural gas (LNG) terminals and exporting energy to places where prices are higher such as Asia will ultimately increase prices in the US. This will mean industry loses some of its competitive edge.

“What effect LNG exports will have on US prices is the central question holding up the federal regulatory approval process,” Teri Viswanath, a natural gas commodity strategist at BHP Paribas, said. The Department of Energy (DoE) is required to give permits to export natural gas.

So far, the DoE has only licensed one US business to export LNG to the rest of the world Cheniere Energy (AMEX: LNG - news) . The company has federal permission to export LNG from a terminal at Sabine Pass in Louisiana. There are about 15 other export permits awaiting approval.

“In the relatively unlikely event that all proposed export terminals are developed, US LNG exports would sky-rocket to 43pc of current production and almost certainly put upwards pressure on domestic prices,” Ms Viswanath noted.

However, most observers think that the current low price of gas in the country is unsustainable anyway - and prices will rise even if no export permits are granted.

As natural gas prices have plunged, producers have simply stopped pumping gas and explorers have stopped looking for new resources. This will ultimately crimp supply and cause prices to rise when the recovery really kicks in.

Indeed, US gas prices have already doubled from their exceptional nadir earlier this year.

Prices at the Henry Hub in Louisiana fell to a decade low of $1.85 per million British thermal units (mBTUs) in April, but have since recovered to around $3.60. Prices have gained now for three consecutive quarters and prices are likely to stay at around this level or move higher over the next few years, as US power stations switch to gas from coal.

Last week, Moody’s lifted its assumptions for the North American

Henry Hub benchmark spot price by $0.50, to $3.50 per million mBTU in 2013 and to $4.00 in 2014 and thereafter.

“North American natural gas prices had sagged in recent years as a shale and hydraulic fracturing boom and mild weather led to a significant oversupply, but prices have climbed in 2012 on coal-to-gas switching and hot weather, and as companies have scaled back their dry gas drilling activity,” Moody’s said.

Goldman Sachs (NYSE: GS - news) sees the US price hitting $4.25 sometime during 2013. The chance of rises to $5 to $6 in the next few years remains high.

“Amidst the ongoing debate, a recent Baker Institute paper suggests that the 'hand-wringing’ about domestic price impacts is unnecessary as the international market response will ultimately limit US LNG exports,” Ms Viswanath adds.

“Indeed it is possible the current hold-up of federal approvals might delay the development of US export capacity until such time that other sources of global supply become available, thereby limiting the call on US supplies.”

Ms Viswnath thinks that all this will mean just 2bn to 4bn cubic feet a day of gas will be exported, so the scare stories over how much exports will cause US gas prices to rise are over egged.

So it looks like US regulators need to stop worrying. Preventing the export of gas isn’t going to stop US prices rising, but exports could improve the country’s balance of payments. GW

[TxPm]

Put,

Not sure who your sources are but about 1/2 of the proposed LNG projects are in the gulf with 1/4 on either coast. From what I've hear down here in TX we will see a lot of the gas funds it's way to Europe but some of the Gulf facilities will supply Asian demands as will the facilities on the West coast. See the PDF below:

http://ferc.gov/industries/gas/indus-act...ential.pdf