OPEC, for some quiet moments..

[jft310]

Quote from above article US gas prices may rise from $3 to $7. To get that Gas to Japan add in liquification costs plus transportation costs .@ $6.00 per the WSJ. Thus U.S. LNG lands in Japan at $13 per mmbtu without any profits .

"Significant U.S. exports will likely boost prices, currently at about $3/MMbtu, Energy Aspects Ltd. said in a report for UniCredit SpA on Tuesday. U.S. gas may converge toward European levels, now at about $7/MMbtu, the analysts said"

[Thylacine-2]

The model for US LNG production seems to be that the plants don't produce gas, just buying it on the open market. That introduces an element of risk. Quite a difference from IOC's situation in PNG.

[ArtM72]

Another element of that article didn't quite seem right. That is the suggestion the US could grow into the world's third largest exporter by 2020.

That's a lot of capacity growth in a very short time in an industry where $10 billion plus plants take 3-4 years to build. That's also a lot of capacity within a market that some say is already flooded with LNG capacity and weak demand growth. But then we see the IEA projecting market growth of 40% from 2013 to 2019. Without long term contracts you have to ask who will be putting up the money to build these plants.

If anything the LNG market appears awash in opinion and speculation parading as information. Whatever the truth might, be absent an unforeseen catastrophe it appears IOC is well positioned to be making real money before 2020.

[jft310]

Thy the U.S. Buys gas in the open market at $3 today may go to $7 . How much are Oil Search and Total paying for Interoil's gas ????That answer is around a dollar per mcf . Using my new math from High School Interoil's gas price is fixed at the Certification price per mcf . Or $ 1 per mcf fixed price for the gas is less than the U.S. price per mcf of $3-7 per mcf. Interoil owners also get the benefit of an even lower cost per mcf with chemicals and condensate revenue to offset Interoil's cost per mcf .
Or US LNG is not a threat to Interoil's LNG future .

[Putncalls]

US gas is not going to 7$! The more oil the US produces the more gas the US produces. On the other hand 6$ for liquefaction AND transportation to Asia seems low. I think the trip to Asia is a one way trip. IE: The panama canal gets paid twice for one cargo of LNG.

[Thylacine-2]

I'm wondering if US LNG is even a good investment. It's the hottest thing right now. There are lots of companies clamoring to get into the business and the eagerness must be based on analysis. But how can building 20 billion dollar plants be justified when the cost of the gas isn't determined?

[admin]

The November 2014 meeting was one of the most widely covered in years. After leaving its collective output quota unchanged for several consecutive meetings in a row, much of the world watched for a major policy change. The glut of oil had led to a crash in prices, falling from well over $100 per barrel, down to the $70 range. As it had in the past, surely the cartel would pull the production lever downwards, switching off a million barrels per day or so in order to stop the bleeding?

How Long Can OPEC Maintain Its Current Strategy? | OilPrice.com

Funny enough, we asked the same question and are not at all convinced the present course is rational for OPEC (at least for almost all members)

• OPEC's strategy to force a dramatic retreat of American shale isn't succeeding anywhere near the scale needed for the strategy to be called a success.
• The cost to OPEC itself is too big for this strategy to be continued. Steep revenue losses, severe budgetairy problems, foreign currency losses, political instability and rift within OPEC itself.
• Other casualties have emerged in the form of expensive oil exploration (deep sea, tarsands, Arctic, etc.) and an increase in oil demand offers some compensation.
• However, expensive oil is facing an onslaught already from alternative energy and climate change regulation, OPEC has no need to slay this dragon.

Has OPEC Gone Mad? | Seeking Alpha

[Putncalls]

I'm wondering if US LNG is even a good investment. It's the hottest thing right now. There are lots of companies clamoring to get into the business and the eagerness must be based on analysis. But how can building 20 billion dollar plants be justified when the cost of the gas isn't determined?

I don't think it's hot any more. With 3$ US NG, US LNG bereakeven is over 8 bucks in Asia according to this 2013 Bloomberg article.

http://www.bloomberg.com/news/articles/2013-01-11/u-s-lng-profit-seen-elusive-as-price-gap-closes-energy-markets ;

[Thylacine-2]

Folks in the business in Texas and ND would disagree that a "dramatic retreat" in shale oil is not occurring. As for current production....the decline in production due to the decline in drilling is starting to show up now. There is the lag from drilling rate to production rate.

[Putncalls]

There will be a retreat in pay and pay days.