In this issue


US spot gas prices at Henry Hub are forecast to rise through much of 2016, spurred by rising industrial consumption and moderate supply growth due to falling rig counts. Starting into 2016 near $2/MMBtu, Henry Hub spot prices will rebound to $2.65/MWh, according to EIA estimates. 

Liquefaction is energy-intensive; hence the construction of such a facility tends to significantly increase the power load already being served in an area. An array of LNG export projects have been proposed along the ERCOT Gulf Coast, notably Freeport LNG and Cheniere’s Corpus Christi project – both due to export first cargoes in 2018. As the regional power grid operator, ERCOT is wary about project partners eyeing expansions and another six LNG projects seek grid connection in the Brownsville area. 

Steward, a sleepy former gold and silver mining town on Canada’s northern Pacific Coast, might be revived by a liquefaction project after regulators granted an export licence to a firm, backed by Chinese investors. The National Energy Board (NEB) authorized Canada Stewart Energy Group to ship 25 Tcf of natural gas over 25 years in tanker cargoes to be loaded at a rate of up to 4.6 Bcf/d. 

Houston-based Sanchez Energy said it has made further progress with the Catarina shale-gas wells underpinning plans for a liquefaction plant in South Texas. Sanchez and its partner Targa said they would build the LNG plant and pipelines on the western part of the Eagle Ford. 

A ‘facility development permit’ has been granted to Royal Dutch Shell for development of up to 13 mtpa LNG Canada project, to be near Kitimat on British Columbia’s Pacific coastline. Green light from the provincial regulator, BC Oil and Gas Commission, marks another step towards a final investment decision, though project partners still need to finalize cost projections on EPC works. 

Canada's National Energy Board (NEB) has awarded its first 40-year LNG export license to the Shell-led LNG Canada Development Inc. Project developers, including PetroChina, were seeking a 6.1% annual tolerance and a maximum annual export quantity of 38.056 Bcm of natural gas. 

Expanding US LNG exports beyond 12 billion cubic feet per day (Bcf/d) would benefit the US economy while maintaining cheap gas prices at home that give the domestic industry a competitive  edge. In disregard of stalling demand in Japan, South Korea and China, analyst project a mid-term 20 Bcf/d of external demand for US LNG and suggest that stepping up exports to 12-20 Bcf/d could reap $7-20 billion annually from 2026 to 2040 in today's prices. 

With the liquefaction process at Cheniere Energy’s Sabine Pass terminal now in full swing, it looks like the first cargo will leave the Louisiana facility as planned in the third week of January. Cheniere officially flipped the switch on December 30, after having invested close to $11 billion in the first US LNG export project. 

Neal Shear, interim chief executive at Cheniere Energy, has been given the green light to continue in his post until June 15, 2016. He succeeded the famed Charif Souki, who was replaced on December 13 because of policy differences with new shareholders, notably the activist investor Carl Icahn. 

US gas prices are likely to stay low for longer, as the Energy Information Administration (EIA) expects gas production to rise by 1.5 Bcf/d in 2016 despite declining rig counts – largely thanks to improved efficiency in shale gas drilling. 

Tuesday, 16 February 2016

Natural gas production across all major US shale regions are seen declining. Substantial drop in rig counts since mid-2014 can no longer be compensated by productivity gains, hence EIA analysts anticipate gas production will decline from 44.3 billion cubic feet per day in December to just over 43.9 Bcf/d in January 2016. 

The U.S. has been using the anti-Russian sentiment in the Baltic countries to foster LNG deals with Lithuania. Next in line might be Turkey, as the country is at the brink of a gas supply shortage, exacerbated by the risk of a cut in Russian supplies. 

EU leaders reckon that Nord Stream-2 contradicts efforts to reduce Europe's energy dependency and undermines Poland and Ukraine’s role as gas transit countries. The pipeline extension is meant to transport another 55 Bcm of Russian gas to Germany, but there is little need for additional volumes as long as CCGT profit margins stay negative. 

Shale gas from the US has been brand marked as ‘a new rival’ by the Gas Exporting Countries Forum (GECF) as it undermines the alliance’s strategy on pricing and production volumes. Leaders of Russia and Iran, whose countries hold 44% of global gas reserves, have forged closer ties at the side-lines of latest Gas OPEC meeting in Tehran to rise by 1.5 Bcf/d in 2016 despite declining rig counts – largely thanks to improved efficiency in shale gas drilling. 

News Nudges

US to stay ‘net exporter’ past 2018

The United States’ status as a net exporter is expected to continue for the rest of this year and past 2018 because of growing U.S. natural gas exports to Mexico, declining pipeline imports from Canada, and increasing LNG exports the US Energy Administration (EIA) forecasts. Meanwhile, Wood Mackenzie principal analyst, Patrick Kirby forecasts oil pricing dynamics will increase, through near-term $50-60 range.

Texas oil and gas boost

The Texas Alliance of Energy Producers said natural gas prices in July averaged $2.84 per thousand feet, increasing the value of Texas-produced gas by 2.3 percent to nearly $1.9 billion. Sizeable year-on-year improvements in the rig count, drilling permits and the value of Texas-produced crude oil and natural gas combined to push the Texas Petro Index up in July to 176.9, the eighth straight monthly increase. However, it is in oil where Texas and the US are excelling. “OPEC production curtailments did not achieve the desired price outcome,” said spokesman Karr Ingham. “Oil supplies remain plentiful because domestic producers are becoming increasingly efficient at producing crude oil at lower costs, so a $45 per barrel (US) oil market provides more incentive than in the past,” added Ingham, referring to the West Texas Intermediate (WTI) US benchmark oil price.

Florida LNG bunkering

Jax LNG, the port bunkering project in Jacksonville in Florida, has received a Letter of Acceptance (LOA) for the facility from the United States Coast Guard and approval to conduct ship-to-ship LNG fuel operations with the LNG barge “Clean Jacksonville”. The expectation is that ship-to-ship LNG bunkering will start in early 2018. Jax LNG already supplies fuel for the LNG-fueled container ships of US shipping line TOTE Maritime. The fuel is supplied by Pivotal LNG.