Northeast US states to pay highest for winter power for lack of LNG cargoes to offset lower pipeline supplies
While the US is now one of the world’s largest LNG exporters, the government said states in the Northeast US will pay the highest electricity prices because of inadequate natural gas pipeline supplies, reduced inventories and difficulties in securing LNG shipments for domestic use because of tight global supplies and high prices.
“We forecast that wholesale electricity prices at major power trading hubs will be about 20-60 percent higher on average this winter,” said the Energy Information Administration in its short-term and winter energy outlook.
“The highest wholesale electricity prices are likely to be in New England because of possible natural gas pipeline constraints, reduced fuel inventories for power generation and uncertainty regarding liquefied natural gas shipments given the tight global supply conditions,” explained the EIA report.
The report’s conclusions mean that people in the states of Maine, Vermont, New Hampshire, Massachusetts, Connecticut and Rhode Island will pay the highest power bills in the nation this winter.
The US benchmark Henry Hub natural gas price is expected to remain above $7 per million British thermal units in the winter season.
Henry Hub price
“We expect the Henry Hub natural gas spot price to average about $7.40 per MMBtu in the fourth quarter and then fall below $6.00 per MMBtu in 2023 as US natural gas production rises,” said the EIA report.
“We forecast that US natural gas inventories will end the injection season (April-October) at nearly 3.5 trillion cubic feet, which would be 6 percent below the five-year (2017-2021) average,” the report added.
US consumption of natural gas is forecast as averaging 87.9 billion cubic feet per day in 2022, up 3.9 Bcf per day from 2021 and reflecting more consumption across almost all sectors.
US dry natural gas production averaged 98.5 Bcf per day in the third quarter.
“We forecast natural gas production will average 99.1 Bcf per day in the fourth quarter and 99.6 Bcf per day in 2023,” stated the EIA.
Natural gas will fuel 38 percent of US electricity generation in 2022, up from 37 percent in 2021.
Renewables and coal
“Growing generation from renewable sources limits growth in natural gas-fired generation and coal’s generation share declines because of the expected retirement of some coal-fired capacity,” the report explained.
The outlook forecasts Brent crude oil spot prices averaging $93 per barrel in the fourth quarter and $95 per barrel in 2023.
“Potential petroleum supply disruptions and slower-than-expected crude oil production growth could lead to higher oil prices, while the possibility of slower-than-forecast economic growth may contribute to lower prices,” said the EIA.
“US crude oil production is forecast to average 11.7 million barrels per day in 2022 and 12.4 million barrels per day in 2023, which would surpass the record high set in 2019,” the report added.
Trump concludes two-day visit to India in joint pledge with Modi on LNG supply and nuclear
President Donald Trump concluded his two-day visit to India by issuing a joint statement with Indian Prime Minister Narendra Modi on a variety of issues, including future cooperation on liquefied natural gas as both leaders noted that the US-Indian energy relationship over the last four years had been worth $20 billion.
They said they welcomed growing links between the United States and India in trade and investment in hydrocarbons.
“Through their Strategic Energy Partnership, the United States and India are seeking to enhance energy security, expand energy and innovation linkages across respective energy sectors, bolster strategic alignment, and facilitate increased engagement between industry and other stakeholders,” they said.
Trump and Modi noted the potential for the US to meet India’s goal to diversify its import base for coking and metallurgical coal and natural gas.
“We welcome recent commercial arrangements intended to accelerate access to LNG in the Indian market,” they added, in reference to the accord between US company Tellurian and state-owned Petronet LNG, the nation’s largest importer.
They also referenced moves by ExxonMobil and others to advance with the provision of more LNG fuel use for transportation and small-scale distribution.
“The US has indeed become a very important oil and gas source for India,” they said.
“Over the last four years, our total energy trade volume is about $20 billion,” added the statement.
They also noted that they encouraged the Nuclear Power Corporation of India Limited and US company Westinghouse Electric to finalize the techno-commercial offer for the construction of six civil nuclear reactors in India at the earliest date.
Westinghouse and the Indian nuclear power operator plan to build the 1,100 megawatts reactors in the southeast Indian state of Andhra Pradesh.
However, there was no statement on the firming up of Petronet’s supply agreement with Driftwood LNG developer Tellurian, nor on its accord on a possible equity stake.
The initial agreement between Tellurian and Petronet for up to 5 million tonnes per annum of US LNG was signed during a visit to Houston in September 2019 by Modi, who also held a Texas rally for Indians living in the US.
Petronet and Tellurian will continue their talks on the Indians investing $2.5 billion in the Driftwood plans proposed for the west bank of the Calcasieu River, south of Lake Charles in Louisiana.
Petronet currently operates India’s busiest regasification facility at Dahej, north of Mumbai, with 15 million tonnes per annum of capacity and six storage tanks. The terminal is being expanded to handle 17.5 MTPA.
The company was formed by the Government of India in 1998 specifically to import LNG and will be expanding its interests in the years ahead into LNG fuel distribution.
Shareholders in Petronet, which began operations in 2004, include the other big Indian energy players, Gas Authority of India, Indian Oil Corp., Oil and Natural Gas Corp. and Bharat Petroleum Corp.
