Today’s Blog – Wednesday 30th November 2016

Editorial

With all eyes on Vienna, today’s editorial takes an Ultravox approach (kids of the 1980s, you know what I’m talking about – “you mean nothing to me!”) and instead looks at a gas story.

This was the US recently becoming a net natural gas exporter for the first time in many decades.  Platts reported on this a few weeks ago, but the numbers quoted didn’t seem to stack up – probably due to sloppy on-reporting.

Now things are clearer.  This month the US has been exporting around 7.4 Bcf per day, whilst importing 7 Bcf per day.  The latter mostly comes from Canada (with small amounts from other countries imported as LNG into New England liquefaction facilities).

The exports are more diverse – in rough numbers, around 4 Bcf per day to Mexico (a figure that has been on a rapid rise this year), 2 Bcf per day to Canada (largely to Canada’s East Coast markets whilst imports come from Canada’s West) – and now more than 1 Bcf per day to diverse markets through Cheniere’s Sabine Pass liquefaction facility.

The latter has largely supplied South American markets – but cargoes have also gone to Europe, the Middle East and Asia.  This week Cheniere said that current Asian LNG spot markets of just over US$7/mmbtu made greater Asian sales economic (subject to Henry Hub pricing of course – note the rapid recent rise).

More pipeline sales to Mexico and further liquefaction plants coming on line in 2017 should widen the US export gap next year, potentially significantly.  The limitations on this will be – any trade wars that a Trump Presidency might ignite which could reduce LNG trading; a sustained rise in Henry Hub pricing – particularly if oil-linked pricing does not rise (watch OPEC tomorrow….); whether Washington might push more coal into the US energy market, hence displacing gas into looking for a new home; new pipeline developments in Canada; etc, etc; and the interaction of the all of the above.

Commodity prices

Crude markets continue in their pre-Vienna funk, with prices falling 3.5% overnight to US$46.47 in London and US$45.35 in New York.  Negative stories about the attitudes of key recalcitrants – Iran, Iraq and non-member Russia – drove trading on the day.

Goldman Sachs has calculated that the market is saying that there is now only a 30% chance of a deal on cuts.  Others are now saying that no deal could mean prices with a “2” in front of them (ouch! – lets cancel Christmas).   Our view is hardening that the most likely outcome is some wishy-washy commitment to cut that will be largely honoured in the breach.

Henry Hub was flat at US$3.32.

LNG and international gas

Another FRSU story that is interesting as much for the identity of one of its proponents as anything else.  This concerns yet another member of the UAE planning a FSRU – Sharjah (joining Dubai and Abu Dhabi).  Sharjah’s NOC has partnered with large German energy company Uniper in pursuing this venture (which includes converting an adjacent depleted gas-field into an underground gas storage asset).

Uniper is what is supposed to be the boring fossil-fuel hive-off of German energy giant E.on – who is pursuing sexier subjects like renewables, distributed generation, etc.  Uniper however seem to taking some joy in showing E.on what it can do in this brave new energy world (there must be a German word for that).  Its skills in sourcing gas, managing developments, underground gas storage, etc, seem to complement very well the circumstances that exist in the UAE (and indeed “other” places we would mention…).

Governments, fracking, etc

The leader of South Australia’s Liberal Party, Stephen Marshall, has announced a policy of changing his middle name to “Hans0n-Young”, er, we mean imposing a fracking “moratorium” of 10 years (why not a gazillion years?) in the State’s South East.

Fidel Castro himself would appreciate the gesture politics.

Quotes of the day

Continuing this week’s theme of the comedic opportunities that pre-OPEC meeting posturing brings, today we invite readers to match characters from Little Britain with their favourite OPEC country:

Andy – “I want that one.”

Vicky Pollard – “yeah, but no but, yeah but.”

Carol – “computer says no.”

Lou – “what a kerfuffle.

 

 

 

 

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