Replies to This Discussion

Permalink Reply by adubu on June 12, 2012 at 4:32

P.G. ---- if We could export NG to Japan prices in USA would not be $2--- just like crude oil it is a world wide commodity and priced as such as a result royalty owners here in USA receive prices related to the WTI price. I have a small income minerals that has a little condensate (OIL) that I receive in range of 85-105 per BOE in my check over last year. Yes my NG today price suck as compared to 2001-2008 years --- that is reason we need to start LNG export projects. Then coal would be competitive again

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Permalink Reply by P.G. on June 12, 2012 at 6:23

I'm sure anything that  lowers supply and would have a positive effect on local prices...but until there was enough volume demand by shippers... what would keep them from paying the local prices and then selling it to Japan for a windfall?

Even CHK sells it cheap to one of their own subsidiary companies to get around paying a fair price for it compared to other companies..right?

I would imagine Mexican built cars cost less to make in Mexico but the manufacturers are keeping the difference when sold here...what would stop the shippers from doing the same only with ng?

Supply would have to get pretty short before prices would get like they were a few years ago..

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Permalink Reply by ALongview on June 12, 2012 at 6:40

The real demand for gas if prices remained cheap would be in the power sector.  This would drive the theoretical export prices up at least in the short term until power producers used other means(coal) due to the increasing price of gas.  Supply and demand.  I do however think that exports ultimately would put a floor under prices if enough capacity was permitted and built out.

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Permalink Reply by adubu on June 12, 2012 at 7:42

Alongview--- that's happing in USA now with power plants changing from Coal to Nat Gas and other uses increasing like Dow Chemical building new plants to use Nat Gas for Ethylene production and relative produces. Alcoa and steel plants using more NG. If enconomy improves more demand and usage will go up faster. But the game changer is still  "make NG a world commodity like crude oil" which the answer is LNG export from USA. It will happen IMO around 2016 and there after if not sooner. So look at buying Nat Gas Stock companies during 2013-2014 if not NOW and store them away long term you can make lots of money. There will never be a floor to prices just like crude it's boom-bust-boom in last 20 years low of $10 to high of $141 and several ups and down in between but changes with world price not just local like Nat Gas in USA. LNG will not place floor on Nat Gas but will vary with world prices.

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Permalink Reply by adubu on June 12, 2012 at 7:30

PG--- That's what Algeria, Oman, Qatar,Nigeria, Tobago,Trinidad, et al does sell their cheap gas to Japan,UK,Europe cause they can!!!! with minimal pricing competition at present time with huge profit margins. This is reason Japan wants so much to make  a deal with XOM and USA to get prices lower--- this will help the producers in US with a greater demand users. If this happen then as I think NG will become a world commodity and price as such world wide rather than price at local markets.

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Permalink Reply by ken hatcher on June 12, 2012 at 8:30

Look for no decision to be made on Japan or really anything else until after the election.

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Permalink Reply by adubu on June 12, 2012 at 11:27

Ken hatcher--- I agree with you on that

Permalink Reply by Les Bamburg on June 12, 2012 at 16:28

Abudu, several Japanese companies have already made several deals for access to US and Canada sourced LNG and none of them have been with ExxonMobil. 

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Permalink Reply by adubu on June 13, 2012 at 0:25

LesB-- correct know that-- I was simple talking about new deals Japan desired with XOM in talking stage with Obama step in and told media no permits would be issued.

Permalink Reply by Les Bamburg on June 12, 2012 at 16:20

Abudu, the US natural gas price will continue to be set based on US supply and demand fundamentals with LNG export being only a small part of demand.  It is unlikely US natural gas prices will be related to WTI oil prices since there is no linkage between the two commodities.

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Permalink Reply by adubu on June 13, 2012 at 0:31

Les B--- yes our market will continue to be set on US supply/Demend--but I strongly disagree with your opinion that LNG export being only a small part of demand. It over time will be large (of course will take more construction of plants other than LNG to export enough to change that--- therefore 2020+) It will happen IMO and then we will have more of a world wide market rather than a local market. LNG will be the harmonizer far that to happen.

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Permalink Reply by Les Bamburg on June 12, 2012 at 16:14

PG, there is profit but smaller than you depicted.  Landed price in Japan is closer to $12.  Long term prices in the US will likely be $5+/MMBtu and the cost of liquefaction plus shipping will be $5-6/MMBtu.  The main plus is the new US projects can deliver LNG cheaper than some of the other new projects and the US is more stable politically than some other supply regions. 

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