Companies heavily vested in unconventional gas production, such as shale, could experience further pressure if LNG supplies intended for Asia and Europe, end up coming to an already oversupplied U.S.

OECD gas demand fell by 4 percent in the first quarter of 2009 and is expected to drop even further through the year, according to IEA projections. At the same time, 60 billion cubic meters of LNG capacity is expected to come online. [OECD or Organization for Economic Co-Cooperation and Development has 30 member countries, which includes the U.S., Mexico, Australia and European nations.]

What does this mean? Well, the IEA anticipates unconventional gas production in the United States will likely bear the brunt of falling demand, increased LNG capacity and low spot prices. In IEA’s report, it’s not a matter of if, but when and how fast.

“The question for 2009 is how rapidly U.S. unconventional gas production — which is generally higher cost and therefore less competitive — will decline,” the IEA said in a press release about the report.

Tags: gas, imports, lng, natural

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Permalink Reply by adubu on July 2, 2009 at 14:22
I understand Dubai UAE can transport LNG to the USA and sell it at $2.50 and still make a profit. If there is no market in europe etc then they will dump it in the USA. It's sad 15 years ago we thought the USA would have to import NG and invested in LNG terminal then shale gas with new tech drilling horizontial discovered now we have over supply. At least no one going to invest billions to build pipeline to transport NG from Alaska at present time. Problem for east texas and NE La. they are finding new shale fields everywhere. USA now has 100+ years of NG. Come on Obama listen to T. Boon Pickens.
Permalink Reply by Les Bamburg on July 2, 2009 at 15:25
Adubu, some LNG supplies such as the UAE cannot be delivered to the US because they cannot be made compliant with pipeline gas specifications.
Permalink Reply by Mark on July 3, 2009 at 10:55
Hello Les,
I've read a month or so ago that Qatar, being the largest player in LNG export, is mainly interested in the distillates rather than the gas. Although, there exports from the distillates are still exported to the US but for much higher profit.
Permalink Reply by adubu on July 5, 2009 at 15:49
my error -you are correct-- I should say Qatar not Dubai has more gas than they know what do with it and a articule on Bloomberg business stated they could transport to USA and still have profit at $2.50 henry hub price
Permalink Reply by sesport on July 5, 2009 at 19:02
asubu - Question for clarification regarding your statement that "no one is going to invest billions to build pipeline to transport ng from Alaska at present time."

It was my understanding, after reading both the Senate & House bills, that language was included to provide for an Alaskan pipeline. I've also seen the Denali website.

http://www.denalipipeline.com/overview.php

It's my understanding that open season will begin within a couple of years. Are you saying that you think that pipeline WILL NOT happen, or recognizing that it's not immediately in the works?

Thanks in advance for clearing my confusion - sesport :0)
Permalink Reply by Les Bamburg on July 2, 2009 at 15:22
Mark, one error in the article is that unconventional gas is generally higher cost. Actually many unconventional shale gas plays are the lowest cost. It is really more a factor of location and proximity to natural gas markets. This is the reason areas such as the Rockies and Permian Basin - both conventional gas and unconventional gas - have been the most severely impacted by the lower natural gas prices.
Permalink Reply by Mark on July 3, 2009 at 11:01
You are correct, and many folks do not reallize this. One horizontal well in a high pressure gas play will produce so much more than several, (8-14), vertical wells and with much less impact on the environment. I t is just so upsetting to me that we are importing well over 6 bcF/d of lng, when we have plenty. WE should be exporting!
Permalink Reply by sesport on July 3, 2009 at 17:29
Mark - I agree, it would be nice if we could export LNG. I believe, but am just an Everyday Joe and not an expert, that we don't export LNG because we have no liquification plants. Plus, I beleive, but again am no expert, demand in the rest of the world is so depressed right now, even if we could make LNG, that there wouldn't be many, if any, places to which we could export it.

Short version: Don't think we can make LNG, don't think we have anywhere to send it if we could, IMMVHO.

best - sesport :0)
Permalink Reply by Les Bamburg on July 4, 2009 at 3:05
Sesport, the main issue is LNG exported from the US would likely not be cost competitive against other LNG supply sources (Qatar, Nigeria, Trinidad, Norway, etc) in the near term. We still import large amounts of natural gas from Canada that can be displaced by growing US production. By increasing natural gas' share of the power generation market there will be more than enough demand in the US to support development of our resources at a reasonable price.

Just realize we need sufficient natural gas to supply US consumption for many years and the current imbalance situation is a short term event.
Permalink Reply by sesport on July 4, 2009 at 4:21
Les - You're right, not cost competitive. Which is why, I assume, there has been no interest in building a liquification plant?

My take on Mark's last statement was that there is some thought that if we can export and decrease supply that production & prices here would begin to increase sooner. Or perhaps we'd find another market to add to profits & proceeds from production to mineral owners. Not really sure what Mark meant, though.

And I sure hope ng finds it's way into that share of the power generation market! That's a rather large piece of the demand pie. And I'm "down" with the short term event, I'm a very, very patient person, like going [a] long while!

Thanks & best, Happy 4th to you & yours,too - :0)
Permalink Reply by Mark on July 7, 2009 at 4:01
Is it Shell or Exxon that's building the LNG plant in the Midwest that also removes CO2 on final production? If we could have a smaller scale LNG plant in the midwest, we could do interstate trucking to remote areas, if it were feasible. SouCal is importing due to none to very few lines in Cal. They are importing Indonesia gas from a regas plant in Baja.
Permalink Reply by Les Bamburg on July 4, 2009 at 2:58
Mark, LNG imports have only been ~ 1.0 - 1.5 Bcfd to date this year and that is mainly in the Northeast where it is required due to pipeline capacity limitations. The majority of natural gas imports (6 - 8 Bcfd) are from Canada.

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