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 w.r. frank on July 4, 2009 at 12:53
Correct. LNG is only up about .1 bcfd over last year. The tsunami of LNG has not arrived. LNG is the most opague market in the world. There is speculation that China/India is taking a lot of the current LNG as their economies (particularly China, whose GDP is expected to grow 7% this year).

Also, much of the LNG supply is sold to Japan and South Korea under long term contracts tied to OIL price. I personally don't buy the delivery to the US of LNG AT A PROFIT for $2.50 mcf.
Permalink Reply by benny688 on July 5, 2009 at 14:28
Well, I think Les B's analysis is probably the best, even though it won't happen overnight. Market insight is BG Group's purchase of Exco's (XCO) HS lease holdings in Shelby County last week. They paid 19k/acre in this bad market. The logic behind this is that they have long term contracts to supply LNG to the US and they would like to ship it to other markets where the price is higher. They are betting a lot of money that they can produce it here a lot cheaper than they can ship it here. It'll take some time and a lot more investment, but importing LNG to the US will go the way of the hoola-hoop (sp?) and pet rock . I don't think there's a whole lot we can do about C02 emissions without making the economy worse, but in the meantime let's go for NG so we don't have all that heavy metal particulate matter we get in the atmosphere from the coalers. More and more I think NG will help reach a compromise between the environmentalists and the economists. The average American just can't afford wind or solar power now or anytime soon.

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