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Permalink Reply by cocodrie man on July 15, 2015 at 1:20

The final paragraph of this article compromises that wee bit of good news (for royalty owners) gleaned from the preceding portion the article.  When viewed alongside a different article suggesting that most LNG export plants will not make it to the construction phase because of weak demand and the price of U.S. LNG, the immediate future for the Haynesville seems to say that what we now have is what we shall have for a good long while.  

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Permalink Reply by Skip Peel - Mineral Consultant on July 15, 2015 at 2:00

With little fanfare, on GHS, two milestones much discussed in the early days have been reached.  The first was unconventional gas surpassing 50% of total annual US gas production and now surpassing coal in the generation of electricity.  As more facts become available concerning LNG export it has become clear that it is likely to cause only a marginal improvement in the price of gas sourced from the Haynesville/Bossier Shales. Yes, cocodrie man, not great news for royalty owners or for my business for that matter but positive news for the country and our energy future. 

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Permalink Reply by Skip Peel - Mineral Consultant on July 15, 2015 at 3:17

Most U.S. LNG projects won’t cross the finish line, new study says

Posted on July 14, 2015 | By Rhiannon Meyers  fuelfix.com

Most of the proposed U.S. liquefied natural gas export projects won’t get built amid stiffening competition from foreign competitors who will flood the market with the supercooled gas as demand begins to slow, a new study finds.

Five U.S. LNG projects already under construction, including Cheniere’s two terminals in Louisiana and Corpus Christi, will cross the finish line, but beyond that, construction appears “increasingly unlikely” for the remaining proposals, according to the latest study unveiled Tuesday by a task force of natural gas experts assembled by the Brookings Institution, a Washington D.C.-based think tank.

It’s the latest report to raise doubts about the flurry of multi-billion dollar proposals announced in recent years that would soak up vast supplies of cheap U.S. natural gas destined for markets in Asia.

“We believe it will be increasingly difficult to finance new LNG projects, due to high upfront costs in combination with a substantial number of uncertainties which influence supply and demand,” the report said.

Developers have been rolling out proposals on the assumptions that U.S. natural gas prices will remain at record low levels while LNG prices in Asia and Europe remain high, offering North American exporters attractive margins. Developers also placed bets that U.S. LNG, which is linked to natural gas prices, would allow them to hold a competitive edge over foreign suppliers, whose LNG is tied to crude prices, which were relatively high until they began falling late last year.

The report found that there are flaws in those assumptions that call into question whether U.S. LNG projects will be successful.

“While the projected number of North American LNG export facilities is massive, closer examination of the projects’ financial realities offer a more nuanced story,” the report stated.

U.S. natural gas prices are expected to rise slowly, which could undercut the competitive advantage of U.S. LNG exports unless developers figure out cheaper ways to liquefy, transport and re-heat the gas. Natural gas faces stiffer competition from other competing fuel sources, such as cheap coal and renewables, and that waning demand makes it increasingly difficult for North American LNG projects to turn a profit, the report found. And collapsing crude prices gave a fresh advantage to rival oil-linked LNG projects in other countries.

With international oil price hovering just under $60 per barrel, Australia is more competitive than U.S. exporters when it comes to supplying LNG to lucrative and high-demand Asian markets, the report found.

U.S. projects are “poised to compete favorably” in the global marketplace because they’re cheaper to build, particularly the so-called “brownfield” projects that call for converting import terminals into export facilities. Developers also have access to cheaper energy and “significant skilled labor at a reasonable cost” compared to other countries.

But swelling demand for materials and labor could erode the U.S. advantage at a time when falling oil prices are making foreign projects more attractive, the report found.

“Given all these uncertainties, possible constraints and the fact that a significant amount of projects are permeating the market in the coming years, it may be increasingly difficult to finance projects going forward,” the report said.

 

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