Replies to This Discussion

Permalink Reply by jim weyland on January 2, 2014 at 10:47

starting last to first, when they first proposed/built the lng export facility, i feel certain they procured sufficient long term ft to satisfy their lenders. if they haven't relinquished it already, i'm sure the relevant pl(s) would fall all over themselves to allow them to flip the primary receipt and delivery points around for the balance of the agreement(s). and if they have already turned it back, it will easily and cheaply procured. and,as before their bankers may well require it. 

fwiw, with respect to s. la short haul ft, i represented one e&p entity which with 5 others developed an offshore project with an estimated peak deliverability of around 1Bcf/d. i want to recall we took about that much long term ft with the interstate we tied into. the agreement provided us with an aggregate firm delivery capacity using their various s. la interstate interconnects. the demand charge was $0.01/MMBtu, again, as i recall.

now, even as large as the sumitomo deal may seem to be, it's small beans in the context of the us natural gas marketplace. our nat gas market is large, efficient, transparent and fungible.

their demand as sizeable as it is will not make them price makers, rather, they will be price takers, just like everybody else.

only in a monopsony can a buyer demand price or other terms.

as an ad absurdum example, let's imagine if michcon, the largest gas utility in michigan, announced to the marketplace that henceforth, they would only buy gas in twenty year chunks and that they would pay, oh, let's say, 1 pound of peach pits per mmbtu. well, we know what would happen, the good citizens of mi would get mighty cold for the ensuing 20 years.

now, if cabot management has agreed to a lt fixed price sale to them. then, they by definition are hedged, the transaction price meets their requirements. it doesn't necessarily make the hedge a good idea, though.

producers are perpetual "longs" and by definition a fixed price sale is a hedge. on the other hand a market is a perpetual "short, any fixed price purchase they make is hedged.

the old saying about there being old pilots and bold pilots, but very few old, bold pilots could apply to those who enter into fixed price deals. index type pricing is the holy grail of all commodity markets.

note: those parties financing $5-!0B projects aren't interested in innovative and novel things. (the worst that ever was said to me while in the army was by my boss "well, jim, that sure is an innovative idea".

gas price "bounding" is easily done if not by contract then by options transactions. it's not new or innovative producers have hedged gas for years by using nymex + basis and , if desired, bounded by puts and calls.

 i know cabot, i've done good business with them. they've been around for well over a hundred years. while they might be willing to try new things, i would expect their management would nod in agreement upon hearing the japanese saying "the nail that sticks up, gets hammered down"

do you have details on the cabot/sumi deal terms? is it at cove point or one of the gc facilities?  note: if it's cove point, then anything i've said above about their not needing ft goes out the window. the appalachian pls are extremely transport constrained, in other words, there's way more gas there than be transported out. and, as i've said before, buying gas there, now, is like hunting fish in a barrel.

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Permalink Reply by dbob on January 2, 2014 at 13:54

An interesting point on all this is that IMHO, the proposed projects outstrip the economically available gas by some margin.  As projects start to get approved and actually start moving forward, both in the US and abroad, we should start to see some of the projects get canceled.   Just an indicator to look at, and we may not see it until say 2018.

Next up, I know there are not as many LNG carriers as there are crude tankers, nor is it easy to retrofit ships.  It might be interesting to look at the total carrying capacity and what is being built to get a better idea of how many of these facilities can be kept busy.  

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Permalink Reply by jim weyland on January 2, 2014 at 14:24

dbob, all lng tankers are purpose built. they're about as specialized as vessels can be. 

i agree with your point vis-a-vis cancellations; it costs nothing (other than pride) to issue a press release to announce another lng export project.

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Permalink Reply by Les Bamburg on January 3, 2014 at 4:08

Dbod, only a fraction (+/- 6) of the announced US LNG export projects will actually move forward as the market size is limited.  The projects with long term capacity contracts with customers and financing will be the only ones actually constructed.  Sabine Pass cleared these hurdles and Cameron, Freeport & Cove Point are the next in line to clear. 

Additional LNG carriers will be purchased and constructed as required once projects reach development decision.  Customers such as Mitsubishi, Mitsui, BG, etc have LNG carriers under contract but will supplement with new ships based on their overall portfolio of supply and markets. 

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Permalink Reply by j garrett on January 2, 2014 at 16:08

Here is a vetted list of companies that have announced shale gas related expansion projects dated May 2013, and a link to a 42 page report http://chemistrytoenergy.com/sites/chemistrytoenergy.com/files/shal... :

3M

IndoramaVentures

Agrium

INEOS

AitherChemicals

Invista

AppalachiansResins

KochIndustries

Arkema

KurarayAmericas

AscendPerformanceMaterials

LANXESS

BASF

Lubrizol

BayerMaterialScience

LyondellBasell

BioNitrogen

MEGlobal

Braskem

Mexichem/Oxychem

C3Petrochemicals

Methanex

Celanese

Mitsui&Co.

CFIndustries

MitsuiChemicals

ChevronPhillips

MitsuiChemicalsPrimePolymerCo.Ltd.JV

CHS

Noltex

CytecIndustries

OccidentalChemical

DowChemical

OhioValleyResources

Dow/MitsuiJV

OrascomConstructionIndustries

DuPont

PCSNitrogen

DynoNobel

PetroLogistics

EastmanChemical

PTTGlobalChemical

EnterpriseProducts

Renetch

EvonikIndustries

SABIC

ExxonMobilChemical

Sasol

FlowPolymersLLC

ShellChemical

Formosa

Shintech

G2XEnergy

Solvay

GeorgiaGulf

SouthLouisianaMethanol

ʹ

apartnershipof

GrupoMissi&

Ghisolfi

ZEEPandToddCorp

HoneywellSpecialtyMaterials

USNitrogen

HanwhaChemical

TPCGroup

HuntsmanChemical

WestlakeChemical

ICLIndustrialProducts

Williams

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Permalink Reply by Randy Peterson on January 11, 2014 at 9:13

For an interactive copy of new projects, Send me an email to hcosite@bellsouth.net

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Permalink Reply by kelandonahue on January 17, 2014 at 7:27

I didn't see this posted, but here's an interactive map showing different LNG exporting terminals in the pre-permitting, permitting and construction phase.

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