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Permalink Reply by j garrett on January 2, 2014 at 13:03

Does anyone have an updated (or even outdated) list of other industrial user projects in the TX/LA area that are building or upgrading facilities because of cheap NG?  I'm referring to plastics companies, chemical companies, gas-to-liquids (GTL) projects etc.

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Permalink Reply by Les Bamburg on January 2, 2014 at 13:27

JG, the potential Sasol GTL and G2X NG to gasoline projects in Lake Charles area and the Methanex methanol plant near Baton Rouge are the only industrial projects I am aware that utilize natural gas as feedstock.  The other chemical and petchem plants utilize natural gas liquids as feedstock and benefit from any increase in natural gas production.

Permalink Reply by dbob on December 31, 2013 at 8:16

A few minor points -

The two facilities in Oregon that are proposed should be viewed as their own separate beasts.  Those are a mater of politics and the need for natural gas in Asia.  Their construction or lack there of will have little to do with the US

Kinder has its hands in two projects.  I'd bet only one gets built

The Waller Marine project is not really intended for export, but rather to supply the marine fleet.  While its got to go through the same process as the others right now, I could se that getting fast tracked or kicked out of the major export pathway. 

Thanks for the chart.  If you want to look at the Sabine Pass Project, there is a Google Earth Image from earlier this year.  Not sure what the state of construction is, but they are moving a lot of dirt. 

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Permalink Reply by Les Bamburg on December 31, 2013 at 8:26

Dbod, attached is a September picture of the project.  I drove by the site a couple of months ago and there is plenty of activity.  At peak there will likely be 4000+ people on location. 

Attachments:

• Sabine Pass - Sep 2013.pdf, 211 KB

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Permalink Reply by dbob on December 31, 2013 at 9:05

Les,

Do you recall if Train 1 and Train 2 will come online before Train 3  and Train 4, or will the whole first phase come online in 2016?

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Permalink Reply by Les Bamburg on December 31, 2013 at 9:09

Dbod, the Trains are projected as follows (subject to change):

Train 1 - Q1 2016

Train 2 - Q2 2016

Train 3 - Q2 2017

Train 4 - Q3 2017

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Permalink Reply by jim weyland on December 31, 2013 at 8:39

dbob, i think you make a good point inre: oregon lng export. up there, they have the same "save the squids" attitude that folks opposing the keystone xl pipeline have. imo, there's not a chance in our political lifetimes that any export terminal, gas or liquids, will be built in the nw us. now, north of the border, it's a different matter. our loss will be their gain. i feel there will be multiple gas and liquids export facilities built in canada. after all, it'll be their production being moved. they've got a lot of "skin in the game".

as to kinder, imo, the most relevant project they've announced lately is their $1B acquisition of Jones act tankers. these will allow them to transport LLS type crude from gom ports to the east coast refineries that are set up to run light sweet crude. fwiw, by and large, the gulf coast refineries are set up to refine heavy and/or sour crude stocks  but not lls. it would take $Bs and years to convert gulf coast refineries to lls.

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Permalink Reply by Spring Branch,mineral owner on December 31, 2013 at 10:44

Jim, I assume the Kinder acquisition of the Jones Act Tankers would play to the advantage of the TMS, should that play work out successfully.

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Permalink Reply by jim weyland on December 31, 2013 at 12:43

yes, sir. as regards condensate/crude.

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Permalink Reply by Les Bamburg on December 31, 2013 at 11:55

We should recognize that the "traditional" manner of purchasing gas supply on a monthly or daily basis may not be relevant for the LNG export projects.  Because customers have 20-year contracts they may want to lock in feed gas supply on a long term basis.  Also, the feed gas supply requirements for a single customer can be 500 to 700 MMcfd so this may lead to purchasing gas solely from large suppliers (producers or marketers).  These factors may weigh heavier in their decision than price alone.

Cheniere (Sabine Pass) will need to purchase ~ 2.5 Bcfd of feed gas.  They have not yet announced any firm transportation capacity deals on the interstate pipelines so it is unclear if they will purchase supply in the "field" or at the interconnects with Creole Trail pipeline.  If it is the later then the gas supplier will need to hold the firm gas transport capacity on Texas Eastern, Transco, Trunkline, etc. 

 

 

 

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Permalink Reply by jim weyland on December 31, 2013 at 13:36

les b,

with all due respect, the more things change, the more they same the same.

1st, as to sabine pass, they probably won't need much, if any, FT, just to buy the stuff in s la. the beauty of coastal tx and la is all of the pl and other infrastructure in place, in addition to their intrastate shale supplies. this is one reason you read of new build facilities being proposed in coastal tx and la and not in the bakken field area or in the dj basin in ne colorado or the uinta/pinedale areas of utah. fwiw, i've worked for interstates selling capacity.

as to long term pricing, natty is mostly daily/monthly priced by index pricing. now, a party may buy/sell fixed price product for any period of time, daily and monthly or even years longer. note: the many daily and monthly fixed price deals reported to the publications is where the daily and monthly index prices come from. after all, how bad can one screw up by selling a day's swing gas at a fixed price. a month's worth of fixed price gas usually comes from one of the parties being in a bind and the other one putting the wood to him. or from gambling on one or both party/parties behalf. imagine that, traders gambling with the firm's money.

as to long term physical(or paper ones for that matter) deals, it is possible to buy/sell on fixed price terms. however, not too many two parties can agree to a lt fixed price deal. and if they did such a deal w/o laying fixed price risk off by swapping out, their boards would have managements heads when their side of the fixed price deal turned out to be on the wrong side.

 if i found a significant deal that wasn't hedged, even if it was in "our" favor, i'd run off anyone and everyone directly responsible. it's very simple, one cannot gamble with someone elses money

what's way, way more typical is a lt transaction at monthly index pricing. in doing so, each party, buyer/seller, is able to swap out his "floating" price risk to a fixed, management justified price. 

scaling up purchases/sales is not difficult. it's easier to buy/sell large packages than very small ones.

again, with all due respect, this is how things are done today.

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Permalink Reply by Les Bamburg on January 2, 2014 at 9:16

Jim,

Sumitomo's 20-year purchase agreement w/ Cabot is first sign of a different approach.  Parties involved in $5-10 billion projects may take new approaches to mirror traditional LNG long term sales.  These gas purchase deals could be pegged to NYMEX (common) or fixed price.  One alternative would be to set price on NYMEX basis but include a floor and ceiling.  This has been done in the international LNG markets and would provide some protection for both buyer and seller.  Some of these LNG customers are middlemen so their purchase deals may depend on their sales contracts.

Price hedging with outside parties would be virtually impossible due to the size and length of the transaction.  These deals are similar to the pre-1990's US where gas buyer simply passes gas cost to consumer and avoids price/margin risk.

Someone in the transaction chain will definitely need to hold the firm pipeline capacity from field area to LNG facility to have the necessary assurance of feed gas supply.  LNG export facilities are not easily re-started and will need to run on a rather continuous basis.   

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