Replies to This Discussion

Permalink Reply by P.G. on March 13, 2013 at 2:18

What's the likelihood of a royalty owner seeing any of those prices if exports increased?

Don't royalty owners get paid local prices ...<$4..for their NG?

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Permalink Reply by adubu on March 13, 2013 at 2:29

PG -- this increases market demand therefore Nat Gas prices would slowly increase and stabilize prices in $5-6 range over next decade highly possiblilty . No We would not receive these prices just like last week in New England and New York market in North East spot prices went as high as $30 for few hours during the Cold Blizzard spike

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Permalink Reply by Skip Peel - Mineral Consultant on March 13, 2013 at 3:43

IMO the rush to export LNG will slow as it becomes apparent that shale gas will also provide export opportunities for other nations.  The Middle East conventional gas and Australia shale gas will compete with any US LNG for market share in Japan and other Far East markets.  And the Japanese are searching for additional sources of energy including gas hydrates which they recently announced.  The natural gas glut may be spreading globally and could become highly competitive.  Countries with low F&D costs and low transportation costs owing to location in proximity to major markets will have pricing advantages that could make for stiff competition with US LNG.

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Permalink Reply by essay on March 13, 2013 at 4:49

if they actually figure out how to get methane hydrate off the seafloor cheaply and safely all bets are off.  and i do mean all bets... there is a staggering amount of gas locked up in the ocean sediment.  right now i don't think they're very close to a solution that makes economic sense, but one day.. yeah it'll happen.

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Permalink Reply by Skip Peel - Mineral Consultant on March 13, 2013 at 4:57

I agree. The Gulf of Mexico has large deposits of methane hydrate.  I agree that technology does not exist to make hydrate production feasible at this time.  However if the last five years have taught us anything it has taught us not to doubt the ability of evolving technology to overcome obstacles when sources of energy are at stake.  The glut in domestic natural gas could become a global glut in the future and other forms of energy will evolve and compete in the world market.  LNG export may not turn out to be the panacea for low domestic nat gas prices.

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Permalink Reply by Todd Hackney on March 13, 2013 at 5:23

Production is feasible, proven as it has already been done.

The remaining hurdle is economic.  Prices in Japan likely justify it.  US prices are a long ways from it this year.

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Permalink Reply by adubu on March 13, 2013 at 5:33

skip--- you know MMR has spend several Billions on the Dave Jones well that is in shallow waters off coast into Gulf. Well in 20,000 feet and very tight formation that has been problem to Fac at that depth but MMR CEO Billy Bob thinks it has huge volume of Nat Gas in formation. This is reason he in merging FCX with MMR and PXP for funds to one day complete the Dave Jones Well. 

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Permalink Reply by adubu on March 13, 2013 at 5:00

Skip--Yes that is true, but any increase in demand even if small helps the market. The USA will also increase the Export ( Via pipelines) to Mexico from about 2.5 Bcfd to close to 5 Bcfd by 2015. Cheniere Energy (LNG-Stock symbol)  will be able to start LNG Exports of 2-3Bcf/day begin 2015 + other export facility will be able to export about 10 Bcfd from US in few years.   The US presently produces a little less than 70 Bcfd .The demand in USA is increasing and supply/demand will stabilize with added exports so Nat Gas prices will follow and stabilize for longer periods. (Operators like predictability).    The US also continues imports of about 0.5 Bcfd under old contacts. Prices paid by Japan will slowly decrease in time, but doubt they will ever see prices much below $11  

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Permalink Reply by ledlights on March 13, 2013 at 6:46

It may be worth mentioning that the potential profit margin for exported US LNG is less than some may realize.

Bloomberg article on LNG export margins

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Permalink Reply by Skip Peel - Mineral Consultant on March 13, 2013 at 6:59

Good article.  The actual race to export LNG may be one of regulatory compliance.  The first handful of projects to gain all their regulatory approvals and get funding may cause others in the race to drop out.  A long term assessment of the global market should give some pause to capital commitments in the billions of dollars.

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Permalink Reply by adubu on March 13, 2013 at 12:03

Skip-- article says what I attempted to say that in time USA will export about 10 Bcfd --for market will dictate supply by demand every where in World which in turn dictate prices to that local market. Of course LNG will cost consumer in that local market a premium money spilt up by Producers local price Nat gas +,LNG plant,shipper, and receiver. Our local markets will by a major degree be control by operators drilling -- rigs drilling vs. rigs laid down in dry gas fields based on local supply/demands -- total gas in storage which will dictate local prices to operator and royalty owners

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Permalink Reply by Skip Peel - Mineral Consultant on March 13, 2013 at 13:00

adubu~My point is that there are far more companies and proposed facilities than the market will likely bear.  If 10 Bcfd is a reasonably accurate assumption of total US LNG export, compare it to the one project that has past regulatory muster, gained funding (at least in part) and has contracts for supply.

Cheniere's Sabine Pass facility before the expansion has storage for 17 Bcf and current contracts for 2.2 Bcfd delivery once the expansion is complete.  Doesn't appear that you need but 4 Sabine Pass type facilities and you have your 10 Bcfd.  Maybe 3.

http://www.cheniereenergypartners.com/liquefaction_project/liquefac...

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