Replies to This Discussion

Permalink Reply by JHH on November 13, 2018 at 16:10

I subscribe to NatGasWeather.com and they indicate colder than normal weather forecasts and average to lower builds in storage.  The nat gas storage level is already below the (5-year?) average and it might be difficult to build storage levels due to demand caused by colder weather.  I'm only guessing increasing exports are a factor too.  Prices go up and then they go down... then they go up again. Ride the wave.

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Permalink Reply by Jesse Joyner on November 14, 2018 at 3:47

NG shot up about 40 cents this Wed. morning to $4.40. Seems to be the perfect storm for the bulls to run it up on futures speculation. Yeah, and with low oil, that'll cut back drilling in certain basins, which will also help curtail NG supplies. It'll be interesting to see which operators can continue to chase the AC at these low oil prices, although OPEC and the Saudis could turn on a dime and turn off the crude flow, yet that might not happen for six months or so. 

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Permalink Reply by j garrett on November 15, 2018 at 17:55

Three weeks ago Trump got Germany to kill the Russian pipeline and import USA LNG instead.  I believe that to be the reason for the spike in prices.  Hopefully this is what we've all been waiting (im)patiently on the past 10 years to get prices above $4.50 and get new Haynesville production going.  The dip in oil prices will work in our favor as well.  Maybe we will see some rigs heading back to East Texas!  https://www.foxbusiness.com/politics/trump-germany-invest-us-gas-im...

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Permalink Reply by Rock Man on November 15, 2018 at 18:01

Even though it is a positive that Germany will start to import USA LNG, I can't see this being an "impact point" on recent gas price increases. The LNG terminal is years from being constructed - too far out to impact near term IMO.

As indicated by other posters, issues such as storage volumes and recent cold spell are more "real time price impactors".

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Permalink Reply by Skip Peel - Mineral Consultant on November 16, 2018 at 2:21

There is little LNG going from US to Europe for the simple reason that there are few re-gasification facilities there now.  That will change in the not too distant future.  Trump and Germany have nothing to do with this price spike.  This is seasonal weather and low storage.  And Europe will continue to buy the cheapest natural gas they can get in the future whether it comes by pipeline from Russia or from the US as LNG.

As much as we would like to see higher natural gas prices it is worth keeping in mind that the main reason that demand has been on a steady increase is the price.  The increased demand is a function of natural gas prices competitive with coal and the fact that many end users are wary of making long term investments in dirty energy sources.  Regardless of what this administration has done or will do in the future, the market is headed away from coal and toward a cleaner energy mix of natural gas and renewables. There are fewer US coal jobs today than there were when this administration took office.

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Permalink Reply by Skip Peel - Mineral Consultant on November 16, 2018 at 3:27

Why America struggles to sell LNG in Europe

It looks unlikely to challenge the pre-eminence of pipelined Russian gas

America is the world’s largest producer of natural gas and is on track to become the dominant exporter of LNG, thanks in part to soaring demand from South America and Asia. But the big problem with its LNG, as far as European buyers are concerned, is that it is more expensive than pipelined gas from Russia. American LNG exporters need to sell in Europe for at least $6-7 per million British thermal units (mBTU) to cover the costs of freezing, shipping and re-gasification. By contrast Russia’s long-run marginal cost of supply to Europe is only about $5 per mBTU. American LNG is also more expensive than LNG from Qatar and some African countries because feed gas in America is more costly to extract, and the distances it has to travel to the customer are longer.

Last year, as a result, Europe imported eight times more gas by pipeline than in the form of LNG, according to the US Energy Information Administration. This trend appears to be continuing into 2018. Imports of Russian gas by countries in the European Union hit a record high in the first half of the year, up 8% year-on-year. The threat of competition from America has forced Gazprom to become more efficient and to lower prices. So American LNG is actually more likely to end up in Asia, where Australia and Qatar sell a lot of LNG but are unable to meet growing demand. China, the main driver of that growth, has become a particularly important destination. Ensuring that President Donald Trump’s trade war with China doesn’t close off this market is more important to American LNG suppliers than any deal signed in Europe.

https://www.economist.com/the-economist-explains/2018/11/16/why-ame...

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Permalink Reply by Rock Man on November 16, 2018 at 7:16

Skip, good article on the worldwide LNG issue. I was in Warsaw a few years ago at a "shale gas" conference. The primary theme was to develop Polish unconventional gas reservoirs (which has essentially failed after the drilling of several test wells). They (Poles) are heavily linked to the pipeline gas from the Ukraine - so much so that the connection seems next to impossible to break.

The agreement for Germany to take LNG from the USA sounds good, but what will happen to this agreement with Merkel stepping down?

Your article touches on costs to extract the gas that eventually goes to LNG transport. As we all know, the US plays are expensive, frac stimulation driven plays - lots of capital on a per well basis to get gas flow. And then some long pipelines to get the gas to LNG facilities on the coast. Qatar and Africa's LNG sources are from HUGE conventional reservoirs that require no significant stimulation and fewer wells to extract large per well EUR's of gas. And these gas fields are either offshore (North Dome / Qatar) or on the coast (Africa) - so transport of gas from its source to LNG facilities is short and more efficient than the USA situation.

World wide economics and competition at its best as to the LNG issue.

Side bar comment - While at the Warsaw conference I referenced earlier, Day #1 presentations were delayed by a well orchestrated protest by "anti frac" groups who first created a diversion for security and then chained themselves to the podium / speakers area for the conference. It was widely known that these protesters were funded by French backers (who have outlawed frac'ing in their country) and then Russian funding (in support of their pipelines). One of the related protest issues being touted was that pipelines were safer than LNG "time bombs" coming into European ports.

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Permalink Reply by Skip Peel - Mineral Consultant on November 16, 2018 at 7:44

The politics of energy is complicated and often opaque.  I am so relieved that it was France and Russia behind those protests and disinformation campaigns.  And not George Soros.  :-)

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Permalink Reply by Rock Man on November 16, 2018 at 7:49

Too funny.

Building on earlier comments, there are some legitimate "shale gas" targets in Europe onshore. Poland, Germany, France, Netherlands, England, other areas. Aside from France (Where frac'ing is verboten), one of the biggest issues to exploiting these formations is logistics - dense population and development makes drilling and facilities installation (plus new gathering lines) difficult to construct.

And when you add in the costs to "import" horizontal drilling and frac stimulation technology from the US, the costs go through the roof and individual wells costs are at least double a US well with similar depths and completion approach.

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Permalink Reply by Jesse Joyner on November 16, 2018 at 8:30

As a NG royalty owner, I'm pleased that the LNG demand has bumped up prices. The more the better. Anyone want to speculate on how many decades into the future that the U.S. has in regards to NG supplies for its own needs? I'm sure when it runs out, which it eventually will as it was trending to do before the shale came along with its vast reserves, that the coal mines will still be around to step up and supply their mineral hordes for the gasification plants that'll be built, like they were in times of old.

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Permalink Reply by Rock Man on November 16, 2018 at 8:41

Depending on future prices, present "uneconomic" gas plays may move into the "economic" window and help to extend future gas supply.

Present uneconomic plays like the Pearsall Shale (S Tx), much of the Woodford and Barnett in Permian Basin (non Alpine high area), the Collingwood (Utica equivalent / Michigan) and other "failed" shale plays may eventually have their day/

$10+ gas will do that.

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Permalink Reply by Skip Peel - Mineral Consultant on November 16, 2018 at 9:36

There is probably something on the order of 100,000 acres, maybe twice that, of currently non-economic LA Haynesville Shale areas.  As wells become more efficient and the price rises, those areas will become economic.  I think the US has another fifty years of supply which should be more than enough to transition to other future energy sources.

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