Daily Management Review

American Gas Unmoors


America’s long expected go-to-market of gas has finally took place: the first tanker with US liquefied natural gas (LNG) will be exported before the of the week.

Wolfgang Meinhart, Hamburg
Wolfgang Meinhart, Hamburg
Today, US starts loading Energy Atlantic tanker with LNG. The procedure takes place at the Sabine Pass terminal on the Gulf Coast. Although the United States has been exporting LNG from a small factory in Alaska for more than 40 years, the tanker will be first in the US export history of gas supply to be consigned from the country’s main territory. The ship should be ready by the end of the week, giving impetus to the real participation of the United States in the struggle for gas markets outside the North American continent. According to Platts, the tanker will go to BG Group’s list (in the process of merger with Shell), the destination is unknown, but most likely it will be Europe or Latin America.
After starting the shale boom in the US, investors announced their intention to build several dozen terminals for LNG export.

Sabine Pass owned by Cheniere, the largest player in this market in the US, is the first such project. It involves construction of five lines of 4.5 million tons of LNG per year each, to be commissioned in 2015-2018. Only two lines will be working this year. US gas export scheme differs significantly from international practice. Cheniere only provides services on LNG. Interested companies - as a rule, they are large consumers of LNG, or merchants - rent capacity for a fixed fee, which is levied regardless of whether the gas is actually liquefied. Everything else - production or purchase of gas in the US market, its transportation to the factory, freight and sales of LNG tanker – is business of consumers or traders. So, Cheniere has already contracted 88% of the capacity of five lines of Sabine Pass.

However, in the face of very low oil prices it is not clear how the US supply of gas will be in demand. For example, the current price of gas at the American Henry Hub is about $ 82 per thousand cubic meters, another $ 70-85 per thousand cubic meters is price for liquefaction and $ 35 - delivery by tanker to the North-West Europe. As a result, value of US LNG excluding margin trader is approximately $ 200 per thousand cubic meters, while the price on the British hub NBP - about $ 180 per thousand cubic meters, while price of Russian gas to the German border - about $ 190 per thousand cubic meters. Thus, now the American LNG can be a balancing supplier for Europe in terms of cost, but it cannot displace Russia or Norway from their main market. The situation in Asia is similar, although in terms of cost, the American LNG is more competitive than the new Australian projects.

If price of LNG will remain low, load of LNG hubs in the United States may be weak. According to Bentek Energy, in 2016 capacity of LNG hubs in the United States will amount to 9 million tonnes, and will be loaded by 54%, but already in 2017 - 16.5 million tons when loaded by 45%. LNG plants owners will be little worried about the actual occupancy rate, but traders and consumers will have to decide whether to take LNG or lose money paid to rent facilities for liquefaction. At the same time, Bentek Energy believes that by 2020, the United States, despite the current unfavorable market conditions, will be have production capacity to 100 million tons of LNG per year, that is, the country could become its largest producer and second largest exporter of gas after Russia.

source: platts.com