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    Senior Member JohnDoe2's Avatar
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    Global market for natural gas has finally arrived

    Global market for natural gas has finally arrived


    A tanker is berthed at Tokyo Electric Power’s gas-fired thermal power plant at Futtsu in Japan. Pic: Bloomberg

    • RUSSELL GOLD, ALISON SIDER
    • Dow Jones
    • 10:07AM June 7, 2017
    • One day in March, the Rioja Knutsen tanker, filled with liquefied natural gas, was travelling from the US to Portugal. Suddenly, Mexico’s power company lobbed in a higher bid for its cargo. At the Bahamas, the ship abruptly made a starboard turn and headed south.



    How natural gas is bought and sold in the world’s scattered regional markets for the fuel is changing rapidly. Ships such as the Rioja Knutsen are stitching those regions together and a single global market is emerging.


    This is already how nearly every other hydrocarbon, from crude oil to obscure petrochemicals, is sold. As gas joins the club, the effects will ripple through energy prices, company profits, the environment and geopolitics.


    Behind the evolution is improving technology for moving gas as a liquid, which means it can go to many more places rather than simply where a pipeline runs.

    In addition, a glut of gas has producers working to develop new consumers all over the world. The result is growing flexibility in once-rigid gas contracts and a convergence in prices long dictated by local factors such as weather.


    The share of gas moving by sea reached 40 per cent of total trades in 2015, and the International Energy Agency forecasts that seaborne gas will account for a bigger share of trading than pipelines by 2040.


    Thirty-nine countries now import LNG, up from 17 a decade ago, according to data and analytics firm IHS Markit. Several more, among them Uruguay, Bahrain and Bangladesh, are expected to lift the total to 46 in the next couple of years.


    An LNG tanker berths in Japan.


    In one sign of how gas is going global, the US and China are working on a trade deal that could send vast quantities of gas pumped in Texas and Pennsylvania to factories in Shanghai and Guangdong. Improved access for US exporters to China’s giant energy markets could boost overall global shipments.

    The changes are contributing to rapidly narrowing price differences from place to place. In 2012, Asia spot prices for LNG were $US5.74 per million British thermal units higher than natural-gas prices in Europe, according to S & P Global Platts. This year so far, the difference has averaged less than $US1, something analysts expect to continue.

    Worries by US political leaders that gas exports would drive domestic prices significantly higher haven’t been borne out, at least so far, as Energy Department studies show only marginal effects. The US appears to be exporting its low gas prices rather than importing higher ones from the rest of the world.


    As LNG import terminals open in more locations, gas pricing and trading mechanisms are developing as well. Some investors are increasingly using the gas price at a pipeline intersection in Louisiana, called the Henry Hub, as a global benchmark.


    Trading in the New York Mercantile Exchange’s Henry Hub gas futures contract is becoming more global, said Peter Keavey, global head of energy at Nymex owner CME Group. In May, the Intercontinental Exchange launched the first futures contract reflecting LNG produced in the US, based on S & P Global Platts Gulf Coast price assessments.


    Seaborne gas is reducing some countries’ historic dependence on pipelines that run through potentially unfriendly territory. Poland, for instance, opened its first import terminal a year ago, lessening its reliance on gas piped from Russia.


    When global trade in LNG began in the 1960s, the cost of liquefying gas was so high it was a niche product, affordable only by developed countries such as Japan.


    As the technology proved reliable, trade in LNG became more common, but contracts to deliver the fuel by ship were decades long and had iron-clad destination clauses. Gas contracted for Tokyo couldn’t be rerouted to Seoul. Traders called gas tankers “pipelines at sea.”


    Now, contracts are getting shorter and starting to allow gas to be diverted to where demand is greatest. Earlier this year, three large LNG buyers in Japan, China and South Korea agreed to work together to push sellers for more contract flexibility and fewer onerous restrictions.


    At any given time, there are about 170 tankers filled with LNG on the world’s oceans, up from 150 a year ago, according to a tracker firm called ClipperData.

    Before long, traders will be able to “make a very quick phone call to get that gas to whatever market is in distress at that particular time,” said Charif Souki, chairman and founder of Tellurian Inc., which is seeking to export gas from the US Gulf Coast.


    At the heart of the changes is supply. Huge new discoveries in the US, Middle East, East Africa and Australia, along with recovery techniques such as fracking, have expanded the amount of gas available for export. Companies and countries are moving to develop new markets to where they can sell it all.


    One pioneer is Houston-based Cheniere Energy.

    Founded and led for years by Mr Souki, Cheniere initially developed terminals to import gas along the US Gulf Coast. When US gas production soared in recent years, the company converted its facilities into export terminals. It has spent more than $US19 billion on plants at Sabine Pass, Louisiana, and Corpus Christi, Texas, that cool gas to minus 162 degrees Celsius, at which point it turns into liquid and can move by tanker.


    The Cheniere Energy terminal in Texas.


    The US continues to import some gas via pipeline from Canada. By next year, Sabine Pass and other LNG terminals are expected to turn the US into a net gas exporter.


    In a quest for customers, Cheniere has invested in a Chilean project to build a power plant, LNG terminal, storage facility and pipeline. The company is willing to put in “early-stage capital, modest amounts of equity ... to grow the LNG market,” said Anatol Feygin, chief commercial officer.


    Oil titans Total and Royal Dutch Shell also are offering to build facilities to burn gas. The two and their partners are building an import terminal and pipeline for an estimated $US200 million in Ivory Coast, which will feed a power plant in the West African country’s economic hub of Abidjan.


    Part of what persuades nations to invest in infrastructure to import and burn gas is a belief its price will stay low. There are no signs supply growth is slowing. Qatar, the longtime LNG leader, recently lifted a self-imposed moratorium on the development of its North Field, the single largest gas reservoir in the world.


    The volume of LNG expected to be delivered this year, 294.1 million tonnes, is up 22 per cent in three years. It is likely to rise 21 per cen% more by 2020, according to IHS data and forecasts.


    “We are going into a period of oversupply, and prices will face downward pressure for some time,” said Gautam Sudhakar, an LNG analyst with IHS Markit.


    LNG faces competition even at low prices, because in some places it is cheaper to keep burning coal than to build gas facilities. In India, one of the world’s largest consumers of coal, it is renewables such as solar power, rather than natural gas, that may be mounting the strongest challenge. In nuclear power, Japan recently restarted some idled plants and China is building several new ones.


    “LNG is going to have to fight for its place in the global energy mix,” said Keo Lukefahr, general manager of natural gas for the Americas arm of PetroChina International. “It has a narrow window to establish itself as a cost-competitive clean energy resource if it is going to realise its potential in the world’s energy supply.”


    To take advantage of the window, producers are looking for new ways to finance gas-burning projects.

    Virginia-based AES Corp. is building a $US1 billion project, including an import dock and gas-burning power plant, near the mouth of the Panama Canal, the recent widening of which has enhanced trading by letting larger tankers pass.


    The project is aided by a $US150 million loan from the World Bank’s International Finance Corp. It became involved both to provide Panama with needed power and because the plant will displace electricity from dirtier fuels such as diesel.


    Helping make gas more accessible is a relatively new technology — floating LNG facilities.


    Offshore plants can be built in about half the three years it takes to put up a land-based LNG import terminal. Their mobile nature also is an advantage in certain markets where an importer doesn’t have spotless credit. If it can’t pay, the terminal can weigh anchor and relocate.


    The first floating terminal was christened in 2005.

    Today there are 25, according to the International Group of Liquefied Natural Gas Importers, a trade association. Excelerate Energy, a Houston company that developed this technology, is working on new floating terminals in Namibia, Bangladesh, Pakistan and elsewhere. The equipment to liquefy gas can also now be put on a large vessel that can be anchored offshore.


    One sea creature owes its life to this new, interconnected gas market.


    When the Rioja Knutsen tanker abandoned its Portugal destination to take advantage of an opportunity in Mexico, the Algerian energy company Sonatrach stepped into the breach, sending a tanker of LNG to Portugal.


    That tanker, the Cheikh El Mokrani, returned to Algeria to fill up with a new cargo on April 9. As it idled off the coast, its crew spotted a small whale trapped in a fishing net. A sailor jumped in to untangle it. A video posted online showed the whale swimming free as the rest of the crew cheered.

    http://www.theaustralian.com.au/busi...f992067a5795db
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    Senior Member JohnDoe2's Avatar
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    JUN 8, 2017 @ 01:45 PM 515

    U.S. Racks Up Massive Natural Gas Trade Surplus With Mexico

    James Taylor , CONTRIBUTOR

    Opinions expressed by Forbes Contributors are their own.

    U.S. energy companies exported $3.7 billion of natural gas to Mexico last year, putting a huge dent in our $7 billion trade deficit with our southern neighbor. In the absence of environmental activists and policymakers blocking proposed pipelines and export terminals, our natural gas trade surplus with Mexico would be even higher.

    Mexico’s economy is growing at a steady pace (2.4 percent), translating to steady growth in energy demand. By 2029, Mexico’s natural gas demand is expected to grow by 31 percent. At the same time, Mexican natural gas production is declining, dropping 10 percent during the past year.

    TOPSHOT - Mexican President Enrique Pena Nieto (L) and US presidential candidate Donald Trump shake hands after a meeting in Mexico City on August 31, 2016.Donald Trump was expected in Mexico Wednesday to meet its president, in a move aimed at showing that despite the Republican White House hopeful's hardline opposition to illegal immigration he is no close-minded xenophobe. Trump stunned the political establishment when he announced late Tuesday that he was making the surprise trip south of the border to meet with President Enrique Pena Nieto, a sharp Trump critic. / AFP / YURI CORTEZ (Photo credit should read YURI CORTEZ/AFP/Getty Images)


    Our growing natural gas trade surplus is bringing in tremendous wealth from south of the border. Our natural gas exports to Mexico are expected to double in just the next two years. This growing trade surplus and infusion of wealth is a model that can and should be emulated in our trade with other nations.

    [For economic context, while policymakers debate whether and how to pay for a Mexican border wall, Mexico will be sending enough money in natural gas purchases every year to pay the estimated costs of a border wall.]

    Most of the natural gas we sell to Mexico is delivered through pipelines. Currently, 17 pipelines deliver natural gas to Mexico and another four are under construction. Nevertheless, Mexican demand is so high that we don’t have enough pipelines to deliver all the natural gas Mexico would like to purchase. In 2016, for the first time, U.S. energy producers delivered significant quantities of natural gas to Mexico via liquefied natural gas (LNG) tankers.


    Environmental activist groups like the Sierra Club are fighting construction of new pipelines, even though natural gas imports from the United States will generate cleaner electricity than the oil- and diesel-generated electricity that is still prevalent in Mexico. Such opposition seems shortsighted and a knee-jerk reaction against anything related to fossil fuels.

    The construction of more pipelines will bring more wealth to the American economy. It will reduce our national trade deficit. It will improve air quality in Mexico. It is a win-win-win for all parties involved.

    The United States also needs more LNG export facilities. There is only one operating export facility in the United States, at Sabine Pass in Louisiana. Environmental activist groups, the Obama administration, and liberal policymakers at the state and local level have blocked the construction of additional facilities. This is preventing U.S. energy companies from exporting clean-burning natural gas to nations around the world that would like to purchase U.S. natural gas.

    The Australian published an article this week documenting a particularly compelling episode in which a tanker scheduled to deliver LNG to Portugal suddenly changed course and delivered its cargo to Mexico because Mexico offered a higher price. In an ideal world, U.S. energy producers could deliver natural gas to Portugal and Mexico (and many other nations that demand American natural gas).


    American natural gas exports would also enhance global political stability and defund terrorism. Egypt, Saudi Arabia, and other Middle Eastern nations gave Qatar an ultimatum this week to stop funding Iran and terrorist groups like ISIS, Al Qaeda, Hamas, and the Muslim Brotherhood. Qatar exports more liquefied natural gas than any other nation in the world, with Asian nations like Japan and South Korea as its primary market. A U.S. LNG export facility on the West Coast could displace much of Qatar’s LNG market and starve the nation of the funds it delivers to terrorist groups. Nevertheless, the Obama administration last year blocked the construction of an export facility at Jordan Cove, Oregon. The Trump administration can reverse this decision, boosting the American economy and delivering a blow against global terrorism.


    The future is bright for American natural gas exports to Mexico and elsewhere, so long as our politicians stop getting in the way.


    https://www.forbes.com/sites/jamestaylor/2017/06/08/u-s-racks-up-massive-natural-gas-trade-surplus-with-mexico/

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