United States LNG Exports Reach Third Place

[Tomasz + 1,608]

Quote

Cold weather does not leave Europe, demand for natural gas is growing, Gazprom notes, citing data from Gas Infrastructure Europe, according to which, as of February 10, the occupancy of underground storage facilities in Germany has already dropped to 37%."

Germany, the largest consumer of Gazprom's gas, increased the purchase of Russian gas by 47.8% over 10 days in February compared to last year," the company said.

For the next week in Warsaw, during the day they predict minus 5 to minus 7 degrees. But at night they portend frost of almost 20 degrees.

It was a bit lucky for Gazprom that harsh winter proves the need for greater gas imports from Russia to Germany just when the fate of Nord Stream 2 is decided, because no LNG producer will never be able to quickly and effectively respond to such frost attack that we see in Europe in January and February.

Only Gazprom has great spare production capacity available and is now proving the necessity of Nord Stream 2.

Edited February 12, 2021 by Tomasz

[Jan van Eck + 7,558]

What puzzles me is that an oil condensate such as propane is not more popular in Europe.  Propane is widely consumed in New England area of USA, is cheap enough, and is a clean alternative to fuel oil in areas where there are no nat-gas pipelines.  My guess is that propane would be relatively easy to ship, as the pressure needed to keep it liquid is a lot less than that of LNG.  Does anyone have an explanation as to why propane is not used in Europe?  (Or, it is used and I don't know about it!  😯 )

[Tomasz + 1,608]

Last week demand for propane/butane in USA was reportedly 2 milion barrels per day when US citizens work remotely from home. Its equivalent of total german oil demand.

Let me cite this as an example how harsh winter this winter affects oil demand.

2 milion barrels cost about 120 milion dolars. For such prices you can  get 0,6 billions cubic meters of NG.

So Im not sure whether from economic point of view its better to use propane/butane instead of NG.

It is better to burn natural gas from ecological point of view. Especially that in the era of global warming, one of the greatest risks is the risk of spontaneous gas and Co2 release in Siberia.

The best solution for the world would be to simply burn this methane, and whether Europe or the Chinese will do  this is a secondary issue.

Edited February 12, 2021 by Tomasz

[ronwagn + 6,290]

On 2/1/2021 at 2:51 PM, Tom Nolan said:

It was a good day (Monday Feb 1st)  for me.  I had over 1,000 shares of BOIL (Natural Gas ETF).  It went up to over 20%.  Hell...I sold and bought more silver.

BOIL - https://finance.yahoo.com/quote/BOIL?p=BOIL

Natural Gas went up about 26 cents - 10% - https://tradingeconomics.com/commodity/natural-gas

Smart move. 

[ronwagn + 6,290]

2 hours ago, Tomasz said:

For the next week in Warsaw, during the day they predict minus 5 to minus 7 degrees. But at night they portend frost of almost 20 degrees.

It was a bit lucky for Gazprom that harsh winter proves the need for greater gas imports from Russia to Germany just when the fate of Nord Stream 2 is decided, because no LNG producer will never be able to quickly and effectively respond to such frost attack that we see in Europe in January and February.

Only Gazprom has great spare production capacity available and is now proving the necessity of Nord Stream 2.

Only because Deutschland has not prepared the pipelines and storage facilities to receive it. They could also be using their own natural gas if not so foolish as to ban fracking. They could also use coal gasification. 

[ronwagn + 6,290]

On 1/12/2021 at 12:29 PM, Tomasz said:

According to Kommersant today Asian JKMC spot prices reached 1170 $ per 1.000 m3.

7 or 8 months in May ago spot prices were about 70 $ per 1.000 m3.

I dont have anything to add.

May prices and January prices are not based on  supply/demand balance  but purely on speculation.

Today Novatek according to Kommersant  will send couple of LNG carriers by North Sea Route to get some revenue in a peak of winter for first time from Yamal without icebreaker protection and therefore it is a sign of the times.

https://www.kommersant.ru/doc/4639727

 

 

I thought I had heard of a pipeline, being built, that would go from Texas to the Mexican Pacific Coast near Mexico City. That would seem like a logical route to Asia. 

https://www.msn.com/en-us/money/markets/pipeline-completion-expected-to-boost-natural-gas-exports-to-mexico/ar-BB16oESJ

Edited February 13, 2021 by ronwagn
reference

[ronwagn + 6,290]

On 2/10/2021 at 11:10 PM, Tom Nolan said:

Dangerously Cold Temperatures Pour Into Europe This Week

Wednesday, Feb 10, 2021 - 11:45

https://www.zerohedge.com/commodities/dangerously-cold-temperatures-pour-europe-week

While the Arctic blast over the central US is set to worsen in the coming days (see: here & here), temperatures in northern Europe are set to dive as low as -20 degrees Celsius (-36 degrees Fahrenheit), data firm Maxar Technologies said in a report on Wednesday. 

The pattern of exceptionally frigid air blasting parts of the US and Europe at the moment is due to a disruption of the polar vortex, which has allowed Arctic air to spill south into North America and Europe. 

Maxar said European heating degree days (HDD) between Feb. 10-14 would register around 102, which is well above the ten-year average of 82.1. HDD is a measurement designed to quantify the demand for energy needed to heat a building. 

However, there is good news following dangerously cold air that has poured into Europe since early January and sent natural gas prices sky-high - that is - temperatures are expected to return to normal by next Friday across the UK, continental Europe, and the Nordic region.

"High pressure over northern Europe will slowly move to the continent and this will slowly cut off the supply of cold Arctic air and the general flow will veer more to southwesterly directions in the course of the next week. Tomorrow through Sunday will be very cold and mostly dry with well below normal temperatures and strong night frost. Next week will start similar but daytime highs will increase and will be partially above zero especially in the west. The second half of the next week will be generally milder with near normal temperatures and the west sould see occasional light rain. A breakthrough of mild and wet weather with strong winds is not likely as high pressure seems to remain dominant over the continent," Reuters' Greg Muller said. 

The Global Forecast System (GFS) predicts cold weather for Europe through Sunday. 

Energy traders usually look at forecasts a few weeks out - so with warming trends ahead - natgas prices in the UK have recently slipped after a huge upside move earlier this year. 

 

In January, Russia's Gazprom delivered a record amount of natgas to Europe amid the cold weather. 

Climate alarmists, such as Greta Thunberg, have been absent this year to explain why Europe and the US are experiencing fridge temperatures. 

 

I must commend her on her beginning to talk about China and India though!

[ronwagn + 6,290]

On 12/22/2020 at 6:22 AM, NickW said:

Whats your evidence for them running a campaign against fracking? Opposition against fracking in Europe has been local and more often than not based on the fact that suitable geology is underneath major urban areas. 

That article just states the bleedin obvious that China with the Worlds biggest population as a country has the highest total Carbon emissions. A far better measure of carbon intensity is carbon emissions per capita . That would paint a different picture. 

Communists (really fascists) work through their agents, not directly. Anyone who has studied how communists work knows about the useful idiots, their leaders, and where the directions come from. Front organizations stop pipelines, fracking, and everything else that they do not want for whatever reason. The profits of Russia depend on a captive market in Europe. The Germans are equally to blame though, as are the other European conuntries that will be dependent on Russian natural gas and oil. 

Antifa, and BLM are only the latest front groups for China and Russian interests. All leftists are allies of China, Russia, and their allies. Some may not realize it however. They are undermining America any way they can. 

[NickW + 2,714]

11 hours ago, ronwagn said:

Communists (really fascists) work through their agents, not directly. Anyone who has studied how communists work knows about the useful idiots, their leaders, and where the directions come from. Front organizations stop pipelines, fracking, and everything else that they do not want for whatever reason. The profits of Russia depend on a captive market in Europe. The Germans are equally to blame though, as are the other European conuntries that will be dependent on Russian natural gas and oil. 

Antifa, and BLM are only the latest front groups for China and Russian interests. All leftists are allies of China, Russia, and their allies. Some may not realize it however. They are undermining America any way they can. 

Right. 

But  campaigners against wind farms / solar farms* are all salt of the earth locals then? 

* which further curtail demand for Russian gas. 

[ronwagn + 6,290]

Natural gas is needed for heating. Wind and solar are poor substitutes that cannot presently do the job in the winter. I am not a campaigner against wind and solar, just not an alarmist thinking they are the only way to go or should be allowed to destroy the beauty of Europe or anywhere. The renewables extremists want everyone to be forced to use their choice. That is who I oppose. 

[ronwagn + 6,290]

1 hour ago, NickW said:

Right. 

But  campaigners against wind farms / solar farms* are all salt of the earth locals then? 

* which further curtail demand for Russian gas. 

Natural gas is the preferred source of heat in winter. 

[Tom Nolan + 2,441]

16 hours ago, Jan van Eck said:

My guess is that propane would be relatively easy to ship, as the pressure needed to keep it liquid is a lot less than that of LNG.  Does anyone have an explanation as to why propane is not used in Europe?  (Or, it is used and I don't know about it!  😯 )

 

[Tom Nolan + 2,441]

As Freeze Grips U.S., One Gas Producer Rushes to ‘Open the Taps’

https://finance.yahoo.com/news/freeze-grips-u-one-gas-050001188.html

Fri, February 12, 2021, 11:00 PM·4 min read    Rachel Adams-Heard

(Bloomberg) -- Chris Bird first saw the rumors Friday morning on Twitter.

Physical natural gas prices were soaring in Oklahoma amid a cold blast that was gripping much of the U.S. and only stood to get worse. Bird, owner of a small gas producer in Tulsa, called one trader who confirmed the heating fuel was going for a staggering $350 per million British thermal units. Then he called another who said it had risen to $395.

That’s all Bird needed to know. He and his production technician grabbed some winter clothes at the dollar store and drove the stretch of highway to Osage County some 20 miles north. They met up with a buddy who owns a propane torch and began melting ice off idled gas wells to get them back online.

“We’ve got four of us in the office turning on every single gas well that we’ve got,” Bird said. “We have old wells that haven’t produced in 10 years, and we’re like, ‘open the taps, let’s go.’”

After years of depressed prices and weak margins, U.S. natural gas producers -- at least those with wells and equipment that aren’t frozen -- are cashing in on an unusually extreme blast of cold. The freeze is giving a rare boost to a market that’s never recovered from a crash more than a decade ago, flooded by cheap supplies from shale fields.

Prices have surged more than 4,000% in two days in Oklahoma, while gas processing plants across Texas are shutting as liquids freeze inside pipes, disrupting output just as demand for the heating fuel jumps.

The Arctic blast that’s unleashed deadly ice storms as far south as Houston is also disrupting oil output in the Permian Basin of West Texas, potentially impacting several hundred barrels a day of oil output, and has sent electricity prices surging.

As much as 6 inches (15 centimeters) of snow could fall in Fort Worth, Texas, over the weekend, with temperatures possibly plunging into the single digits Fahrenheit on Monday. Freezing rain has already created treacherous driving conditions there, with a 130-vehicle pileup on Thursday leaving six dead and dozens injured.

Texas’s top energy regulator adopted emergency measures to ensure households, hospitals and churches get first dibs on gas for furnaces as the coldest weather in decades descends on the Lone Star state.

Electricity prices in northern Texas averaged more than $300 a megawatt-hour Friday afternoon, compared with an average of about $18 so far this month, according to grid data compiled by Bloomberg.

Texas facilities operated by pipeline companies DCP Midstream LP and Targa Resources Corp. were reported shut on Thursday due to the cold, while Enbridge Inc. said it was limiting requests to transport gas on a pipeline stretching from Texas to New Jersey. Gas production in the mid-continent region is down 35% from the 30-day average, BloombergNEF said Friday.

Meanwhile, Bird estimated that his company will bring in $600,000 to $700,000 a day for as long as gas prices in Oklahoma remain at these levels -- up from just a few thousand dollars a day normally. That’s enough to make conventional wells drilled years ago, and all but forgotten, profitable again. “We’ve got a roustabout crew hooking up wells that are so old they were disconnected,” he said.

His company, Exponent Energy, owns a few hundred wells in Osage County, though these aren’t the gushers out in West Texas. Three-quarters of them had been shut because they no longer made any money at recent prices.

On Friday, that changed.

“We’ve got every single person who works for us in the field turning on wells,” he said.

A weekend of crazy prices could pay for a purchase he made three and a half years ago. By the time he and his team were sipping celebratory margaritas, prices had climbed even higher -- soaring above $500 per million British thermal units.

“We’re paying off 10% of the acquisition value of the deal every day -- today, tomorrow, Sunday and probably Monday,” he said on Friday. “In three to four days, we’re going to pay off the value of the asset from when we bought it.”

 

 

[NickW + 2,714]

2 hours ago, ronwagn said:

Natural gas is the preferred source of heat in winter. 

That wasn't the question - nice diversion. 

Your premise is that  anti fracking campaigners in Europe are commie stooges ( I except some could be) rather than being residents concerned about having fracking operations underneath or near their houses.

Stands to reason then that your fellow anti wind farm / solar protesters are commie stooges too? 

[ronwagn + 6,290]

2 hours ago, NickW said:

That wasn't the question - nice diversion. 

Your premise is that  anti fracking campaigners in Europe are commie stooges ( I except some could be) rather than being residents concerned about having fracking operations underneath or near their houses.

Stands to reason then that your fellow anti wind farm / solar protesters are commie stooges too? 

Putin doesn't compete on electricity, just oil and natural gas. Those two are far beyond solar and wind in importance, at least in the this decade. 

[Tom Nolan + 2,441]

For about a decade more, we will see weather patterns which correlate with the GRAND SOLAR MINIMUM SYMPTOMS which we are seeing currently...

https://secure.meetupstatic.com/photos/event/9/6/5/9/highres_494738489.jpeg

30 minute video with sources and website in show notes.

GRAND SOLAR MINIMUM SYMPTOMS

https://youtu.be/FqcL1JGlA2I

 

 

[NickW + 2,714]

1 hour ago, ronwagn said:

Putin doesn't compete on electricity, just oil and natural gas. Those two are far beyond solar and wind in importance, at least in the this decade. 

Wind and solar investments erode the need for natural gas, and coal of which Russia is a major supplier to Europe. 

[NickW + 2,714]

1 hour ago, ronwagn said:

Putin doesn't compete on electricity, just oil and natural gas. Those two are far beyond solar and wind in importance, at least in the this decade. 

Hate to spoil the party but natural gas consumption in Europe has flatlined since 2006, infact has only recently recovered some lost ground on the back of some extensive coal decommissioning. 

The UK is using 25% less than it did a couple of decades ago. 

10590.pdf (europa.eu)

[Tom Nolan + 2,441]

3 hours ago, NickW said:

Wind and solar investments erode the need for natural gas, and coal of which Russia is a major supplier to Europe. 

Actually, wind power and solar power have their problems in winter, especially with freezing weather on turbines or no wind... or snow/ice on the solar grid, along with overcast days.  Electric heat is a tough go compared to gas heat.

[Tom Nolan + 2,441]

"Power Bills To The Moon": Chaos, Shock As Electricity Prices Across US Explode

https://www.zerohedge.com/markets/power-bills-moon-chaos-shock-electricity-prices-across-us-explode

by Tyler Durden

Saturday, Feb 13, 2021 - 15:00

Updated (1726 ET): Weather forecast models suggest the polar vortex will continue pouring Arctic air into much of the central US through Feb. 20. This means nat gas prices could rise even higher early next week as electricity demand continues to soar over the weekend as Americans crank up their thermostats and watch Netflix shows or mine Bitcoin. 

* * * 

On Thursday, when we reported that nat gas prices across the plains states had soared to never before seen levels as a result of a brutal polar vortex blast...

... which literally froze off nattie supply as wellheads freeze-offs, cutting production receipts just when they're most needed by customers' demand for heating, we said that since the winter blast is expected to last for the duration of the week, it is likely that nattie prices across the plains states could hit GME ^batshit levels.

TWITTER IMAGE

One day later that's exactly what happened because as frigid temperatures caused equipment failures, temporarily shutdowns and flaring in at least four nat gas processing plants ...

• Targa Resources’ Benedum Gas Plant in Upton County affected for 7 hours overnight, co. said in a filing
• Occidental Petroleum’s Bennett Ranch Unit RCF Facility in Yoakum County, which is used for EOR, was affected for 9 hours Thursday: filing
• DCP Midstream’s Goldsmith Gas Plant in Ector County affected for 1 hour Thursday: filing
• Occidental’s nearby gas plant, another EOR facility, was affected by DCP Midstream incident: filing

 

... we hit the proverbial offerless market where any natgas that was available would be purchased at virtually any price, which is why midcontinent prices such as the Oneok OGT nat gas spot exploded from $3.46 one week ago, to $9 on Wednesday, $60.28 on Thursday and an insane $377.13 on Friday, up 32,000% in a few days. This is one of those places where having a limit up circuit breaker could actually be useful, even though there simply is nowhere near enough product to satisfy demand at any price hence the explosive move.

Hubs across the Midcontinent led the surge in prices again Feb. 12 as weather forecasts predicted the coldest temperatures in more than a decade would hit the region over the upcoming holiday weekend. Platts reported that at locations across Kansas, Oklahoma and Eastern Arkansas, hub prices were trading at single-day record highs around $200 to $300/MMBtu. Regional hubs, which typically service only limited local demand, saw fierce competition among shippers, utilities and end-users looking to meet weekend requirements.

At one Enable Gas Transmission location, the cash market traded as high as $500 with weighted-average prices holding steady by mid-session around $359/MMBtu. At other nearby hubs, cash markets moved to dizzying, record highs with One Oak Oklahoma at $374 (chart above), Southern Star at $275, Panhandle at $225 and ANR Oklahoma at $205. At the region's benchmark location, NGPL Midcontinent, the market was holding around $205/MMBtu, data from the Intercontinental Exchange showed.

And as end-users across the Midcontinent compete for available gas, shippers moved quickly to cut transmissions to neighboring markets. On Feb. 12 net, inbound shipments of gas climbed to 180 MMcf/d – their highest on record dating back to 2005. In January, the Midcontinent region – which typically delivers gas to neighboring markets – saw net outbound transmissions average nearly 3.1 Bcf/d.

Of course, as natgas went offerless it was just a matter of hours before the immediate downstream commodity, electricity, would follow suit and that's precisely what happened overnight as wholesale electricity prices across all US markets on Friday.

Echoing what we said on Friday, Platts wrote that "as arctic air mass continues to blanket much of the central US, the US National Weather Service has issued multiple severe weather notices. Widespread wind chills warnings and advisories are extended through Feb. 14 and likely into the next week for much of the Upper Midwest and Midcontinent, as well as some areas in the Northwest and northern Texas. Daily temperatures across some of the locations will range between 30 to 40 degrees below average, according to the NWS. Eastern PJM, Northwest and much of Texas are also under winter storm warnings and winter weather advisories."

This is catastrophic news not only for the continued freeze in nat gas distribution, but for the explosion in electricity prices which could see many customers see a February electricity bill in the thousands, if not tens of thousands. This is what a power trader at a Houston energy company advised us on Friday:

Prices in response to the persistent cold have pushed load expectations to all time winter highs, and on par with the hottest summer days the ISO has experienced.  Actual shortages could persist if units aren't weatherized and fail at any point.  Monday peak is currently bid 4000, and balweek inclusive of Tuesday through Friday is 1000@2000.  Off peak (nights) have traded insane levels as well, with the balance of the month trading 650$.  For reference, summer of 2018 never came close to touching these levels.  The highest trade on a balday was around 2000$, if i'm not mistaken. 

The PUC is meeting today to discuss coordination and potential conservation efforts, but this event will likely crush several firms who are not collateralized enough to weather (no pun intended) the storm IMO.  And all those folks on griddy could literally be looking at paying 4$+ per KWh across the state (as opposed to 12 cents or whatever rate you got at your house), pushing power bills to the moon.

One day later, and the peak price in Ercot west real-time hit an absolute all time high of $5,500, up from $302 the day before. If anyone has a little extra nat gas in storage, this is the time to sell it and buy a private island.

What follows is a breakdown of how the nat gas supply collapse is impacting soaring electricity prices across the US, courtesy of Platts:

Texas

ERCOT next-day prices reached record highs on the Intercontinental Exchange as temperatures throughout Texas were forecast to tumble double digits on Feb. 15. Dallas temperatures were forecast to drop to 8 degrees Fahrenheit, and Houston was forecast down to 34 F, according to CustomWeather.

The brutally cold temperatures also affected wind supply in ERCOT, generation for Feb. 15 was forecast to tumble down 52.5% to 27.8 GWh of generation as cold temperatures impacted wind turbines. DeAnn Walker, chairman of the Public Utility Commission of Texas, said at a meeting on Feb. 11 that there were some "issues with some gas generation plants being curtailed" and that "wind turbines are all frozen," further placing upward pressure on already sky-high prices.

ERCOT North Hub real-time next-day Feb. 15 on-peak power prices skyrocketed to trade above $3000, up from its previous settlement of $325/MWh. Next-day prices broke high records, and they had not seen similar four-digit prices since Aug. 15 2019, when prices settled around $1848/MWh.

ERCOT North Hub real-time balance-of-the-week for Feb. 16 through Feb. 19 surged to top $1500/MWh, and the balance-of-the-month off-peak package for Feb. 16 through Feb. 28 climbed about $499.75 to trade at $650/MWh.

In response to the unprecedented scramble, the Texas oil/gas regulator, the RRC, approved emergency provisions, and warning that the deep freeze may have a "severe impact" on energy supplies, said that power plants may struggle to acquire gas for generators.

Bloomberg's Javier Blas said, "Texas utilities are asking citizens to conserve electricity if possible as ERCOT prices surge across the board above $5,000 Per MWh (!!!) and hit the $9,000 cap in many nodes. Texas electricity grid is facing massive demand as cold weather hits southern and central U.S. states." 

Bloomberg's Rachel Adams-Heard shared a tweet from a Texas power trader...

TWITTER IMAGE

Central

In the Midcontinent ISO, Indiana Hub on-peak jumped to its highest price since January 2019 to trade above $100/MWh. Bal-of the-week also rallied to price on par with the next-day flow package. As polar vortex continues to impact the region, the February-to-date average day-ahead price jumped almost 70% month on month and nearly doubled year on year. MISO demand forecast for Feb. 15 is the strongest since August 2020 at 98.63 GW.

As of Feb. 12, MISO is declaring conservative operations due to extremely cold temperatures and generator fuel supply risks through Feb. 16. All transmission and generation maintenance will be suspended in the affected areas, and all outages plans should be reviewed, according to the most recent grid operator's notice.

In PJM, AD Hub on-peak traded in the upper $70/MWh, rising double digits day on day. PJM West Hub also rose to trade in the mid-$60s/MWh. Power demand was forecast to begin retreating slightly in the upcoming days, however, it was still expected to remain relatively strong.

West

West power prices surged to the triple digits, the highest prices of the year so far, as a Pacific storm system was forecast to hit the Pacific Northwest to generate heavy snow and ice accumulations from Portland to Seattle. Mid-Columbia on-peak for Feb. 15 and Feb. 16 delivery boosted about $116.25 to trade at $155/MWh, and the off-peak package hiked about $113.50 to trade around $146.75/MWh.

California packages for Feb. 15 and Feb. 16 rose, with SP15 on-peak up about $117/MWh to trade around $193/MWh, and NP15 on-peak climbing $32.75 to trade around $106.75/MWh. California Independent System Operator peakload demand supported the rally in prices, with forecast demand for Feb. 15 up 1.9% to 26.7 GW.

Southwest packages saw price increments in the $200s/MWh across the board also as the weather service forecast wind chills between -10 and -25 degrees common across eastern New Mexico. Palo Verde on-peak priced around $270.25/MWh, and Four Corners on-peak traded at $314/MWh.

Northeast

Power packages in the ISO New England and NYISO were more mixed in Feb. 12 trading. Mass Hub on-peak tumbled from its recent highs to trade in the mid-$70s/MWh. Bal-of-the-week, in contrast, rose $3 to price at $87.50/MWh.

The locational marginal prices in the New York Independent System Operator were also rangebound, with Zone G adding about $2.50 to trade around $91.25/MWh and Zone J NYC falling about $7 to $94.50/MWh. The corresponding off-peak packages each rose about $5.50 to trade in the mid-$70s/MWh. Despite some of the declines, regional power prices in both ISOs remained elevated.

Unlike the rest of the country, the US Northeast is set to experience more settled weather, with high temperatures in Boston and New York City forecast to slightly increase to the low 30s on Feb. 15 with moderate chances of snow and rain, according to the weather service.

Edited February 14, 2021 by Tom Nolan

[Tom Nolan + 2,441]

Investors Are Looking Long Term In LNG Markets 

By Irina Slav - Feb 13, 2021, 6:00 PM CST

https://oilprice.com/Energy/Gas-Prices/Investors-Are-Looking-Long-Term-In-LNG-Markets.html

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This winter saw something that made exporters of liquefied natural gas very happy: a more than a 1,000-percent surge in LNG prices on the spot market from a year earlier as a cold spell gripped swathes of Asia. What could make them even happier is the fact this surge has seriously compromised the appeal of spot market deals. Long-term contracts are reclaiming their territory. Traditionally, natural gas was bought and sold under long-term contracts pegged to the price of crude oil. This benefited sellers when oil was expensive and reduced their income when oil was cheap. In either case, the sellers had long-term secure markets for their gas.

With LNG came the spot market where you could sell a cargo more than once while it was still in the ocean. The increased popularity of LNG gave rise to a dynamic spot market where prices reflected demand and supply much more accurately than long-term oil-linked contracts. Buyers loved the spot market when LNG supply exceeded demand and brought prices to historic lows. Yet they didn’t love it so much last month when a million British thermal units topped $30, from less than $2 in May 2020.

As Reuters’s commentator Clyde Russell noted in a column in late January, the gas world was moving towards a greater preference for spot market deals thanks to the abundant—even excessive—availability of LNG. Yet one sudden surge in demand may have been enough to cause some rethinking: after all, long-term contracts do have their advantages, chief among them the guaranteed availability of the commodity.

It is no wonder, then, that one of the world’s biggest producers of liquefied natural gas is grabbing the opportunity to secure its market share. Earlier this month, Qatar’s energy minister warned LNG importers that they would face more price spikes unless they bet on the certainty of long-term contracts.

What’s more, Saad al-Kaabi said, as quoted by the Financial Times, that new LNG supply was going to be tighter now, with U.S. shale oil—and gas—production in survival rather than growth mode and with international energy companies shelving projects amid spending cuts. At least half of LNG projects planned to start in the next few years, al-Kaabi said, were not going to materialize.

“There isn’t a lot of money that will be helping oil and gas companies,” the official told the FT in an interview. “But the pure economics of these projects do not fly any more at low oil prices.”

What flies, however, is the economics of Qatar’s own LNG production expansion plans. Last week, the tiny Gulf nation announced what it called the largest LNG project in the world that will bring its annual production capacity from 77 million tons to 110 million tons by 2025. The expansion will cost Qatar close to $29 billion and will cement its place as the world’s top LNG exporter.

Related: The Oil Deal That Could Break Up Iraq

With such plans in place, it makes perfect sense for Qatar to promote the security of long-term supply, since this also means the security of revenues for it as a producer. But with oil prices on the rise and spot market LNG prices falling—March deliveries to north Asia are already below $10 per mmBtu—buyers may start having second thoughts.

In the period between 2016 and 2020, according to Reuters, Asian spot market prices for natural gas were on average 27.2 percent lower than Brent-indexed long-term contract prices. Even so, only a third of the gas that enters Asia is bought on the spot market.

There have been hopes that the lower prices on the spot market would help it mature and make the foundation of an international gas market that is not that closely linked to crude oil. But the lower average price comes with much greater price volatility: 51 percent higher than price volatility in Brent-pegged prices over 2016-2020, according to Reuters.

Volatility is great when the market is in oversupply but not that great when demand surges, as the recent events in Asia once again proved. But there is also another factor working to the advantage of long-term Brent-indexed prices. Storage space for liquefied natural gas is limited. This means that even if importers fill up all the available space in preparation for the winter, it may not be enough to secure the fuel they need for their thermal power plants.

With long-term contracts, on the other hand, you don’t need to worry about storage space because the seller guarantees you deliveries. Brent-indexed long-term contracts have been called archaic, but it looks like they are here to stay, according to analysts.

“If buyers don’t secure long-term deals . . . they will see spikes every winter and they will pay a hefty price,” Qatar’s al-Kaabi said.

“People thought this is a cheap commodity and you can have it whenever you want and nobody wanted long-term contracts,” he added. “[But] one or two shutdowns in Qatar or Australia and you’re dead.”

The way to avoiding death appears to be a single one: long-term contracts. However, the fact that the security of global supply hinges on just two huge producers may—and even should—become a cause for worry, especially in an environment where long-term contracts dominate the market.

By Irina Slav for Oilprice.com

Edited February 14, 2021 by Tom Nolan

[Coffeeguyzz + 454]

While the above article contains many accurate data points, what is NOT said is every bit as important, as relevant,  as the presented information is.

Qatar has been unsuccessful in its attempts to get Pakistan and India to lock in long duration oil-indexed contracts for LNG.

The latest reports claim that the  offers are  in the $7/$8 mmbtu range.

As Qatar  owns a huge fleet of massive LNG tankers (soon to greatly enlarge)  that can ship to India or Pakistan in  a couple days' time, the potential Qatari profits would be staggering.

 

Competing with  Qatar's plans is the huge projected supply arising from other sources, most notably the US.

 

A discerning reader may note the phrase above describing US shale as being in "survival"  mode.

That is not only complete and utter bullshit, the rock bottom cost of US natgas production is none other than an existential threat to the Al Thani regime.

 

Some context and what to expect ...

Qatar now has ~77 mtpa capacity, expanding to ~126 mtpa in a few years'  time.

Current US LNG capacity is ~56 mtpa with 2 projects that are under construction (Calcasieu Pass and Golden Pass) adding an additional ~28 mtpa.

Just 3 (of the many) proposed US LNG projects - Driftwood, Rio Grande LNG, and Port Arthur LNG (including Expansion) will add an additional ~80 mtpa as these are all 27 mtpa operations.

Not only are the US sales greatly advantaged by being priced off Henry Hub, threre are tentative feelers to actually target regional hub pricing (Waha, Agua Dulce, Dominion South) in efforts to lower export pricing even more.

 

This dramatic cold snap will reverberate for years to come in many ways.

The fact that US LNG can be viably  offered at sub $7/mmbtu  to global markets is a threat to many competing suppliers, industries, countries, etc.

This has been a HUGE factor in this decade long demonization propaganda targeting the US shale industry.

Anyone unable to recognize this does not merit consideration as a serious student in these affairs.

Edited February 14, 2021 by Coffeeguyzz

[ronwagn + 6,290]

7 hours ago, NickW said:

Hate to spoil the party but natural gas consumption in Europe has flatlined since 2006, infact has only recently recovered some lost ground on the back of some extensive coal decommissioning. 

The UK is using 25% less than it did a couple of decades ago. 

10590.pdf (europa.eu)

Possible reasons are more expensive renewable electricity, less availability, better insulation with government help, etc. Watch it go up as Russia offers unlimited natural gas western europeans are paying far more for their electricity already. https://www.statista.com/statistics/418078/electricity-prices-for-households-in-germany/

Edited February 14, 2021 by ronwagn
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[NickW + 2,714]

9 hours ago, Tom Nolan said:

Actually, wind power and solar power have their problems in winter, especially with freezing weather on turbines or no wind... or snow/ice on the solar grid, along with overcast days.  Electric heat is a tough go compared to gas heat.

I'm not disputing that intermittent renewables need back up which in many cases comes from gas and coal. Also Im inclined to agree where gas is available its most convenient for heating. However this notion that across countries wind and solar  provide nothing in anti cyclonic conditions in winter is hokum

As I write (approx midday mainland sub zero Europe) 

Germany is getting 35% of its electricity from wind and solar

UK 42%

Ireland 65%

Denmark 32%

Spain 40%

Portugal 35%

Netherlands 48%

Poland (King Coal) 19%

Austria 23%

Romania 13%

Northern Italy 21%

electricityMap | Live CO₂ emissions of electricity consumption

 

 

[NickW + 2,714]

9 hours ago, ronwagn said:

Possible reasons are more expensive renewable electricity, less availability, better insulation with government help, etc. Watch it go up as Russia offers unlimited natural gas western europeans are paying far more for their electricity already. https://www.statista.com/statistics/418078/electricity-prices-for-households-in-germany/

Wholesale prices in Germany have been fairly stable since 2010. Its taxes that are responsible for most of that increase. 

Some of that tax has been to support renewables with tax credits. others have been to support end use efficiency programs as well as public transport (electrification of rail, trams etc) 

The Germany economy has hardly suffered.  Its got the highest / 2nd highest trade balance in the World.