LNG Growth Factors | Russell T. Rudy Energy LLC
With plentiful reserves and prolific wells that readily meet any increases in domestic demand, natural gas prices remain relatively weak. Liquefied Natural Gas (LNG) exports represent a new market for an abundant resource and hopefully will lead to stronger natural gas prices. Investors were quick to respond to the opportunity presented by LNG. Many projects are planned or under construction and one, Chenierie Energy Partners’ Sabine Pass facility, is already exporting.
“Rigzone” reports that Deloitte Consulting recently completed a study entitled, “Report on the Changing LNG Landscape”. The rather lengthy “Rigzone” article features an interview with one of the authors of the report, Andrew Slaughter. The article concludes with a list of factors which will influence the LNG industry’s growth over the next decade. The first three factors are short term negatives for LNG exports, but the last four represent upsides.
The short term negative factors influencing LNG’s prospects include:
Slower Economic Growth– This has negatively affected overall energy demand and LNG in particular. Asia, especially China, and Europe seem to be losing economic momentum, which will reduce the need for natural gas and LNG.
Increased Energy Efficiency-Even when economic growth returns to previous levels, demand for energy will be somewhat offset by more efficient technologies.
Excess LNG Capacity-With a number of new projects either under construction, or already on stream, the market will be flooded with LNG, at least in the short to intermediate term.
However, the Deloitte study also found four factors will positively impact LNG over the next decade:
Lower Shipping Costs-New LNG projects are closer to markets, making shipping costs lower and prices to consumers more competitive. For example, Australia is closer to some Asian markets than the Middle East, and the U. S. has an edge in European LNG markets.
New Geographic Markets-Emerging technologies are making floating liquefaction and regasification facilities feasible. These will lower costs and consequently the critical mass of volumes required to make LNG available to countries that have not previously used LNG.
New Users-LNG could become a viable fuel for transportation as well as power generation in remote locations.
Improved Market Liquidity-Lower costs through use of floating facilities and new technologies would enable buyers and seller to develop contracts that take advantage of new delivery options. For example, it might be possible to shift from long term, oil indexed, contracts to shorter term agreements based on spot natural gas prices.
To read the article in its entirety, please go to http://www.rigzone.com/news/oil_gas/a/144600/What_Will_Drive_LNG_Growth_for_the_Next_Decade/?pgNum=1 .
Russell T. Rudy Energy, LLC buys oil, gas and mineral interests nationwide. Please call (800-880-0940), or write (info@rudyenergy.com ) to let us know if you agree, disagree or would just like to comment on this, or any of our posts.
