Why Future is Bright for LNG | Russell T. Rudy Energy LLC
In a recent article in “Oil Voice”, author Patrik Farkas presents the reasons that he thinks the U. S. will soon became a dominant player in the global LNG (Liquefied Natural Gas) market. Since Farakas is Hungarian, he understandably views the world from a European perspective. This is important however, as Europe is emerging as the swing consumer of LNG, given Asian economic stagnation and China and Japan’s interest in coal.
Reserves-The United States has almost 400 Trillion cubic feet of proved natural gas reserves. The shale revolution has enabled operators to produce ever increasing volumes in response to consumer demand. In fact, the Marcellus shale alone produces more gas (18 billion cubic feet per day) than Qatar, China or Canada.
Farakas also feels that the royalty system in the U. S. gives operators a major advantage over their foreign counterparts. In Europe, for example, mineral rights belong to the state and landowners try to keep oil and gas operations as far away as possible. Conversely, in the U. S. mineral rights are conveyed with the land (at least initially), so land owners have an economic incentive to embrace oil and gas exploration and production. Farakas feels that this gives U. S. operators easier and more sustainable access to reserves.
Infrastructure-There are more pipelines than roads in Texas, and the U. S. has over a quarter of a million miles of pipelines with relatively few bottlenecks. These are operated by private companies which must manage efficiently or go out of business. This insures a steady supply of natural gas to LNG facilities.
Competitive Production Environment-Unlike many foreign operations, much of the U. S. gas production is onshore, and consequently, relatively low cost to access. There is also stiff competition between operators which insures that only those who can produce larger volumes, more cost effectively and efficiently, will survive. This insures that U. S. gas prices remain relatively low compared to foreign competitors.
Efficient Market-Domestic LNG facilities have physical access to Henry Hub which provides for a predictable and efficient pricing structure. LNG processors can always buy or sell feedstock natural gas at market value. Efficiency and predictability also insure stable prices.
Legal and Regulatory Environment-Compared to some other countries, the U. S. government and its regulatory system are relatively stable and predictable and cannot be capriciously altered.
Low Cost Liquefaction-The competitive nature of the U. S. economy insures that only those LNG projects with rock solid business plans, based on cost effective designs, will ever get funded. The facilities are all located in relatively convenient and accessible locations. This helps keep construction and operating costs for converting natural gas into a liquid state down, and ultimately insures a cost competitive product.
Expertise-Texas is the center of the global energy industry. LNG investors and operators have ready access to all the necessary expertise, and long standing relationships with the major technology providers such as Bechtel, CB&I, etc.
Flexibility-As newcomers in terms of supplying LNG, U. S. companies are willing to be flexible and offer customers solutions tailored to their needs. They are open to virtually every business opportunity and willing to take innovative approaches in order to secure markets.
Conclusion-Farakas summarizes his points by saying, “All in all, (the) U. S. can provide a low cost gas combined with low cost liquefaction. Operating in a highly competitive business environment with a stable and predictable regulatory background, there is everything set for the U. S. to become an A-list star of the global LNG play.”
To read the article in its entirety, please go to http://www.oilvoice.com/n/71-Reasons-Why-the-US-Will-Be-an-LNG-Hot-Spot-in-the-Next-Years/a2d37fceb6cc.aspx .
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.
