Ask the Experts: Natural Gas Pricing, LNG Production and International Fundamentals
In our monthly webinar series, the Energy Market Intel Webinar, we offered our customers the opportunity to submit questions to learn more about economic factors and marketplace trends that may affect their future energy pricing and purchasing decisions.
At what price level does a producer pull the plug and stop drilling? And when?
Break even prices would occur around $2.25/MMBtu. If prices fall below $2/MMBtu, wellhead shut-in would be more likely. As storage injections decline and production curtails, we should see the NYMEX market begin to stabilize.
How much power demand is related to LNG growth or does the LNG production produce its own power?
While the design and specification details regarding each LNG terminal facility are case-specific, the majority of the LNG trains use pipeline gas feedstock (their portion of the 14.5 Bcf/d) for onsite power generation. These are generally large projects that require several hundred megawatts (500-800MW) of capacity, so a general assumption is that ~15% of project-nominated gas would be used for onsite power generation. Some terminals may have power delivered from dedicated plants. For example, Freeport LNG is located in the Houston Ship Channel and receives offsite power to comply with clear air regulations.
Why is OPEC not entering the race for LNG share of the market?
In some cases (such as Algeria), OPEC may already be involved. Many OPEC countries use gas associated with oil production for domestic heating and industrial needs.
Algeria is OPEC’s 2nd largest gas producer, and a lot of its production is exported to southern Europe as LNG and there are plans to expand. Iran is the largest producer, but U.S. and UN sanctions have limited development of LNG export capabilities. Saudi Arabia and UAE are two other candidates for LNG exports, but Qatar is the primary LNG exporter.
What will the anticipated 50% increase in LNG exports after 2024/2025 do to NG prices in North America, and also thoughts on EU if you have any?
Logistically, since most of the proposed LNG trains are located in the TX/LA part of the Gulf, supply will be sourced from TX/OK/LA. Given the size of supply needs, +6%, the question is whether it’s backfilled when the Northeast Appalachian basin is curtailed on growth due to the hurdles of building new pipelines. Besides the demand for U.S. LNG, there will demand for TX/NM gas from the Permian and Eagle Ford basins if Mexico builds new projects on its Pacific coast.
For thoughts on the EU, see link to EIA story below: Basically, the EU has to replace 12 Bcf/d of Russian pipeline imports (they are still buying Russian LNG). It appears that Europe is going to be dependent on U.S. LNG for some period of time to come.
https://www.eia.gov/todayinenergy/detail.php?id=56400
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