This interesting article from the Trinidad Express Business magazine sheds some light on how that country (a major exporter) is seeing the market.
Last Wednesday, the price of natural gas on the Henry Hub Index plunged to a ten-year low to US$1.96 per thousand cubic feet (MMBtu). It later fluctuated, hovering around the US$2 mark, where it seems destined to stay – unless unusual weather conditions drive up demand for the commodity in the United States. While Trinidad and Tobago no longer sells most of our LNG on the US market, reality is that we are very much a gas-based economy. When, therefore, prices plummet in a country like the USA, we need to understand what that could mean for us.
Between 2002 and 2008, with the establishment and expansion of Atlantic LNG – its four trains have an annual capacity of 14.8 million tonnes – we exported between 20 and as high as 60 billion cubic feet of LNG per month to the USA. Cornering up to 70 per cent of the USA's LNG imports, our gas fetched prices between US$7 per MMBtu and US$14. By 2009-2010, prices had fallen to US$4, by which time our LNG exports to that market had also dropped to around ten bcf per month.
We do not have current data, but we have been told by the Ministry of Energy that very little of our gas is sold on the US market. Still, what is happening in the USA, the factors that caused the price of gas there to plummet below US$2, must interest us, since we rely heavily on global gas prices and the prices of downstream commodities (ammonia, methanol, urea) for much of our revenue.
With a virtual explosion of shale gas production in the USA (and Canada), that country now produces around 63 bcf of gas a day, while consumption, mainly for around 25 per cent of its power generation, is slightly below that volume. Following a very mild winter, hence lower usage, its gas storage has risen from an average of 1.5 trillion cubic feet (tcf) to 2.5 tcf. Further, because of the gas glut, drilling activity has declined by 30 per cent in the past few months.
In other words, besides becoming self-sufficient in gas, the USA now stands poised to graduate as a gas exporter. In fact, several huge energy corporations are actively examining their LNG options. That is hardly good news for us, since, with 14.8 tonnes of LNG that we must sell every year, the markets seem to be shrinking for us.
Although we do not have specific data, we know that Atlantic exports gas to Argentina (current average US$13), Europe (US$8) and Japan (up to US$16). Japan is still suffering from the energy aftershocks of the earthquake and tsunami that devastated that country last year, forcing it to shut down all but two of its nuclear power plants. It is paying premium prices for LNG and oil to run alternative plants, but that handicap is sure to change within the next few years. Europe's pricing is linked to oil prices, which are buoyant.
At this point, we do not face a crisis in selling our LNG. But we face stiff competition from big producers like Qatar (42 million tonnes a year), Indonesia, Russia, Algeria and emerging giants like Australia and some African countries. The authoritative Oil and Gas Journal projects some 14 million tonnes of LNG coming on stream in 2012, with a whopping 41 million tonnes to be added by 2014.
Last Wednesday, the price of natural gas on the Henry Hub Index plunged to a ten-year low to US$1.96 per thousand cubic feet (MMBtu). It later fluctuated, hovering around the US$2 mark, where it seems destined to stay – unless unusual weather conditions drive up demand for the commodity in the United States. While Trinidad and Tobago no longer sells most of our LNG on the US market, reality is that we are very much a gas-based economy. When, therefore, prices plummet in a country like the USA, we need to understand what that could mean for us.
Between 2002 and 2008, with the establishment and expansion of Atlantic LNG – its four trains have an annual capacity of 14.8 million tonnes – we exported between 20 and as high as 60 billion cubic feet of LNG per month to the USA. Cornering up to 70 per cent of the USA's LNG imports, our gas fetched prices between US$7 per MMBtu and US$14. By 2009-2010, prices had fallen to US$4, by which time our LNG exports to that market had also dropped to around ten bcf per month.
We do not have current data, but we have been told by the Ministry of Energy that very little of our gas is sold on the US market. Still, what is happening in the USA, the factors that caused the price of gas there to plummet below US$2, must interest us, since we rely heavily on global gas prices and the prices of downstream commodities (ammonia, methanol, urea) for much of our revenue.
With a virtual explosion of shale gas production in the USA (and Canada), that country now produces around 63 bcf of gas a day, while consumption, mainly for around 25 per cent of its power generation, is slightly below that volume. Following a very mild winter, hence lower usage, its gas storage has risen from an average of 1.5 trillion cubic feet (tcf) to 2.5 tcf. Further, because of the gas glut, drilling activity has declined by 30 per cent in the past few months.
In other words, besides becoming self-sufficient in gas, the USA now stands poised to graduate as a gas exporter. In fact, several huge energy corporations are actively examining their LNG options. That is hardly good news for us, since, with 14.8 tonnes of LNG that we must sell every year, the markets seem to be shrinking for us.
Although we do not have specific data, we know that Atlantic exports gas to Argentina (current average US$13), Europe (US$8) and Japan (up to US$16). Japan is still suffering from the energy aftershocks of the earthquake and tsunami that devastated that country last year, forcing it to shut down all but two of its nuclear power plants. It is paying premium prices for LNG and oil to run alternative plants, but that handicap is sure to change within the next few years. Europe's pricing is linked to oil prices, which are buoyant.
At this point, we do not face a crisis in selling our LNG. But we face stiff competition from big producers like Qatar (42 million tonnes a year), Indonesia, Russia, Algeria and emerging giants like Australia and some African countries. The authoritative Oil and Gas Journal projects some 14 million tonnes of LNG coming on stream in 2012, with a whopping 41 million tonnes to be added by 2014.
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