Japan's nuclear problems will drive up cost of NG in the UK
 

Expect higher energy bills for UK consumers

Guy Chazan - FT - May 6, 2012

Meanwhile in the US we have a glut of cheap gas --Ed.

The completion of Japan’s nuclear shutdown raises the threat of higher winter gas prices and bigger energy bills for UK consumers as cargoes of liquefied natural gas are diverted to Asia.

UK imports of LNG have plummeted 30 per cent this year as prices have climbed, showing the effect of last year’s Fukushima disaster and the subsequent closure of Japan’s nuclear reactors, the last of which was switched off on Saturday.
Japan has plugged the energy gap by switching to gas, leading to a surge in demand for LNG. Dozens of LNG cargoes that were originally destined for EU countries have been sent instead to Japan, enticed there by higher spot prices for gas. That has increased the risk of gas shortages in Europe.

Analysts said the drop reflected lower gas demand due to the recession and a relatively mild winter. But the effect of higher Asian prices was identified as the overriding factor.

Sabine Schels, a commodities strategist at Bank of America Merrill Lynch, predicted that Britain’s main LNG supplier Qatar would continue to reduce LNG exports to the UK in the coming months and it was “not inconceivable” that they would fall to zero by the end of the year.

Analysts said UK gas prices will have to increase to stem the diversion of supplies to Asia, and to entice more pipeline gas from Europe. Much European gas is indexed to the price of oil, and is more expensive than gas traded in the liberalised UK market.

Ms Schels said UK winter gas prices, at present 70.5p a therm, would have to increase to 90p a therm to attract the necessary supplies.

... [Read More]

Re: Japan's nuclear problems will drive up cost of NG in the UK
 

Hi All:

With an arbitrage opportunity like the one going on in the US right now, you can bet the powers that be will find a way to move our NG to Japan as there is simply too much profit incentive in it. Markets are meant to be balanced although I think it would be a bit more troublesome to conceal an LNG tanker being loaded in Seattle or Long Beach than moving “name your contraband here” on or off-shore.

Wayne

Re: Japan's nuclear problems will drive up cost of NG in the UK
 

I think they will fill up at the Gulf terminals and use the Panama Canal, it looks like we need terminals in the West coast.

Here is a partial list of LNG terminals:

Trunkline LNG, Lake Charles, Louisiana - (Trunkline LNG Company, LLC)[16][17]
Golden Pass LNG, rural Jefferson County, Texas - (Golden Pass LNG)[20][21]
Sabine Pass LNG, rural Cameron Parish, Louisiana - (Cheniere Energy, Inc.)[22][23]
Cameron LNG, rural Cameron Parish, Louisiana - (Sempra Energy)[24][25]
Freeport LNG, Freeport, Texas - (Freeport LNG Development, LP)[26][27]
Gulf LNG, Pascagoula, Mississippi - (El Paso)[30]
Gulf Gateway Deepwater Port, Gulf of Mexico - (Excelerate Energy LLC)[31]

http://en.wikipedia.org/wiki/List_of...nd_Puerto_Rico

Re: Japan's nuclear problems will drive up cost of NG in the UK
 

http://gcaptain.com/worlds-largest-exporter-lng/?44108

Will the US Become the World’s Largest Exporter of LNG?

By 2017 the U.S. could be the largest exporter of liquefied natural gas in the world, surpassing leading LNG exporters Qatar and Australia. There is one big “if,” however. America can produce more gas, export a surplus, improve the trade deficit, create jobs, generate taxable profits and reduce its dependence on foreign energy if the marketplace is allowed to work and politics doesn’t get in the way.

In May 2011 Cheniere Energy received an Energy Department license to export LNG from its Sabine Pass LNG import terminal in Louisiana. Cheniere subsequently reached long-term deals with the U.K.’s BG Group, Spain’s Gas Natural and India’s GAIL. Cheniere is targeting operation in 2016 and plans to export up to 730 billion cubic feet of LNG annually, roughly 3% of current U.S. gas production.

Sabine Pass originally was built as an import facility to alleviate projected U.S. gas shortages. Shale-gas technology changed that assumption radically. Now Sabine Pass is attractive because it already possesses much of the infrastructure for an export plant: LNG storage tanks, gas-handling facilities and docking terminals. Only a liquefaction plant is needed to convert natural gas into LNG. Overall, Cheniere can create its export terminal for half the investment required for a new one.

With world oil over $100 per barrel, equivalent to $17 per million BTUs of gas, versus domestic natural gas at $2.10 per million BTUs, the opportunity is obvious: Cheniere can deliver its gas to Asia or European customers well below current market prices.

Six developers with existing import terminals are following the Sabine Pass model. And Cheniere has another project in Corpus Christi. With the expansion of the Panama Canal, Gulf LNG projects can economically target the lucrative Asia market. By 2017, the U.S. could be exporting upwards of 13 billion cubic feet of LNG per day.

But exporters must overcome growing opposition to LNG exports by environmentalists and industrial users of natural gas. Exporters must also get multiple permits from environmentally conscious federal officials. And Rep. Ed Markey (D.-Mass.) has proposed legislation to bar federal approval of any LNG export terminals until 2025. Those who most fear global warming don’t want anyone anywhere to use more fossil fuel, even “cleaner” natural gas.

It is uphill for the anti-gas crowd. High oil prices are driving a transition to natural gas, even as fuel for trucks and cars. In the U.S., the T. Boone Pickens Plan would displace gasoline and diesel fuel for compressed natural gas in large trucks. Pickens estimates savings of two million barrels per day of oil imports if the nation’s fleet of 18-wheelers converts to CNG. The Pickens Plan might fail legislatively because it calls for subsidies to fuel the transition. But if CNG’s nearly $2-per-gallon price advantage over gasoline continues, the concept will evolve via natural market forces, as it should.

Re: Japan's nuclear problems will drive up cost of NG in the UK
 

Hi Herm:

Excellent report.

Wayne