Sunday, June 10, 2012

Cheap U.S. Exports: What A Reversal!

While the first significant cargoes from LNG exporters along the Gulf Coast are still several years away, the prospect of Henry Hub-priced gas is already causing ripples throughout the world.  While cheap U.S. gas might not completely upset the LNG market, it will offer a lower priced alternative to countries paying prices referenced to oil or higher priced LNG sources and may shift some bargaining power from the sellers towards the buyers.

This is the second time that shale gas has caused a disruption in the LNG market.  Remember several years ago when the natural gas supply in the U.S. suddenly surged and the LNG cargoes targeted for our shores had to find new homes?  While the first pass only caused a scare, the wake from the next pass likely will cause more disruption, one that LNG buyers will certainly welcome.

It's hard to fathom the ironic concept of cheap exports from the U.S.

2 comments:

JJ Butler said...

Robert,

With the size of the lng market relative to the US market, I'm pretty sure the North American producers could destroy LNG pricing in short order if given the chance.

~JJ

Robert Hutchinson said...

I'm not well versed in the worldwide LNG market, but given the limited venues for export and the long-term contracts, how will the "Henry Hub magic" impact the total market? I'm sure it will make a big difference to pricing in countries receiving shipments (like India). Also, when looking at the entire ex/im market (including pipelines), how much can it influence pricing, especially for countries out of the direct reach of US LNG?

One of the interesting things to watch will be pricing for LNG export facilities in other countries that are in the process of being developed. I'll bet they are the most anxious about the prospects for HH priced gas.