USA LNG FOR EUROPE
Gastech News: What are the economic and strategic benefits of US LNG exports?
Fred Hutchison: "The United States is now the world's leading producer of natural gas. With LNG exports scheduled to begin within the next six months, America's oil and gas renaissance will soon provide both substantial domestic and foreign economic benefits. If US LNG can be imported into regions where there is only a single, monopolistic producer, then strategic benefits could accrue as well."
Gastech News: Could you give us an update on US LNG export projects?
Fred Hutchsion: "Five US export projects have received all required federal licenses, taken final investment decisions, and started construction. Including Train Five at Cheniere's Sabine Pass project, this represents 71 million tons per annum (mtpa) of export capacity which would consume 9 billion cubic feet per day of gas.
A second tranche of projects is under formal review by either the Federal Energy Regulatory Commission (FERC) or the US Maritime Administration (MARAD). Including Sabine Pass Train Six and the Bear Head LNG project in Nova Scotia (which will use US gas), this next group of projects that will reach the FID decision point in 2016 or 2017 could produce an additional 87 mtpa and require 12 bcf/day.
The third wave of US export projects has raised sufficient funding to reach FID and are in the FERC pre-filing stage. These projects represent another 81 mtpa of capacity and would need 11 bcf/day to operate at that level.
By my count there are some 16 major (1 mtpa or greater) US and Eastern Canadian LNG export projects under active consideration in tranches two and three described above. Clearly, the question is how many of these will find the customers and financing required to begin construction. My own best guess is a lot more than people have been thinking."
Gastech News: How close are we to seeing US LNG displacing Russian gas dominance in Europe?
Fred Hutchison: "People who make market forecasts are often — if not almost always — wrong. So, I am loathe to make specific predictions. However, what other prognosticators (such as the International Energy Agency) are saying is that domestic gas production in Europe is likely to decline and that LNG imports will be needed to make up the shortfall. Pipeline gas from Russia will continue to be of great importance for many years to come, but there is no question that many Gazprom consumers are actively seeking alternatives, especially in nations where monopolistic pricing predominates."
Gastech News: What is your perspective on European political will for US LNG imports?
Fred Hutchison: "The European Union as well as member states — especially those in Central and Eastern Europe — have been striving to increase fuel diversity and energy security for many years. However, with recent events in the region, this quest has taken on increased urgency. Would the EU and its members welcome US LNG with open arms? Absolutely. How much more (if any) would they be willing to pay for enhanced energy security remains, of course, the big unanswered question."
Gastech News: How do you see the future of unconventional energy production in North America given recent pricing?
Fred Hutchsion: "Again, I am reluctant to make specific market predictions. There are just too many factors at play and too many players to consider. I would, however, observe that present conditions have already led to increased efficiencies. I was recently on a tour with representatives from a dozen European embassies to the Marcellus field in Pennsylvania. We heard the operators there describe how wells are now being drilled and completed at a pace that would have been considered implausible even a year ago."
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REUTERS - Brent crude futures LCOc1 were down 72 cents at $61.49 per barrel at 1020 GMT, having fallen by 1.5 percent on Tuesday, its largest one-day drop in a month. U.S. West Texas Intermediate (WTI) crude CLc1 was at $55.12 per barrel, down 58 cents.
BLOOMBERG - Prices dropped during the session as the International Energy Agency said the recent recovery in oil prices, coupled with milder-than-normal winter weather, is slowing demand growth. The worsening outlook for consumption dampened some of the enthusiasm that OPEC and its allies will extend supply curbs.
Global energy needs rise more slowly than in the past but still expand by 30% between today and 2040. This is the equivalent of adding another China and India to today’s global demand.
Product exports have grown significantly over the past several years and are expected to continue to grow as Russian refineries add capacity to produce more high-quality products.