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2017-11-13 10:35:00

$84 BLN ISN'T ENOUGH FOR U.S.

$84 BLN ISN'T ENOUGH FOR U.S.

BLOOMBERG During President Donald Trump's visit to Asia this week, a Chinese energy company pledged to spend almost $84 billion helping West Virginia build an entire supply chain that would bring the benefits of America's shale gas boom to bear.

Much of it will probably never materialize. Here are the reasons why.

The Returns

China Energy Investment Corp. and West Virginia have grand -- albeit non-binding -- plans to build new gas-fired power plants, along with complexes to store the fuel and chemical plants to help turn it into plastics. Based on a statement from West Virginia's Department of Commerce, China Energy Investment would spend $83.7 billion over 20 years, or more than $4 billion annually.

China Energy Investment was formed from the combination of Shenhua Group Corp., the nation's largest coal miner, and China Guodian Corp., one of its top-five power generators, making the combined power company the world's biggest.

As Bloomberg Intelligence energy analyst Michael Kay points out, not even U.S. energy pipeline giant Kinder Morgan Inc. budgets that much for growth projects. There just isn't enough infrastructure with high enough returns to make it worthwhile.

"That's not going to happen," Kay says. "The problem isn't necessarily anything other than financial."

On the surface, a massive build-out of infrastructure in Appalachia -- a region that now supplies more than a third of America's natural gas -- makes sense.

Companies and politicians have been pushing for more pipelines and plants there since the shale boom unleashed a flood of gas from formations like the Marcellus a decade ago. West Virginia, in the heart of Coal Country, could especially use the help after a market collapse forced shut hundreds of U.S. mines. Another plus -- the region offers an alternative to the hurricane-prone Gulf Coast.

The Rival

One reason more projects haven't taken off: The Gulf Coast is an easier and often cheaper alternative with existing pipelines to power plants, chemical plants and storage tanks. Meanwhile Texas is home to its own giant shale plays, including the Permian Basin where 9 billion cubic feet of gas is pulled from oil wells every day.

"When you already have a market established in the Gulf Coast, it's easy to expand it -- you have a lot of storage, you have a lot of supply," said Prachi Mehta, a natural gas liquids analyst for Wood Mackenzie Ltd. In Appalachia, "you have a lot of constraints."

The Opposition

But by far the biggest constraint that energy companies face in the eastern U.S. is the regulatory process.

Some project developers have spent over a year waiting for federal approval as landowners and environmentalists there lodge complaints and stage protests. Even as politicians push for more investments, pipeline giants from Energy Transfer Partners LP to Williams Partners LP are being forced to delay projects because of regulatory setbacks and legal challenges.

Even Dave Spigelmyer, president of a coalition that's been pushing for the kinds of projects China Energy Investment has pledged to build, acknowledges the challenges.

"We need to make sure we have our A-game on, because folks are going to go where they have certainty on the return on investment," Spigelmyer said. "When you talk about investment in Pennsylvania, it takes over 100 days to get a drilling permit."

The Money Spent

Another reason West Virginia shouldn't get its hopes up, Kay said, is the fact that much of the major investments that Appalachia's energy market needs may have already been made.

Enough pipelines are coming online to increase the region's take-away capacity by about a third. And so much gas-fired power generation has been built in the area that Moody's Investors Service has warned of "a gas-driven apocalypse" in the power market.

Later this year, Dominion Energy Inc. will bring online a liquefied natural gas export terminal in Maryland, and an ethane export terminal at Marcus Hook, Pennsylvania, is already sending cargoes overseas.

"The truth is," Kay said, "we need to see these projects coming online to see if we do need more infrastructure."

To be sure, a record volume of gas keeps flowing out of the Marcellus and Utica shale formations of the eastern U.S. IHS Markit forecasts that, between 2026 and 2030, the region will produce enough natural-gas liquids to supply as many as four more chemical plants that "crack" the ethane in natural gas streams into a chemical widely used by manufacturers.

Storage Hub

In July, Senator Joe Manchin, a West Virginia Democrat, joined other policy makers to pitch a $10 billion Appalachian storage hub to Trump. The proposal outlined underground storage in Pennsylvania, Ohio and West Virginia, plus pipeline to link storage and petrochemical plants. A report from the American Chemistry Council found that, if approved, it could create more than 100,000 jobs and nearly $36 billion in capital investment.

As shipping gas southeast becomes more expensive, any opportunity to store gas locally may stoke desire for the cheaper fuel there, said Stephen Schork, president of Schork Group Inc., a gas industry consultant in Villanova, Pennsylvania.

"It would be more than competitive," Schork said. "The price of natural gas in the Marcellus shale is really advantageous."

And the MOU with China Energy Investment may be one step toward that. According to the West Virginia Department of Commerce, the company has already made "several trips" to the state. On Thursday, Governor Jim Justice described the agreement as proof that "the tides are turning in West Virginia."

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Earlier:

 CHINA'S INVESTMENT TO U.S.
2017, November, 9, 13:40:00

CHINA'S INVESTMENT TO U.S.

President Donald Trump can return to the United States claiming to have snagged over $250 billion in deals from his maiden trip to Beijing. Whether those deals live up to the lofty price tag is another question altogether. Some huge deals were announced. Among them is a 20-year $83.7 billion investment by China Energy Investment Corp in shale gas developments and chemical manufacturing projects in West Virginia, a major energy producing state that voted heavily for Trump in the 2016 election.

 

 U.S. - CHINA LNG
2017, November, 9, 13:35:00

U.S. - CHINA LNG

China’s top state oil major Sinopec, one of the country’s top banks and its sovereign wealth fund have agreed to help develop Alaska’s liquefied natural gas sector as part of U.S. President Donald Trump’s visit, the U.S. government said on Thursday. The agreement will involve investment of up to $43 billion, create up to 12,000 U.S. jobs during construction, reduce the trade deficit between the United States and Asia by $10 billion a year, and give China clean energy.

 

 U.S. DEFICIT $43.5 BLN
2017, November, 7, 12:20:00

U.S. DEFICIT $43.5 BLN

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $43.5 billion in September, up $0.7 billion from $42.8 billion in August, revised. September exports were $196.8 billion, $2.1 billion more than August exports. September imports were $240.3 billion, $2.8 billion more than August imports.

 

 SOUTH CHINA SEA LNG
2017, November, 3, 12:15:00

SOUTH CHINA SEA LNG

The South China Sea is a major route for liquefied natural gas (LNG) trade, and in 2016, almost 40% of global LNG trade, or about 4.7 trillion cubic feet (Tcf), passed through the South China Sea.

 

 SOUTHEAST ASIA NEED ENERGY
2017, November, 1, 13:30:00

SOUTHEAST ASIA NEED ENERGY

Access to modern energy is incomplete. With a total population of nearly 640 million, an estimated 65 million people remain without electricity and 250 million are reliant on solid biomass as a cooking fuel. Investment in upstream oil and gas has been hit by lower prices since 2014 and the region faces a dwindling position as a gas exporter, and a rising dependency on imported oil.

 

 CHINA'S GAS CONSUMPTION UP
2017, October, 27, 19:20:00

CHINA'S GAS CONSUMPTION UP

EIA - Global natural gas consumption is expected to grow from 340 billion cubic feet per day (Bcf/d) in 2015 to 485 Bcf/d by 2040, primarily in countries in Asia and in the Middle East. China accounts for more than a quarter of all global natural gas consumption growth between 2015 and 2040.

 

 U.S. ECONOMY & EMPLOYMENT 2016 - 2026
2017, October, 25, 12:20:00

U.S. ECONOMY & EMPLOYMENT 2016 - 2026

Changing demographics in the population will have far-reaching effects on the labor force, the economy, and employment over the 2016–26 decade. The overall labor force participation rate is projected to decline as older workers leave the labor force, constraining economic growth. The aging baby-boomer segment of the population will drive demand for healthcare services and related occupations.

 

 

 

Tags: USA, CHINA, GAS, INVESTMENT

Chronicle:

$84 BLN ISN'T ENOUGH FOR U.S.
November, 24, 09:15:00

SAUDI'S OIL FOR CHINA

BLOOMBERG - As Saudi Arabia led OPEC’s output cuts this year to shrink a global glut, it’s lost out on market share in the world’s biggest energy consumer. Russia in September retained the top Chinese supplier spot for the seventh straight month, while the kingdom was third.

$84 BLN ISN'T ENOUGH FOR U.S.
November, 24, 09:10:00

URALS QUALITY WILL DOWN

PLATTS - The quality of Russia's key Urals crude exports towards Europe will continue to fall next year as more of the country's low-sulfur oil flows are diverted eastward to China, Russian national oil pipeline operator Transneft warned.

$84 BLN ISN'T ENOUGH FOR U.S.
November, 24, 09:05:00

S.KOREA'S SOLAR UP

FT - OCI — the world’s third-largest polysilicon maker by capacity and South Korea’s biggest — this month reported a 3,373 per cent increase in operating profit to Won78.7bn ($72m) for the July-September quarter, its best performance in five years. Rival Hanwha Chemical saw third-quarter net profit jump 25 per cent to a record Won252bn. 

$84 BLN ISN'T ENOUGH FOR U.S.
November, 24, 09:00:00

U.S. RIGS UP 8 TO 923

U.S. Rig Count is up 330 rigs from last year's count of 593, with oil rigs up 273, gas rigs up 58, and miscellaneous rigs down 1 to 0. Canada Rig Count is up 41 rigs from last year's count of 174, with oil rigs up 13, gas rigs up 30, and miscellaneous rigs down 2 to 2.

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