Whitepaper released: US LNG Exports – Cumulative Market Impact Assessment

2013-12-19

Company strategies, Exploration and Production, Global markets, LNG, Politics and regulation, Shale resources, Study highlights

Energy Perspectives is pleased to release a whitepaper on coming US LNG exports. The US gas price fall in 2011 and international demand growth has created global interest in accessing both US and Canadian gas.

The US has now (conditionally) authorized five projects, and as of 16 December Canada has authorized seven projects, totaling about 135 BCM/year (75 mtpa of LNG). First LNG is expected from Sabine Pass, Louisiana in Q2 2015. Both the US Department of Energy and Canada’s National Energy Board will review remaining applications and determine if they are in the national interest.

The 30-page whitepaper describes important recent research into shale basin performance, supply-side fundamentals and market pricing dynamics. Patterns emerge that clarify shale gas and oil interdependences and uncertainties about future developments. Four main points are raised:

The long-term balancing price for US natural gas is found to be 8 $/MMBtu at 100 $/Bbl Brent oil price. Strong evidence indicate prices will cycle around this value, with cyclicality accentuated by shale resources.
A robust long-term natural gas export level from the US is probably less than 100 BCM/year, including pipeline exports to Mexico.
Recent upstream contraction in unconventional gas exploration suggest that US natural gas supply is increasingly inelastic, with risk for larger price movements.
The first entrants in US LNG exports have several advantages, but buyers may find that the arbitrage window of the current cycle is closing and that further plans should be based on long-term fundamentals.