Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
The Everything Stock Market Rally Continues - 25th Feb 21
Vaccine inequality: A new beginning or another missed opportunity? - 25th Feb 21
What's Next Move For Silver, Gold? Follow US Treasuries and Commodities To Find Out - 25th Feb 21
Warren Buffett Buys a Copper Stock! - 25th Feb 21
Work From Home Inflationary US House Prices BOOM! - 25th Feb 21
Man Takes First Steps Towards Colonising Mars - Nasa Perseverance Rover in Jezero Crater - 25th Feb 21
Musk, Bezos And Cook Are Rushing To Lock In New Lithium Supply - 25th Feb 21
US Debt and Yield Curve (Spread between 2 year and 10 year US bonds) - 24th Feb 21
Should You Buy a Landrover Discovery Sport in 2021? - 24th Feb 21
US Housing Market 2021 and the Inflation Mega-trend - QE4EVER! - 24th Feb 21
M&A Most Commonly Used Software - 24th Feb 21
Is More Stock Market Correction Needed? - 24th Feb 21
VUZE XR Camera 180 3D VR Example Footage Video Image quality - 24th Feb 21
How to Protect Your Positions From A Stock Market Sell-Off Using Options - 24th Feb 21
Why Isn’t Retail Demand for Silver Pushing Up Prices? - 24th Feb 21
2 Stocks That Could Win Big In The Trillion Dollar Battery War - 24th Feb 21
US Economic Trends - GDP, Inflation and Unemployment Impact on House Prices 2021 - 23rd Feb 21
Why the Sky Is Not Falling in Precious Metals - 23rd Feb 21
7 Things Every Businessman Should Know - 23rd Feb 21
For Stocks, has the “Rational Bubble” Popped? - 23rd Feb 21
Will Biden Overheat the Economy and Gold? - 23rd Feb 21
Precious Metals Under Seige? - 23rd Feb 21
US House Prices Trend Forecast Review - 23rd Feb 21
Lithium Prices Soar As Tesla, Apple And Google Fight For Supply - 23rd Feb 21
Stock Markets Discounting Post Covid Economic Boom - 22nd Feb 21
Economics Is Why Vaccination Is So Hard - 22nd Feb 21
Pivotal Session In Stocks Bull Bear Battle - 22nd Feb 21
Gold’s Downtrend: Is This Just the Beginning? - 22nd Feb 21
The Most Exciting Commodities Play Of 2021? - 22nd Feb 21
How to Test NEW and Used GPU, and Benchmark to Make sure it is Working Properly - 22nd Feb 21
US House Prices Vaccinations Indicator - 21st Feb 21
S&P 500 Correction – No Need to Hold Onto Your Hat - 21st Feb 21
Gold Setting Up Major Bottom So Could We See A Breakout Rally Begin Soon? - 21st Feb 21
Owning Real Assets Amid Surreal Financial Markets - 21st Feb 21
Great Investment Ideas For 2021 - 21st Feb 21
US House Prices Momentum Analysis - 20th Feb 21
The Most Important Chart in Housing Right Now - 20th Feb 21
Gold Is the Ultimate Reserve Asset - 20th Feb 21
Is That the S&P 500 And Gold Correction Finally? - 20th Feb 21
Technical Analysis of EUR/USD - 20th Feb 21
The Stock Market Big Picture - 19th Feb 21
Could Silver "Do a Palladium"? - 19th Feb 21
Three More Reasons We Love To Trade Options! - 19th Feb 21
Here’s What’s Eating Away at Gold - 19th Feb 21
Stock Market March Melt-Up Madness - 19th Feb 21
Land Rover Discovery Sport Extreme Ice and Snow vs Windscreen Wipers Test - 19th Feb 21
Real Reason Why Black and Asian BAME are NOT Getting Vaccinated - NHS Covid-19 Vaccinations - 19th Feb 21
New BNPL Regulations Leave Zilch Leading the Way - 19th Feb 21
Work From Home Inflationary House Prices BOOM! - 18th Feb 21
Why This "Excellent" Stock Market Indicator Should Be on Your Radar Screen Now - 18th Feb 21
The Commodity Cycle - 18th Feb 21
Silver Backwardation and Other Evidence of a Silver Supply Squeeze - 18th Feb 21
Why I’m Avoiding These “Bottle Rocket” Stocks Like GameStop - 18th Feb 21
S&P 500 Correction Delayed Again While Silver Runs - 18th Feb 21
Silver Prices Are About to Explode as Stars are Lining up Like Never Before! - 18th Feb 21
Cannabis, Alternative Agra, Mushrooms, and Cryptos – Everything ALT is HOT - 18th Feb 21
Crypto Mining Craze, How We Mined 6 Bitcoins with a PS4 Gaming Console - 18th Feb 21
Stock Market Trend Forecasts Analysis Review - 17th Feb 21
Vaccine Nationalism Is a Multilateral, Neocolonial Failure - 17th Feb 21
First year of a Stocks bull market, or End of a Bubble? - 17th Feb 21
5 Reasons Why People Prefer to Trade Options Over Stocks - 17th Feb 21
The Gold & Gold Stock Corrections Are Normal - 17th Feb 21
WARNING Oculus Quest 2 Update v25 BROKE My VR Headset! - 17th Feb 21
UK Covid-19 Parks PACKED During Lockdown Despite "Stay at Home" Message - Endcliffe Park Sheffield - 17th Feb 21
How to Invest in ETFs in the UK - 17th Feb 21
Real Reason Why Black and Asian Ethnic minorities are NOT Getting Vaccinated - NHS Covid-19 Vaccinations - 16th Feb 21
THE INFLATION MEGA-TREND QE4EVER! - 16th Feb 21
Gold / Silver: What This "Large Non-Confirmation" May Mean - 16th Feb 21
Major Optimism for Platinum, Silver, and Copper - 16th Feb 21
S&P 500 Correction Looming, Just as in Gold – Or Not? - 16th Feb 21
Stock Market Last pull-back before intermediate top? - 16th Feb 21
GAMESTOP MANIA BUBBLE BURSTS! Investing Newbs Pump and Dump Roller coaster Ride - 16th Feb 21
Thinking About Starting to Trade This Year? Here Are Some Things to Keep in Mind - 16th Feb 21
US House Prices Real Estate Trend Forecast Review - 15th Feb 21
Will Tesla Charge Gold With Energy? - 15th Feb 21
Feeling the Growing Heat and Tensions in Stocks? - 15th Feb 21
Morgan Stanley Warns Gasoline Industry Is About to Become Totally Worthless - 15th Feb 21
Debts Lift Gold - Precious Metal Prices Will Rise on a Deluge of Red Ink - 15th Feb 21
Platinum Begins Big Breakout Rally - 15th Feb 21
How to Change Car Battery Without Losing Power, Memory, Radio Code Settings - 15th Feb 21
Five reasons why a financial advisor can make a big difference to your small business - 15th Feb 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Will The U.S. Ever Become a Net Exporter of Natural Gas?

Commodities / Natural Gas Mar 10, 2011 - 04:12 AM GMT

By: Dian_L_Chu

Commodities

Best Financial Markets Analysis ArticleDavid Alton Clark writes: US producers of natural gas, Liquefied Natural Gas (LNG), and oil like Chesapeake Energy (CHK) continue to drill the Eagle Ford Shale and other unconventional plays when natural gas prices are at depressed levels.


The US rig count has increased from 750 rigs at the beginning of 2010 to currently around 1,700 rigs. Althoug the domestic gas rig count (around 900) plunged to a one-year low the week ending March 4, gas rigs still outnumbered oil rigs, and analysts say the current level of activity is still seen yielding strong gas production.

The price of natural gas in the US is less than $4.00 per million British thermal units (mBtu) and many analysts are predicting it will stay at these levels for the foreseeable future.

The US is awash with natural gas from the shale gas plays of Texas, Arkansas, and Pennsylvania to name a few. The increase in production of natural gas is a major change in circumstances and has created a glut of natural gas on the market.

Not so long ago energy companies believed that the US would be importing large quantities of liquefied natural gas. Re-gasification plants were built to accommodate the LNG shipments. The United States currently imports and exports natural gas from Canada through pipelines. Liquefied natural gas is imported from Algeria, Trinidad & Tobago, Qatar, Malaysia, Australia, and the United Arab Emirates through LNG import terminals.

We may see some relief in the price of natural gas but its not likely under current conditions. Three-year leases originating in 2008 will be satisfied, which will allow producers to reduce the drilling commitments in certain shale plays. Limitations in frac equipment, liquids processing, and pipeline capacity may keep production levels in various plays at bay, but the sheer size of the recent finds and the increase in production levels should allow for the over supply situation to persist.

So what is the solution? Simple, increase exports of natural gas. If you say that to some people in the natural gas business you might get laughed at (I know) but lets take a closer look anyway.

Is increasing exports of LNG feasible?

The Department of Energy is responsible for regulating the import/export of natural gas. Section 3 of the Natural Gas Act of 1938 requires anyone who wants to import or export natural gas, including liquefied natural gas from or to a foreign country must first obtain an authorization from the Department of Energy. The Office of Natural Gas Regulatory Activities is responsible for these authorizations. The import/export authorizations are necessary for anyone who wants to market, trade, or use foreign natural gas.

The price of natural gas in the US is less than $4.00 per mBtu and the price of natural gas in Asia is around $9-$10 per mBtu. This is an opportunity for major profits. The problem is the natural gas market is for the most part local. It is not as easy to ship natural gas as it is to ship oil. Natural gas must be supercooled so it liquefies.

Cheniere Partners (CQP) received permission from the US Department of Energy to export LNG produced in North America from its Sabine Pass terminal. The company had already received permission to re-export imported LNG. Cheniere Partners announced a memorandum of understanding was signed with a Chinese company, ENN Energy Trading Co., to provide the company with 1.5 million metric tons annually of LNG produced at Sabine Pass.

Additionally, Cheniere Partners signed a memorandum of agreement with Morgan Stanley Capital Group Inc. The agreement would allow Morgan Stanley to import or export up to 1.7 million metric tons annually from Sabine Pass. Currently, there is one other North American LNG export facility.

The US has 10 LNG import terminals where the owners are petitioning the US government for export licenses to join the race to export LNG. We could see the ramp-up of export facilities in the near future. This bodes well for the natural gas industry and companies like Chesapeake Energy, Corp. This may be one of the reasons why Carl Icahn recently has taken a sizable stake in the company.

Conclusion

The fact that the US may be on its way to becoming a significant exporter of natural gas rather than a significant importer is amazing and seems inevitable. If shale gas development and extraction continues on its current pace this will become a lucrative new business. Then, the US could soon be competing to supply the world with natural gas. If the US exported just a small percentage of its natural gas, it would become one of the largest exporters of LNG in the world.

The US can compete with any country regarding natural gas costs and reserves. China and Great Britain have become net importers rather than net exporters of natural gas along with a number of other countries. The global demand for LNG is evident. The US supply is abundant and cost effective.

If US energy companies execute on current plans to increase export capabilities the price of natural gas should soar. This opportunity is too great and too obvious to be ignored. I'm betting energy companies won't let this one slip through their grasp.

Related Reading - Natural Gas: Better Days Ahead (in Two Years)

Author Disclosure: I am long CHK. These are my personal opinions on the subject. Detailed facts were gathered from the iea.org and eia.doe.gov websites

About the Author:  David Alton Clark is President and Managing Consultant at Valiant One with over 25 years of diversified experience in various areas including oil & gas and financial analysis. 

Dian L. Chu, M.B.A., C.P.M. and Chartered Economist, is a market analyst and financial writer regularly contributing to Seeking Alpha, Zero Hedge, and other major investment websites. Ms. Chu has been syndicated to Reuters, USA Today, NPR, and BusinessWeek. She blogs at http://econforecast.blogspot.com/.

© 2011 Copyright Dian L. Chu - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules