Oil Plunge Boosts U.S. Natural Gas Imports to 7-Year High
By Naureen S. Malik Jan 9, 2015 3:16 PM ET 5 Comments Email Print
The plunge in global crude oil prices has helped boost U.S. natural gas imports to the most in at least seven years, even as the country prepares to start exporting cargoes.
Deliveries to onshore pipelines from liquefied natural gas terminals in Massachusetts and Maryland on Jan. 8 were the most in data going back to December 2007, according to Ventyx data compiled by Bloomberg. Volumes in January are more than six times higher than a year ago, when the polar vortex spurred record consumption.
Crude oil, used as a benchmark for LNG around the world, fell by almost 50 percent last year, making imports competitive in the eastern U.S., where a lack of adequate pipeline capacity keeps local prices high. LNG was driven from U.S. shores in the middle of the past decade as surging output from shale formations sent natural gas prices tumbling.
“This has caught a lot of market participants, including us, by surprise,” Rick Margolin, senior analyst at Genscape Inc. in Boulder, Colorado, said Jan. 7 by telephone. “If you are an LNG supplier looking at the futures market for this winter, the best price you were seeing was in the U.S. relative to Japan and Europe. You need a rebound in oil prices to revert back to the trend.”
U.S. LNG imports plunged 80 percent from 2007 to 2013, according to Poten & Partners, a global energy broker. Cheniere Energy Inc., the developer of the first U.S. LNG export terminal in decades, expects to begin overseas shipments later this year.
Northeast Asia spot LNG is going for about $10 per million British thermal units while the price in Europe “has fallen quickly” to about $6.80, Trevor Sikorski, head of natural gas, coal and carbon analysis at Energy Aspects Ltd. In London, said in an e-mail yesterday. It costs about 40 cents per million Btu to ship LNG from Trinidad to New England, 80 cents to Europe and $2.80 to Japan, he said.
Spot gas at Algonquin City Gates, which includes delivery to Boston, reached $15 per million Btu Jan. 6 on the Intercontinental Exchange. Prices settled at $9.81 today.
Northeast gas is trading at a premium to the rest of the U.S. as limited pipeline capacity keep it from taking advantage of record shale-gas production from the Marcellus fields in Pennsylvania and West Virginia.
“New England sees higher prices, especially during peak demand times, not because of lack of supply nearby but the lack of ability to get that supply to market,” Phil West, a spokesman for Spectra Energy Corp., which owns the Algonquin pipeline system, said by phone from Houston yesterday. “We have planned expansions to help relieve that strain.”
GDF Suez Gas NA was unloading an LNG tanker at its Everett terminal in Massachusetts yesterday, the third since late October, “to help meet the cold-weather demand,” Julie Vitek, a spokeswoman for the company in Houston, said in an e-mail. To supplement scheduled ship deliveries, which each hold about 3 billion cubic feet of gas, GDF contracted another 1 bcf of LNG to be delivered by truck this winter from Montreal, Vitek said.
Dominion Resources Inc.’s Cove Point terminal in Maryland delivered 3.4 million dekatherms Jan. 6 to Jan. 9, according to Ventyx, which is owned by the Swiss power transmission equipment maker ABB Ltd. Last January, volumes totaled 1.1 million. One billion cubic feet, or 1 million dekatherms, is enough to heat about 13,660 New England homes for a year, according to the American Gas Association.
Excelerate Energy LP delivered gas from its Northeast Gateway port into New England for the first time since March 2010, Denise Madera, a spokeswoman for the company in The Woodlands, Texas, said in a Jan. 6 e-mail.
Deliveries started Jan. 6 and have totaled 565,976 dekatherms over four days, according to Ventyx. The Excelerate port, about 13 miles offshore in Massachusetts Bay, delivers gas to the Algonquin line.
“New England futures were trading in the $19 to $22 range for this winter,” Margolin said. “In the global market, that appears to be the best LNG supplies can get.”
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Just some market climate info there.