Natural Gas Exports Are Ramping Up - What Does It Mean For The Commodity?

Seeking Alpha ^ | Dec. 21, 2015 | : Force Majeure

[thackney]

Summary

Flows On Cheniere Energy's Creole Trail natural gas pipeline have rapidly increased over the past two weeks, suggesting that the company is in the final stages of preparing its first.

Despite natural gas exports being ballyhooed as the savior of the natural gas industry, their impact on supply/demand fundamentals in 2016 will be limited.

Even as exports become a significant component of demand long-term, the evolving fundamentals of the international market that the U.S. is about to become a part of may limit viability.

A trading strategy involving natural gas that takes into account both domestic and international natural gas fundamentals is discussed.

Back in the mid-2000s, the U.S. natural gas industry was in dire straits. Production was sagging and there were concerns that the U.S. would exhaust its reserves entirely within 10-20 years. As a result, many companies, including Cheniere Energy (NYSEMKT:LNG), began building multi-billion dollar liquefied natural gas import terminals along the Gulf Coast in anticipation of the U.S. meeting its natural gas demand through foreign imports. In a case of unfortunate timing, the growth of natural gas import terminals coincided with the arrival of the U.S. shale boom, driven by fracking and other advances in drilling technology. Within 2 years, the U.S. went from having a deficit of natural gas to having a surplus. While some companies planning LNG import terminals threw in the towel, Cheniere persevered and acquired permits to convert its import terminals to LNG export terminals at its Sabine Pass, LA, and Corpus Christi, TX, properties more than 2 years ahead of its peers....

[thackney]

Figure 1: Map of the Creole Trail Pipeline showing termination at Cheniere Energy's Sabine Pass LNG terminal.

Figure 2: Natural gas volumes on Creole Trail Pipeline over the last month showing a 500% increase in flows over the past two weeks suggesting that Sabine Pass is in the final stages of preparing its first LNG export cargo.

Figure 3: Projected LNG capacity over the next four years showing that exports will be limited to Cheniere Energy's Sabine Pass facility for the next three years and 2016 exports will be <2 BCF/day.

Figure 4: Projected worldwide natural gas export capacity showing rapid increase in worldwide LNG supply at the same time that U.S. exports will also be increasing.

Figure 5: Domestic natural gas prices (Henry Hub) versus international natural gas prices showing a steep decline in the latter that has led to a narrowing of the spread between the prices, although a decline in U.S. prices to decade-lows has limited that contraction.

[CincyRichieRich]

A couple things...it is good to read SeekingAlpha...it is a great website...albeit, anyone can author an article there, like me, for example...the title says rising exports...I don’t see that anywhere and though I own some LNG stocks which I’d like to see rise, I don’t see anyone growing globally increasing demand anytime soon...if I am wrong, please show me. Again, SA is a great website, I read it a lot.

[thackney]

the title says rising exports...I don’t see that anywhere

- - - - - - -

http://www.eia.gov/dnav/ng/hist/n9130us2m.htm

Not to mention the article discusses the LNG exports starting in 2016 and illustrated well in the graph.

[catfish1957]

Hey Thackney long time no see.

Interesting write up on the NG developments. See shorts are killing this market right now too. I for one am not too optimistic on the LT prices. I think we in our industry need to hunker down for another 1980 type of situation. Was more optimistic a few months ago, but looks like capacity is king right now.

[bert]

By extrapolating the sales to the impact on the world market, the author may be missing the point.

The exported gas is producing a marginal increase for the companies sales, but it could produce a significant increase in company profits.

[thackney]

The growing petrochem market is going to help some. They are beginning to come online with new plants.

Dow Chemical launches operations at new Freeport propylene facility
http://www.freerepublic.com/focus/f-news/3375076/posts

[catfish1957]

the title says rising exports...I don’t see that anywhere

Last I looked the Sabine Pass facility was bringing in Qatar NG . Yuuuup.

[thackney]

At Sabine, one load before last winter, one load at the end. Nothing since.

http://www.eia.gov/dnav/ng/ng_move_poe1_dcu_YSPL-NTD_m.htm

We haven’t imported any Nat Gas (LNG) from Qatar since early 2013.

http://www.eia.gov/dnav/ng/hist/n9103qr2m.htm

[catfish1957]

The growing petrochem market is going to help some. They are beginning to come online with new plan.

That is why I think the integrated companies will not only survive, but come back stronger after some nice M& A . Upstream is looking dicey right now.

Funny how just as little as 5-10 years ago, a lot of the integrated companies where toying with the idea of spinning off their refining and chemical sectors. Those who didn't are glad right now.

[catfish1957]

We haven’t imported any Nat Gas (LNG) from Qatar since early 2013.

That's what happens when you retire. :)

[thackney]

Crystal Balls always seem to be cloudy...

[CincyRichieRich]

You mean the graph provided by the .gov source? Oh yes that graph. Global warming and 0bamacare also have provided fine and dansy graphs.

[thackney]

So which of those plants under construction do you not believe will be exporting?

[Wonder Warthog]

LOL. It is hilarious that the “Creole Trail Pipeline” is almost as far away from “Creole” territory as it is possible to get, and still be in South Louisiana.

[thackney]

I think the name came from:

Creole Nature Trail
https://res-3.cloudinary.com/simpleview/image/upload/v1/clients/lakecharles/CNT-Map_e67d18c0-de08-066c-5c86d41fa0280a9f.pdf

[DUMBGRUNT]

The Creole Trail pipeline is a 94-mile 42-inch natural gas pipeline (at 1440 PSI Max) in southwestern Louisiana that receives natural gas from six pipelines - TETCO, Trunkline, Transco, Tennessee Gas, Florida Gas, and the Natural Gas Pipeline of America - and terminates at Cheniere's Sabine Pass LNG plant

A typical home in my service district would have a 1" meter and 3/4 pipe at 7 inches of water column( aprox 1/2 psi).
Thats a lot of gas and a lot of jobs!

[Wonder Warthog]

I wonder who picks names for this stuff. REAL “Creole Country” runs along the Mississippi River from New Orleans as far north as St. Francisville, with some extensions west of the Mississippi...”maybe” as far west as Morgan City, but no further. West of MC gets into Cajun (but not Creole) country.

Side note...one of my college room-mates (and lifelong friend) was from Hackberry, La. His family owned the land that contained the salt dome(s), the cavities in which became a major part of the “Strategic Petroleum Reserve”. They sold “nothing” for a lot of bucks!