LNG Exports to the Rescue in Northeast? Not So Fast

The answer to low prices for natural gas in the Marcellus/Utica is more demand. More demand comes either from new sources using natgas within the region–like building power plants–or sending the gas out of the region. Sending it out involves pipelines, mostly. One of the great hopes for drillers and midstream companies has been the prospect of exporting our natural gas to other countries via LNG (liquefied natural gas). Dominion is right now building the Cove Point liquefaction facility in Maryland with the prospect of bringing it online in 2017. All of the LNG Dominion can produce at Cove Point will go to two countries: Japan and India (see Dominion’s Cove Point LNG Facility Achieves Important Milestones). More northeast gas will head to Japan via the Gulf Coast (see Marcellus/Utica Gas Going to Japan: TGP Signs 20-Year Export Deal). But here’s the thing: Japan is bringing their nuclear power back online, and they’re bringing a lot of solar sources online–meaning they don’t need as much natgas as they used to. In December we told you that LNG for delivery to northeast Asia (Japan and Korea) would average $7.397 per million British thermal units (MMBtu) for January delivery (see Platts Says LNG Heading to Japan & Korea Fetching $7.40/Mcf). Looking to March, LNG for delivery to Asia is down to $5.339/MMBtu–the lowest monthly price since September 2009. And there’s no indication it will go higher any time soon. Our point? LNG exports are not a panacea. Yes, Europe is somewhat interested (and that’s good). But world LNG supplies far outstrip demand at this time…

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