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LNG Market 180: Spot Prices are Out, Long-Term Contracts are In

If you monitor the oil and gas industry long enough, you’ll come to discover cycles, trends, and the old saying, “Everything old is new again.” That’s what is happening with the LNG market. For years (several decades), LNG was sold on long-term contracts of 10 to 20 years. Buyers would agree to purchase X amount of LNG for Y amount of cash for long periods of time. Long-term contracts offer price stability and guaranteed availability. But then came shale…
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EIA Cuts 2H22 LNG Export Prediction by 14%, HH Price by 44%

Each month the U.S. Energy Information Administration (EIA) issues a monthly Short-Term Energy Outlook (STEO). In May, the STEO made the startling prediction that the average Henry Hub price for natural gas (the national benchmark) would average $8.59 for the entire second half of this year (see Latest Monthly STEO Predicts HH Spot Price to Avg $8.59 in 2H22). In June, EIA reiterated its prediction of $8.59 for the second half of the year (see EIA’s STEO Predicts Henry Hub Gas Price to Avg $8.69 in 3Q22). The most recent STEO, for July, predicts HH will average just $5.97 for the second half of this year, down some 44% from the May/June prediction. What happened?
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Selfish Big Chemical Join Leftists to Lobby Against LNG Exports

Although we understand self-interest and wanting to protect one’s profit margin, we continue to be distressed that some of the biggest chemical companies in the world (meaning in the U.S.) are actively trying to block LNG exports. Why? They want the natural gas they buy (in very large quantities) to be as cheap as possible. In 2017, Big Chemical–companies like Dow Corning, BASF, Eastman Chemical, and others–via their trade association Industrial Energy Consumers of America (IECA), launched an effort to try and persuade Energy Secretary Rick Perry and the Trump Administration to create barriers to exports of natural gas (see Big Chemical Selfishly Wants to Block NatGas Exports). That went nowhere, so the IECA began hammering the Biden administration last year (see Big Chemical Lobbies DOE to Order LNG Exports Scaled Back). That effort aggressively continues. The IECA is opposing Energy Transfer’s request to the Dept. of Energy (DOE) to extend export authorization for the Lake Charles LNG plant until 2050.
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NYMEX NatGas Price Drops 20% in Single Day re Freeport LNG, Storage

Yesterday the NYMEX natural gas price lost 20% of its value in a single day for the second time in two weeks. When news broke on June 14 that the Freeport LNG plant would not likely return to full service before the end of this year, the NYMEX front-month contract lost $1.42 (19.75%) to close at $7.19/MMBtu (see NYMEX NatGas Down 20% in Single Day on Freeport LNG Bad News). Yesterday the NYMEX front-month contract lost $1.07 (19.8%) to settle at $5.42/MMBtu. What prompted the dramatic loss yesterday was the reaction of traders to two events: (1) a Pipeline and Hazardous Materials Safety Administration (PHMSA) report saying the agency found unsafe conditions at the Freeport LNG export terminal in Texas and will not allow the plant to restart until the completion of an outside analysis; and (2) a larger than expected volume of natural gas was injected into storage, meaning more supplies are now available with the same (or less) demand.
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Chester, PA LNG Project Would Create Jobs & Real Economic Justice

Garland Thompson (credit: WHYY)

Earlier this month, MDN brought you the fantastic news that seemingly out of nowhere a plan to build an LNG export facility on the banks of the Delaware River south of Philadelphia is being actively, seriously discussed (see U.S. East Coast’s 3rd LNG Export Plant Proposed Near Philadelphia). Penn LNG, headed by a native of Philadelphia, has “quietly lined up support to build a $6.4 billion liquefied natural gas export terminal near Philly.” The company is considering several potential locations in the Philly area (see Proposed Philly LNG Export Plant Looking for Real Estate to Build). Predictably, the left is spreading lies and smears about the project, invoking so-called “environmental justice” concerns (claiming oil and gas always build projects in powerless neighborhoods of color) and other specious arguments.
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One of Five Canadian East Coast LNG Export Projects Leads the Pack

In March MDN brought you information from the Toronto Financial Post that said the Ukrainian crisis has put two East Coast Canada LNG export facilities “back on the map” (see Ukraine Crisis Injects New Life into East Coast Canada LNG Exports). There are actually five proposed LNG export facilities announced for the Canadian East Coast. In April we brought you details for all five (see Of Canada’s 5 East Coast LNG Export Projects, Will Any Get Built?). Earlier this week, German Chancellor Olaf Scholz spoke to Canadian Prime Minister Justin Trudeau about Germany buying LNG from Canada. One of the five East Coast projects, in particular, seemed to be the focus of their discussion.
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G-7 Nations Issue Statement Supporting Investments in LNG, NatGas

The Group of Seven (G-7) is an inter-governmental political forum consisting of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. G-7 countries are the world’s largest democratic (freely elected) economies, representing roughly half of the world’s wealth (but only 10% of the world’s population). President Biden and the leaders of the other G-7 countries had a confab yesterday in Germany and issued a joint communique (copy below) that says, in part, it’s OK to invest in natural gas and LNG infrastructure.
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Biden Promises More, and Cleaner, U.S. LNG for Europe

President Biden began a five-day “swing” through Europe on Sunday. Yesterday he met with European Commission President Ursula von der Leyen to discuss energy security in light of Putin’s invasion of Ukraine. European countries are in various stages of reducing the import of Russian natural gas and oil, which is leading to upheaval in the world market. Biden and von der Leyen issued a joint statement following their meeting (pre-written, of course). What does the statement say about energy and LNG in particular?
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NYMEX NatGas Price Down 10% After High Storage Number Released

Strap in–the roller coaster ride continues. Yesterday the NYMEX Henry Hub front-month (July) futures contract for natural gas plunged 10%, by $0.62, following news that more gas was stored (“injected”) than previously anticipated by analysts and traders. Storage inventories rose to 2.169 Tcf (trillion cubic feet) for the week ended June 17 following a 74 Bcf (billion cubic feet) injection. Most people thought the injection would be no more than 60 Bcf. No doubt the ongoing outage at Freeport LNG pushing an extra 2 Bcf/d on the domestic market had something to do with the extra storage build. Models predict cooler weather is coming in the next few weeks. Throw it all into the pot–higher storage, Freeport offline, and cooler weather–and traders got spooked.
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Proposed Philly LNG Export Plant Looking for Real Estate to Build

Map showing section of the Delaware River where Penn LNG wants to locate (click for larger version)

Early last week MDN brought you the fantastic news that seemingly out of nowhere, a plan to build an LNG export facility on the banks of the Delaware River south of Philadelphia is being actively, seriously discussed (see U.S. East Coast’s 3rd LNG Export Plant Proposed Near Philadelphia). Penn LNG, headed by a native of Philadelphia, has “quietly lined up support to build a $6.4 billion liquefied natural gas export terminal near Philly.” However, the favored site for the project–a functioning warehouse (once upon a time a Ford assembly plant) in Delaware County–is not for sale or lease according to the owner. No worries. Penn LNG is “mulling several spots between South Philadelphia and Marcus Hook” according to a new article we spotted.
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Did Russian Cyberattack Cause Freeport LNG Explosion & Fire?

Two weeks ago the second-largest LNG export terminal in the U.S., Freeport LNG located near Galveston, Texas, experienced an explosion and fire (see Explosion Rocks Freeport LNG Export Plant – Offline for 3 Weeks). Initially, Freeport officials said the plant and its 2 Bcf/d of LNG production would be offline for “at least” three weeks. Last week we got the bad news that Freeport will be offline until September, at which time it may partially return to service. Full service at Freeport is not expected until the end of the year (see NYMEX NatGas Down 20% in Single Day on Freeport LNG Bad News). Until now we thought the explosion was just an accident or random equipment failure. However, credible sources are suggesting the explosion may have been caused by Russian hackers.
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Conference Addresses Why It’s Hard to Export More M-U LNG

Wrapping up the coverage of the recent Hart Energy DUG East Conference, Pittsburgh Business Times reporter Paul Gough pulled together comments by various speakers on the topic of LNG and whether or not the Marcellus/Utica can and will benefit from a growth in American LNG exports. Opinions by some of the biggest drillers in the M-U diverged on this topic.
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Will Freeport LNG Fire Cause NatGas Prices to Drop to 2021 Levels?

Have you been watching the NYMEX Henry Hub futures price? It’s been dropping like a rock since last week when a fire caused Freeport LNG and its 2 Bcf/d of exported LNG to go offline (see NYMEX NatGas Down 20% in Single Day on Freeport LNG Bad News). Freeport will be largely offline for most of the balance of 2022. We spotted a post by an analyst on the Seeking Alpha investor’s website talking about the Freeport situation and its impact on the price of natural gas (specifically on the UNG ETF). The analyst had some interesting things to say about how and whether the Freeport situation will affect natgas prices here at home.
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Toby Rice: NatGas Leads the Charge on Energy Security & Climate

Toby Rice

EQT CEO Toby Rice is and has been on a mission–to spread the gospel of LNG (see EQT CEO Toby Rice Unveils Nationwide Plan to “Unleash” U.S. LNG). Rice continued to spread the good news of LNG at a meeting of the faithful yesterday in Pittsburgh. Speaking to Hart Energy’s DUG East conference, Rice said zero-carbon solutions are not yet ready to meet the world’s demand for energy, but low-carbon solutions, like LNG, are ready today.
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NYMEX NatGas Down 20% in Single Day on Freeport LNG Bad News

Freeport LNG provided an update yesterday to inform the public about what happened at its export facility just south of Galveston, Texas, situated on the Gulf Coast. Freeport said an “incident” occurred in pipe racks that support the transfer of LNG from the facility’s LNG storage tank area to the terminal’s dock facilities located on the intracoastal (i.e., north) side of Freeport LNG’s dock basin. None of the liquefaction trains, LNG storage tanks, dock facilities, or LNG process areas were impacted. Freeport originally said the facility would be back online in three weeks. That’s a pipe dream (pun intended). Yesterday Freeport revised their estimate to three months minimum before partial operations are back online. It will be the end of the year for full operations exporting all 2 Bcf/d are back online, according to Freeport.
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Eagle LNG to Supply Royal Caribbean Cruise Ship with LNG at Jaxport

In July 2018 Eagle LNG officially opened its Maxville, Florida (suburb of Jacksonville) liquefaction facility to first liquefy then transport LNG to Crowley’s new LNG bunkering facility at the Port of Jacksonville (Jaxport) where the LNG is used to fuel two Crowley LNG-powered ships designed to carry both containerized and roll-on/roll-off cargo (see Marc/Utica Gas Trucked to Jacksonville, FL for Use in LNG Ship). In August 2020 Eagle and Crowley celebrated the 100th “bunkering” event (see Eagle LNG Celebrates 100th LNG Bunkering at Port of Jacksonville). Eagle is signing up new customers for its bunkering service. Royal Caribbean has signed a deal for Eagle to “fill ‘er up” to service the cruising company’s first LNG-powered cruise vessel, Icon of the Seas.
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