In this article, the author explains why the market is massively underpricing the possibility of a significant natural gas supply deficit in 2019. I'll poke holes in the bearish argument, by explaining why the bears' myopic focus on 2018's temporary supply growth ignores the even bigger demand growth story… and a looming supply deficit in 2019.
https://seekingalpha.com/article/421397 ... 19?page=16
Cut from the article above:
"Based on the latest EIA data through July, U.S. gas production has grown by 7.6 Bcf/d while demand has grown by 8.9 Bcf/d, creating a supply-demand gap of 1.3 Bcf/d. In other words...
Despite 2018’s huge supply growth, demand is growing even faster.
Now, this 1.3 Bcf/d supply-demand gap may sound small on the surface, but compound a small supply deficit over hundreds of days and you get a large supply deficit. And that’s precisely what we have today, with the lowest gas inventories in over a decade heading into the winter drawdown season. The last time gas inventories fell this low back in 2005, gas traded for over $12. Yet, despite the overwhelming evidence of a shift in supply/demand dynamics, even the industry experts continue to get it wrong."
Natural Gas - Some food for the Bulls
Natural Gas - Some food for the Bulls
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Natural Gas - Some food for the Bulls
Three years ago I was on a panel at the University of Houston Energy Conference. One of the other panel members was from IPAA. During lunch he predicted that when the U.S. was exporting over 10 Bcfpd domestic gas prices would move toward the global price of gas. Today the U.S. is exporting ~7 Bcfpd (LNG and pipelines). Below is cut from the article at the link above.
2019 - A Breakout Year for U.S. LNG Exports
2017 was a pivotal moment in U.S. history: the year when America became a net exporter of natural gas for the first time in 60 years. But I believe 2019 will mark the year when average Americans begin appreciating the magnitude of this new trend. That's because the growth in next year's U.S. LNG export capacity will soak up more than 100% of our gas production growth, which should explode the current supply/demand gap and send gas prices much higher.
The rapid growth in U.S. LNG exports is driven by one simple trend: the global shift from coal to gas for power generation. As owner of the world’s largest and cheapest gas reserves, America will become the world's leading LNG exporter by the mid-2020s. This will transform U.S. natural gas from a domestic to an international commodity.
2019 - A Breakout Year for U.S. LNG Exports
2017 was a pivotal moment in U.S. history: the year when America became a net exporter of natural gas for the first time in 60 years. But I believe 2019 will mark the year when average Americans begin appreciating the magnitude of this new trend. That's because the growth in next year's U.S. LNG export capacity will soak up more than 100% of our gas production growth, which should explode the current supply/demand gap and send gas prices much higher.
The rapid growth in U.S. LNG exports is driven by one simple trend: the global shift from coal to gas for power generation. As owner of the world’s largest and cheapest gas reserves, America will become the world's leading LNG exporter by the mid-2020s. This will transform U.S. natural gas from a domestic to an international commodity.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Natural Gas - Some food for the Bulls
This is a really big deal: U.S. LNG exports will add 5.2 Bcf/d of new gas demand over the next 18 months, including approximately 4 Bcf/d in 2019 alone.
An onslaught of new projects coming online over the next 18 months will boost U.S. LNG export capacity by more than 150% to 8.4 Bcf/d. Most of this new capacity will hit the market in 2019. Here’s a brief overview of these incoming facilities...
• Kinder Morgan’s Elba Island terminal located in Chatham County, Georgia will use 10 mini-liquefaction to provide a combined nameplate capacity of 0.35 Bcf/d. Recent delays due to Hurricanes Florence and Michael have pushed back the expected start date from the fourth quarter of 2018 into the first quarter of 2019.
• Cameron LNG has hired Sempra to construct three 0.6 Bcf/d liquefaction trains in Louisiana, for a combined capacity of 1.7 Bcf/d. This project has also faced delays, but the company expects all three trains will come online in 2019. Plus, Cameron has obtained regulatory approval for two additional trains, which if constructed would add another 1.7 Bcf/d of capacity.
•Privately-owned Freeport LNG is building a new terminal in Quintana Island. The first of three 0.7 Bcf/d gas liquefaction trains will come online in September 2019, followed by trains 2 and 3 in January and May 2020.
•Finally, Cheniere will soon add another 0.75 Bcf/d train (number 5) at its Sabine Pass terminal, plus two trains at its new facility in Corpus Christi - each rated at 0.6 Bcf/d. In Cheniere’s latest earnings release on August 9th, CEO Jack Fusco announced that construction of the Sabine Pass train five was 95% complete, and Corpus Christi trains one and two were 90% complete. Sabine Pass train 5 and Corpus train 1 will come online in early 2019, followed by Corpus train 2 in the second half of next year.
An onslaught of new projects coming online over the next 18 months will boost U.S. LNG export capacity by more than 150% to 8.4 Bcf/d. Most of this new capacity will hit the market in 2019. Here’s a brief overview of these incoming facilities...
• Kinder Morgan’s Elba Island terminal located in Chatham County, Georgia will use 10 mini-liquefaction to provide a combined nameplate capacity of 0.35 Bcf/d. Recent delays due to Hurricanes Florence and Michael have pushed back the expected start date from the fourth quarter of 2018 into the first quarter of 2019.
• Cameron LNG has hired Sempra to construct three 0.6 Bcf/d liquefaction trains in Louisiana, for a combined capacity of 1.7 Bcf/d. This project has also faced delays, but the company expects all three trains will come online in 2019. Plus, Cameron has obtained regulatory approval for two additional trains, which if constructed would add another 1.7 Bcf/d of capacity.
•Privately-owned Freeport LNG is building a new terminal in Quintana Island. The first of three 0.7 Bcf/d gas liquefaction trains will come online in September 2019, followed by trains 2 and 3 in January and May 2020.
•Finally, Cheniere will soon add another 0.75 Bcf/d train (number 5) at its Sabine Pass terminal, plus two trains at its new facility in Corpus Christi - each rated at 0.6 Bcf/d. In Cheniere’s latest earnings release on August 9th, CEO Jack Fusco announced that construction of the Sabine Pass train five was 95% complete, and Corpus Christi trains one and two were 90% complete. Sabine Pass train 5 and Corpus train 1 will come online in early 2019, followed by Corpus train 2 in the second half of next year.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group