PIRA Energy Group will release a new study this May entitled, Liquefied Henry Hub: The Repercussions of North American LNG Exports at Home and Abroad, which analyzes and forecasts the effects of foreign gas demand and global competition on LNG production in the North American gas market and beyond.
Not only is North American regional gas demand affecting the price of Henry Hub, but underlying and seasonal demand in markets stretching from the U.K. to China will also play a significant role. As a result, foreign buyers will pay a premium to Henry Hub to acquire North American LNG. What will these buyers pay, along with who in the North American energy industry will benefit from this new demand, and who may have to confront a new price risk to their business in the future? Answering these questions is the focus of this new study.
“There’s a lot of noise and misleading signals in the market,” states Mickey Kwong, Senior Director of International Gas at PIRA . “On the one hand, the U.S. government is limiting where the LNG can go based on the presence of bilateral free trade agreements, which results in fewer customers, lower LNG prices and the potential for other suppliers – such as Russian and Canada – to fill the gap.”
“On the other hand,” according to Kwong, ”the U.S. government also believes that unlimited amounts of LNG exports will have a small or even negligible impact on domestic prices and that the gains to the U.S. will outweigh the losses.”
However, Kwong believes that sending an unlimited amount of gas to a very limited number of buyers could create the wrong results. “At the very least, the U.S. needs to consider real-world demand-supply and pricing, along with reaching a clear understanding of foreign seasonality affecting gas injections and withdrawals in North America. There are many stakeholders in the gas market and they deserve to know the true cost and consequences of LNG exports,” says Kwong.
PIRA’s Liquefied Henry Hub leverages detailed analysis of global demand by sector and supply by source to deliver a unique understanding of gas markets around the world and how they will more closely relate to Henry Hub as a result of North American LNG exports. With announced liquefaction plans bearing down on 30 BCF/D (300 BCM/Y) and with nearly 5 BCF/D (50 BCM/Y) of LNG capacity already signed up by foreign buyers, North American gas balances will be tied to fluctuations in gas markets abroad.
Ira Joseph, PIRA’s Executive Director of International Gas comments that “the North American market is somewhat insulated from how gas is produced, consumed, and priced in the rest of the world. As soon as North American LNG exports begin, it will open up the North American domestic market to immense amounts of risk associated with gas markets abroad that could have a direct impact on Henry Hub prices.” PIRA believes a global network of buyers and sellers will integrate North American LNG supplies within their existing portfolios and impose a completely new dynamic on North American gas markets.
For more information on Liquefied Henry Hub: The Repercussions of North American LNG Exports at Home and Abroad, you can click here to view the prospectus in printable PDF format.
[mappress] LNG World News Staff, March 28, 2013; Image: Apache Canada