T&T
LNG exports increase in 2006
By Energy Correspondent
Trinidad Express
Port
Spain
Petroleumworldtt.com
01 07 07
The
year 2006, offered no real surprises in the LNG
business, though there were watershed developments
on both the local and international markets.
T&T's
LNG production and exports expanded in 2006 as a
result of new output from ALNG Train 4. The world's
largest LNG train experienced some start-up problems
but is believed to have achieved full production
by third quarter. In August 2006, natural gas production
crossed 4 bcf/d, for the first time. On October
12th, ALNG celebrated the shipment of its 1000 cargo.
Over the period January to June 2006, export volumes
to major destinations, US and Spain, averaged 1.5
billion cubic feet per day, or about 75 per cent
of full plant capacity. ALNG continued to be the
dominant supplier of LNG to the USA, contributing
68 per cent of the US LNG imports over the first
three quarters of 2006. Some 30 per cent of ALNG's
output was sold to Spain in the first half of the
year, amounting to 10 per cent of Spanish natural
gas imports.
Despite
a downturn in the US prices, ALNG partners would
have generated windfall revenues from relatively
firm market conditions on both sides of the Atlantic.
The downturn in US gas prices was not unexpected
as the market returned to normalcy in the aftermath
of hurricane induced disruptions that caused prices
to skyrocket in 2005.
US
spot prices averaged US$7.06MMbtu in 2006, 22 per
cent below the US$9.11/MMbtu in 2006. Prices had
hit an all-time high last year, when Henry Hub prices
topped US$14.00/mmbtu in October 2005. Over 2006,
however, prices trended downward, hitting two year
lows in September of US$5.22, mostly due to higher
than average gas inventories in the continental
US over the period. To put this in perspective,
it is worth remembering that in 1996, when an investment
decision was made on ALNG Train 1, Henry Hub spot
prices had averaged US$2.53/MMbtu. Relatively buoyant
market conditions are expected to endure in 2007,
with the futures markets indicating an average US
spot market price at Henry Hub of US$7.55 over the
next 12 months.
Over
in Europe, natural gas prices remained relatively
higher partly because of the indexed link with oil
prices and partly because of rising demand. Over
the latter half of the year, Spanish border prices
averaged US$10.76/MMbtu generating higher netback
to LNG exporters than the US shipments. In October,
for example the estimated average netback earned
by ALNG at the Boston USA Terminal was US$5.50/MMbtu
compared with US$9.30 in Spain.
An
increase in spot market LNG trade and the related
cargo arbitrage were among the significant emerging
trends in the global LNG business in 2006. About
14 per cent of LNG is sold on spot markets today.
Several companies led by Excelerate, maintain floating
storage to take advantage of price spikes in regional
markets. In October it was estimated that as many
as 11 cargoes were being held in floating storage,
by Excelerate Shell and BG.
Meanwhile,
BG is reported to have sold its first cargo from
Trinidad into the UK in September 2006. The expansion
in global LNG trade is expected to continue as more
producers and consumers come on stream. Total estimates
that world LNG trade will double from 190 billion
cubic metres in 2005 to about 450 billion cubic
metres in 2015.
By
2012 eight more producer are expected to join today's
dozen in the production and export of LNG. Both
Mexico and China joined the list of LNG importers
in 2006 bringing the total number of importers to
17. This group is expected to grow to 30 by 2012
according to a study by Total.
Meanwhile,
after years of battles with anti-LNG lobbyist and
the Environmental authorities, the US industry is
making some headway in the construction of new LNG
terminals. Three new LNG terminals, under construction
in Texas and Louisiana are expected to commence
operations in 2008, significantly increasing US
import capacity. Apart from Excelerate's offshore
LNG regas facility- Gulf Gateway; these would be
the first new LNG regas facilities to be constructed
in the US in over 25 years.
The
growth in LNG trade is likely to have implications
for pricing mechanisms and pricing levels globally.
Will market prices converge? Does Government have
the capacity to determine realized prices in a market
with extensive cargo arbitrage? How competitive
will T&T LNG be over the next few years? These
are just some of the pertinent issues that should
hold the attention of the authorities as we enter
the eight year of the new millennium. Interesting
times.
Feedback:
energyczartt@yahoo.com
Trinidad
Express
Wednesday, January 3rd 2007
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©2006 Trinidad Express. All Rights Reserved.
