Crude oil plunge boosts US natural gas imports to five-year high

By NAUREEN S. MALIK
Bloomberg

The plunge in global crude oil prices has helped boost US natural gas imports to a five-year high, even as the country prepares to start exporting cargoes.

Deliveries to onshore pipelines from liquefied natural gas terminals in Massachusetts and Maryland on Jan. 7 were the most since Jan. 10, 2010, according to Ventyx data compiled by Bloomberg. Volumes in January are more than six times higher than a year ago, when the polar vortex spurred record consumption.

Crude oil, used as a benchmark for LNG around the world, fell by almost 50% last year, making imports competitive in the eastern US, where a lack of adequate pipeline capacity keeps local prices high. LNG was driven from US shores in the middle of the past decade as surging output from shale formations sent natural gas prices tumbling.

“This has caught a lot of market participants, including us, by surprise,” said Rick Margolin, senior analyst at Genscape in Boulder, Colorado. “If you are an LNG supplier looking at the futures market for this winter, the best price you were seeing was in the US relative to Japan and Europe. You need a rebound in oil prices to revert back to the trend.”

US LNG imports plunged 80% from 2007 to 2013, according to Poten & Partners, a global energy broker. Cheniere Energy, the developer of the first US LNG export terminal in decades, expects to begin overseas shipments later this year.

Global Prices

Northeast Asia spot LNG is going for about $10/MMBtu while the price in Europe “has fallen quickly” to about $6.80, said Trevor Sikorski, head of natural gas, coal and carbon analysis at Energy Aspects in London. It costs about 40 cents/MMBtu to ship LNG from Trinidad to New England, 80 cents to Europe and $2.80 to Japan, he said.

Spot gas at Algonquin City Gates, which includes delivery to Boston, reached $15/MMBtu Jan. 6 on the Intercontinental Exchange. Prices settled at $7.77 yesterday.

Northeast gas is trading at a premium to the rest of the US as limited pipeline capacity keep it from taking advantage of record shale-gas production from the Marcellus fields in Pennsylvania and West Virginia.

“New England sees higher prices, especially during peak demand times, not because of lack of supply nearby but the lack of ability to get that supply to market,” said Phil West, a spokesman for Spectra Energy, which owns the Algonquin pipeline system. “We have planned expansions to help relieve that strain.”

LNG Tanker

GDF Suez Gas was unloading an LNG tanker at its Everett terminal in Massachusetts yesterday, the third since late October, “to help meet the cold-weather demand,” said Julie Vitek, a spokeswoman for the company in Houston. To supplement scheduled ship deliveries, which each hold about 3 billion cubic feet of gas, GDF contracted another 1 bcf of LNG to be delivered by truck this winter from Montreal, Vitek said.

Dominion Resources' Cove Point terminal in Maryland delivered 2.6 million dekatherms Jan. 6 to Jan. 8, according to Ventyx, which is owned by the Swiss power transmission equipment maker ABB. Last January, volumes totaled 1.1 million.

Excelerate Energy delivered gas from its Northeast Gateway port into New England for the first time since March 2010, said Denise Madera, a spokeswoman for the company in The Woodlands, Texas.

Deliveries started Jan. 6 and have totaled 477,822 dekatherms over three days, according to Ventyx. The Excelerate port, about 13 miles offshore in Massachusetts Bay, delivers gas to the Algonquin line.

“New England futures were trading in the $19 to $22 range for this winter,” Margolin said. “In the global market, that appears to be the best LNG supplies can get.”

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