Sliding gas prices may slow LNG projects from US to Africa

By ANNA SHIRYAEVSKAYA and ISIS ALMEIDA
Bloomberg

New LNG export terminals risk delays after prices for the chilled fuel fell to five-year lows in Asia and Europe, according to the American Gas Association.

US facilities approved or those close to final consent will proceed because they have purchase accords and investors, said Dave McCurdy, president of AGA. US plants not yet approved may be delayed after a price rout, as well as higher build and regulatory costs, while international projects, including Mozambique LNG, could be postponed, he said.

“Those that are in the queue may have a harder time negotiating a firm contract at this stage,” said McCurdy, as the US takes over the presidency of the International Gas Union for the next three years at the World Gas Conference that started on Monday in Paris. “Global pricing has a major impact right now.”

LNG prices to Asia, the biggest consuming region, plunged 40% in the past year amid oil’s biggest slump since 2008 and as new production plants from Papua New Guinea to Australia come online. Producers from Shell to Petronas and BG Group delayed spending on LNG projects from the Pacific to North America in the past six months.

US Exports

Slowing demand also damps prices, while the US shale boom is turning the nation into an exporter, said McCurdy. His group represents more than 200 energy companies including Sempra Energy and Iberdrola’s US unit.

Global gas-demand growth fell for a second year in 2014, according to the International Center for Natural Gas Information in Paris.

The US will start LNG exports from Cheniere Energy’s Sabine Pass plant at the end of the year. Four other major plants have received final approval for worldwide exports, with 47 applications filed, according to the Department of Energy. Morgan Stanley said last month no more than six major US LNG export projects will be completed.

Mozambique LNG has said it has a target of 2018 for bringing natural gas to the market. The project didn’t respond to an e-mail seeking comment.

Henry Hub

The prospect of LNG exports from the US is already affecting the negotiation and renegotiation of contracts “because all of a sudden there is competition,” McCurdy said. Unlike most traditional supply accords, US LNG contracts have no ties to specific destinations and are linked to prices at the Henry Hub delivery point.

Spot LNG in northeast Asia slid 23% this year to $7.8/MMBtu in the week through May 25, according to World Gas Intelligence in New York. US gas fell 42% in the past year to trade at $2.631/MMBtu on the New York Mercantile Exchange at 11:24 a.m. in London.

US gas will probably stay between $3/MMBtu and $5 “for a long time,” McCurdy said. “I don’t think exports are going to increase the price dramatically.”

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