On 7 Oct. 2008, Goldman Sachs reported that LNG prices may decline in the second half of 2009 because of new supplies from Qatar and lower Japanese demand for the fuel. New capacity for LNG production would start by the second half of 2009. Countries including Qatar, Yemen and Indonesia may add 3.2 BCF/D of new capacity by March 2009 and another 3.7 BCF/D in the second half of next year, with Qatar contributing about 4 BCF/D from four production lines, Goldman said.

On 8 Oct. 2008, FACTS Global Energy reported that:

• Global liquefaction capacity in the first half of the year increased just 1.9% to 87.8 MMT/Y as major projects were delayed but those and other projects should come online by the middle of next year (Mid-2009), providing about 40 MMT/Y of new capacity and making it easier for buyers to procure spot and short-term cargoes in the near term.

• The majority of projects originally slated to come online in 2008 would come online next year. Those include Tangguh, Sakhalin 2, Yemen LNG, Qatargas 2’s train 2 and RasGas 3’s train 1.

According to the EIA's short-term energy outlook (published in October 2008):

• For 2009, EIA lowered its supply and demand projections from its previous outlook but still expects growth in domestic gas production to far outpace consumption gains.

• EIA expected that U.S. gas production to climb 4.2% in 2009 to a total of about 22.41 TCF. Strong gains in onshore output were leading the way in domestic production growth.

• The US gas consumption in 2009 was expected to increase by about 1.9% to 65.89 BCF/D, down from the 2.2% gain forecast in EIA's previous outlook.

• Onshore gas production is expected to reduce prices once the winter season ends, EIA said, projecting Henry Hub spot prices to average $9.67/MCF this year and $8.17/MCF in 2009.

• EIA said the US LNG imports climb to about 450 BCF in 2009 as new global LNG supply comes on line. The US LNG imports hit a record high 770 BCF in 2007.

On 13 Oct. 2008, the US Gerdes Group reported that the country's exploration & production industry will likely reduce its drilling activity by at least 20% next year, assuming an average natural gas price of $8/MMBTU. As a result, US supply growth in 2009 should slow to about a third of the growth experienced this year, even assuming a further 7.5% jump in well productivity.

On 19 Dec. 2008, Waterborne Energy president, Steve Johnson, said the consulting company has projected that “winds of change” will bring a major shift to the global LNG market in 2009. Waterborne expects global LNG production to significantly increase next year, and international spot prices to drop accordingly. “While 2009 will start slow, we expect a 30 percent rise in total LNG production worldwide by year end,” Johnson said. “by May 2009, excess global LNG will begin to move toward U.S. import facilities simply because it has no place to go”.

On 30 Dec. 2008, Stephen Smith Energy Associates reported that the gas market in North America likely will remain in an oversupplied state, creating downward pressure on prices, until at least 2010 before a sharp fall in rig counts helps bring the market back into balance. As a result, Smith has lowered his average 2009 gas price 14% to $5.75/MMBTU and his average 2010 price 9% to $6.25/MMBTU. Stephen Smith, principal of the Associates has anticipated that the gas rig count will need to fall to a range between 1,000 and 1,100 -- down from current 1,347 -- and hold that range well into 2010 before balance is restored. "LNG imports to the US are likely to increase as 2009 progresses," Smith said. Smith anticipated an oversupplied North American gas market throughout next year and well into 2010, with average Henry Hub prices holding largely between $5/MMBTU and $6.50/MMBTU.

On 15 Jan. 2009, the US EIA anticipated that Canadian gas shale formations would be an increasingly important part of US natural gas imports in 2009. Interest and optimism regarding unconventional gas recovery in Canada increased following the successes seen in the northeast Texas Barnett shale and other formations in the Lower 48 states, EIA reported. EIA estimated 2007 production in the Upper Montney region of British Columbia at 80 MMCF/D of gas and expects this to rise rapidly in 2009.

On 2 Feb. 2009, Andy Flower said that LNG production may climb about 25 MMT in 2009 and 2010 as new projects start operations in countries including Qatar, Yemen, Indonesia and Australia. The annual increase may suffice to meet yearly demand from South Korea, Flower said.

On 10 Feb. 2009, the US EIA reported that the country's industrial gas demand would fall 5.1% in 2009, referring the economic downturn. Several major industrial gas consumers, including Dow Chemical, DuPont and Alcoa have announced lay-offs and reductions in capital expenditures. Total natural gas consumption is expected to decline 1.3% in 2009 amid continued economic weakness and increase by 0.6% in 2010, the EIA anticipated. According to the EIA, the US marketed natural gas production is expected to increase slightly in 2009 and fall by 1.1% in 2010 as producers cut spending and lower rig counts. Producers such as Chesapeake Energy, Petrohawk Energy and Sandridge Energy have scaled back spending amid falling commodity prices. The EIA projected that the US LNG imports expected to rise to 369 BCF in 2009, a slight increase over the volume received in 2008. “Shipments of LNG to the US will be affected by the timing of supply additions in Russia, Norway, Qatar and Yemen, and the status of global natural gas inventories in LNG consuming regions,” EIA said. Henry Hub Natural gas prices should average $5.01/MMBTU in 2009 and $5.93/MMBTU in 2010, compared with $9.13/MMBTU in 2008. Prices are expected to remain weak as inventories build toward capacity this fall, EIA said.

On 8 Apr. 2009, Gazprom deputy CEO, Valery Golubev, said the company expects that its gas output to fall by some 10% this year and remain down for four to five years, matching a drop in demand in Russia and Europe. Following a 15% year-on-year drop in demand in October and November, current consumption and production has declined 10% on the year, Golubev said. Gazprom now expects its output to be about 492 BCM this year. This year, Gazprom’s exports to Europe are unlikely to fall to less than 140 BCM.

On 24 Apr. 2009, GDF Suez senior vice-president, Edouard Sauvage said that Industrial demand for gas has fallen sharply in Europe, with demand falling by anything up to 25 percent, because of the economic crisis. "Throughout Europe we have seen a very significant reduction in demand in the industrial sector," Sauvage has told Reuters. He said industrial demand for gas in France had fallen between 5 and 10 percent and demand in neighbouring Belgium, where the company is a major supplier, had declined even more.

On 27 Apr. 2009, JPMorgan Chase & Co reported that world’s LNG trade has declined by about 5.5% in the first two months of 2009. The trade dropped 1.4 BCF/D to 24.1 BCF/D in January and February compared with a year earlier. The decline in global LNG exports in 2009 is driven by reduced exports by Algeria, Nigeria, Qatar, Indonesia, Egypt and Equatorial Guinea, as they making decisions to reduce supply in the face of a weak global gas market, JPMorgan reported. JPMorgan suggests that these producers, without having an official collaboration are making individual decisions to reduce supply in the face of a weak global gas market.

On 22 May 2009, IEA Chief Economist, Fatih Birol, said that due to the world wide economic crisis, the agency has predicted a significant investment decline in the global energy sector. IEA study shows that investments in 2009 will drop by 21% from 2008 that is by US$ 100 billion. According to IEA, capital spending plans of 50 leading oil and gas companies found a drop of 14% in investment compared with 2008, from $513 billion to $442 billion, though the super-majors plan to cut spending by only about 5%. A tight credit market, lower energy demand and falling cash flows have led to a worldwide drop in energy project investment. The oil and gas sector has seen a steady stream of cutbacks and project delays and cancellations, mainly as a result of lower prices and cash flow, IEA said. The collapse in prices, which has so far outpaced the drop in costs, has starved companies of cash flow which could be used to finance capital spending.

On 9 Jun. 2009, Kogas said that it has revised its forecast for the country LNG demand in 2009 down 15% to just 23.2 MMT, from an earlier estimate of 27.3 MMT. Kogas executive vice president, resources division, Seokhyo Jang, said that Kogas had originally expected the power sector to consume 11.2 MMT of LNG this year and the city gas sector to take 16.1 MMT. But both sectors are now expected to consume significantly less, with power taking just 8.4 MMT and city gas taking 16.1 MMT. In 2008, South Korea consumed 26.3 MMT of LNG, with the power sector using 11 MMT and city gas accounting for 15.3 MMT, Jang added. The new demand forecast for 2009 would represent an 11.8% Y/Y decline in LNG consumption. South Korea's May LNG imports crashed to their lowest monthly level since, and also fell at the fastest pace of the year so far August 2006, and also fell at the fastest pace of the year so far.

According to the EIA's short-term energy outlook (published in July 2009):

• As the US industrial sector using less gas and as gas storage stocks remain plentiful, the monthly average Henry Hub spot price will stay below $4/MCF until late 2009. Although, The US natural gas production is projected to decline over the coming months, historically high storage levels and limits to storage capacity may cause prices to decline further this fall.

• At the end of June 2009, the country had 2.7 TCF of gas in storage and current inventories are 467 BCF more than the five year average and 615 BCF more than where they were at this time last year.

• The US natural gas prices at Henry Hub are predicted to rise from an average of $4.22/MCF in 2009 to $5.93/MCF in 2010 as economic growth will boost industrial gas consumption in the country. Competitive gas prices relative to coal are projected to lead to a 2.4% increase in electric power sector gas consumption in 2009.

• The US gas consumption will decline 2.3% in 2009 and remain unchanged in 2010. Poor economic downturn situations are expected to prolong the current slump in natural gas demand over the coming months, led by an 8.2% drop among industrial users in 2009. Consumption also will fall in the residential and commercial sectors this year.

• Consumption by the power sector will decline 1% in 2010 as gas prices rise and coal regains ground as an energy source for base-load generation.

• US gas production is expected to decline by 0.6% in 2009 and by 2.9% in 2010.

• The US LNG imports will increase to about 506 BCF in 2009 from 352 BCF in 2008, because of growing supply in the global LNG market.

According to a research report published by Barclays Capital at the end of June (quoted by OGJ):

• The LNG market in 2009 is proving itself “truly global,” as supply-demand fundamentals for the first 6 months forced regional prices to converge. With demand deteriorating sharply in Asia, spot prices in most of the Pacific Basin collapsed to below those in Europe and the US. Major Asian LNG importers i.e. Japan and South Korea primarily continue to struggle, and “emerging market participants” mainly China are only partially offsetting the slowing demand.

• In the Atlantic Basin market, relative weakness in US gas prices compared with European benchmarks is “proving to be a limiting factor for US LNG imports.” Europe, however, continues to unload record LNG cargoes, its natural gas prices maintaining relative strength.

• Given these global supply-demand trends, LNG imports to the US will grow only modestly for the rest of the year, averaging 1.6 BCF/D for all of 2009 and European storage levels and transatlantic price differentials are the leading indicators for US LNG import trends.

According to the IEA "Natural Gas Market Report 2009" (published on 29 June 2009):

• The global financial crisis has turned the economic landscape upside down, with huge implications for the oil and gas sector.

• Since the release of the report last years’ editions, the context has been changed dramatically. In the natural gas sector, we have moved from a tight supply and demand balance with extremely high gas prices to an easing one with plummeting prices. The markets face enormous uncertainty surrounding the timing, pace and extent of any economic rebound, which affects all prognoses for oil and gas market fundamentals over the next five years.”

• The report predicts that for the first time in 50 years, the world will witness a drop in global gas demand. 2009 bears the legacy of this last period as the world goes through the unprecedented combination of a global recession and financial crisis. After a 1% increase in 2008, OECD gas demand fell by 4% during the first quarter of 2009 and is expected to further decline through the year.

• On the supply side, 60 BCM of LNG capacity are planned to come online in 2009. Yet with spot prices in the US bottoming out at below US$ 4/MMBTU, the question for 2009 is how rapidly US unconventional gas production -- which is generally higher cost and therefore less competitive -- will decline.

• The combination of weak demand and lower prices could undermine future investments. Despite the expected relief on EPC costs, project sponsors face both financing problems and increasing uncertainty about when and at what pace the economy and therefore gas demand will recover.

• Besides the recession, the increasing awareness of climate change issues puts a question mark on the future role of gas. Increased energy efficiency and renewable could put downward pressure on gas demand; but increased wind capacity calls for gas-fired plants as reserve capacity.

• If investments in production and supply infrastructure are delayed, there is a risk in the medium term of tightening markets when demand recovers. While liquefaction capacity will see an unprecedented growth of 50% between 2009 and 2013, there will be a dearth of new capacity in the period after 2013 unless new projects are approved in 2009-10. The world’s largest producer, Russia, faces considerable challenges, both technical and financial, already leading to project delays.

• The severe gas disruption in Europe at the beginning of 2009, following a dispute between Russia and Ukraine, highlighted once again the importance of diversified suppliers and supply routes. Despite a new contract between Gazprom and Ukraine, there are many concerns about the security of Russian gas supplies: the difficult economic situation in Ukraine makes every monthly payment a challenge, and tensions remain high. The IEA is therefore seriously concerned that the flow of Russian gas through Ukraine may be subject to disruption at almost any time.

According to the EIA's short-term energy outlook (published in September 2009):

• EIA predicted an October average Henry Hub spot gas price of $2.32/MMBTU, which may make it the lowest monthly price since September 2001. The agency has forecasted the fourth-quarter Henry Hub average price at $3.03/MMBTU and the average US wellhead price at $2.72/MMBTU, down from $3.82/MMBTU and $3.47/MMBTU, respectively, in the last month’s outlook. For all of 2009, average Henry Hub spot price of $3.65/MMBTU. For 2010, Henry Hub price would climb to $4.78/MMBUT. However, upward price pressure next year is limited by the sensitivity” of natural gas use in the electric power sector and continued expansion of US natural gas production from shale gas resources.

• The US LNG imports would reach about 460 BCF this year, a significant increase from the 350 BCF last year but less than the 500 BCF predicted for this year in the EIA’s last month report. Maintenance at existing LNG supply facilities, delays to new projects and higher world oil prices were cited for the downward revision.

• Gas storage inventories likely will set a new record high at the end of this year’s injection season, reaching more than 3.8 TCF. It will take some time to work off current inventory levels and enhanced production capabilities should limit significant increases in prices throughout the forecast period.

• The sustained reduction in drilling activity and production curtailments are projected to result in a 5.7% decline in marketed production from the Lower-48 non-Gulf of Mexico between the first and second half of the year. It is projected Lower-48 production of 51.24 BCF/D this year, up slightly from 51.07 BCF/D last year. In terms of total US marketed production this year, EIA expects a 0.9% increase based on activity during the first half of the year.

• Despite a 20% drop in prices and a 45% drop in working natural gas drilling rigs since the start of the year, total natural gas production increased slightly from January to June. For next year, however, EIA predicts overall 3.5% production decline.

• EIA expects slightly higher consumption in the fourth quarter than it was forecasted in its previous outlook report, 63.08 BCF/D against 62.35 BCF/D.

• For all of 2009, gas demand should rise “slightly” in the commercial and industrial sectors due to improved economic conditions and low prices, but remain “relatively flat” in the residential and electric power sectors. The anticipated addition of new coal-fueled power generation capacity and rising natural gas prices limit the potential for significant increases beyond the forecast level” of 18.64 BCF/D, compared with 18.77 BCF/D this year, in gas use by electric generators.

On 11 Sep. 2009, Gazprom Deputy CEO, Alexander Medvedev said the Russian gas monopoly would earn $42.5 billion in export revenues this year, below last year's record $66.4 billion. Europe will depend on Russia for one-third of its gas within the next decade, Medvedev said, adding the financial crisis has done nothing to erode Gazprom's market share.  "In July, August and definitely in September, the off-take level from our customers was higher than last year. This is a positive sign," Medvedev told Reuters. He said average gas prices to Europe in 2010 would be about $300 per 1000-CM. Though higher than current prices, this is still lower than the average price of $408 per 1000-CM realized last year.

On 6 Oct. 2009, EIA reported that the US gas inventories are expected to reach a record peak of 3.85 TCF when storage injections end on 31 Oct. about 3.59 TCF was in storage on 25 Sept, 481 BCF above the average level of 2004-2008 period. EIA said that household heating with gas can expect to spend 12% less this winter. The decline represents an 11% decrease in prices and a 1% decrease in consumption. The Henry Hub spot gas price averaged $3.06/MMBTU in September, 17¢/MMBTU below August’s average. EIA expects prices to remain low through October, and then begin to increase as space heating demand picks up this winter and economic conditions improve. Prices are expected to increase in 2010 but, even with a projected winter storage withdrawal greater than the 5-year average, end-of-March inventories still will be the highest recorded since March of 1991, EIA said. EIA forecasted that total US marketed gas production will increase by 1.5% in 2009 and decrease by 3.8% in 2010, with marketed production during the first half of 2010 to average 1.8 BCF/D lower than the second half of 2009,” it said. “However, economic recovery and increasing demand next year are expected to push prices up and provide the incentive for increasing production later next year.” EIA expected increases in US LNG imports to about 471 BCF in 2009 and 660 BCF in 2010 from 352 BCF in 2008.

To Explore Why, When and How the Above Developments Happened, Join Us NOW!

Home

© Copyright 2006_2012, Global LNG Limited. All rights reserved.