Plug in point: Port Arthur is a major entry point for US-bound LNG cargoes
'Shale gas destroys US LNG demand'
Shale gas has destroyed demand for liquefied natural gas imports in the US, sinking cargoes into a deep freeze for perhaps the next 10 years according to a new research report by Houston-based securities analyst Tudor, Pickering, Holt (TPH).
The LNG report – the first by TPH since 2007 – predicts shipments to the US in 2010 will fall to 1.8 billion cubic feet of gas per day.
US regasification capacity is about 15 Bcfd, dispersed among nine different terminals on the US Atlantic and Gulf of Mexico coasts.
“Shale gas renders US LNG imports nearly unnecessary over the next five to 10 years,” the report stated.
TPH managing director David Pursell said: “The general gist is the US doesn’t need it. We (the US) are the market of last resort.
“We have a lot of capacity out there that is under-utilised,” Pursell said, adding therefore that it is “highly unlikely” any new regasification terminals will be built in North America.
LNG represents about 10% of an estimated 300 Bcfd in global gas supply gas, but “markets are sloppy right now”, TPH’s report said.
“According to our estimates, the global gas market is oversupplied by about 3 Bcfd in 2010 and by 1.5 Bcfd in 2011,” according to TPH. “We would note, however, that this represents only 1% of global gas consumption,” it added.
However, LNG demand in Asia and Europe is growing “more than twice as fast as overall gas demand and approximately six times that of oil”, according to TPH.
LNG demand in Europe is also surging as a more attractive and sustainable option than gas from Russia, according to the report.
US imports of LNG will still largely be sourced from Trinidad, which is just five days' sailing from the US.
Nevertheless, cryogenic tankers from Qatar – “king” of natural gas supply with 10 Bcfd of liquefaction forecast by 2011 – are expected to arrive at ExxonMobil’s Golden Pass terminal near Port Arthur, Texas, by October this year.
Pursell cautioned not to expect regular shipments to show up at Port Arthur unless prices are fetching. He noted that Qatar, like any LNG supplier, will have “optionality” to deliver to the most attractive bid.
US natural gas demand for power generation can be reckoned from observing growth in the gross domestic product, but just how much will be required for industrial use is exceedingly difficult to quantify, Pursell said, especially as the US economy struggles to regain its footing.
