PIRA Energy Group believes that 2Q13 LNG demand will attract different types of buyers. In the U.S., growing proved natural gas reserves tally likely fell for the first time in over a decade in 2012. In Europe, changing Norwegian gas flows could alter supply risks.
Specifically, PIRA’s analysis of natural gas market fundamentals has revealed the following:
2Q13 LNG Demand Attracts Different Types of Buyers
Even without the introduction of new volumes from Algeria and Angola, spot markets continue to soften rapidly. Spot buyers in this period are significantly more hawkish about what they are willing to pay because demand in these areas are not being driven by weather-related needs. Europe has begun to re-stock, Brazil is coping with hydro shortages, and the Mideast is beginning its six-month purchasing window, but all three of these forms of demand are somewhat passive in nature and a far cry from Asian peak demand in 4Q12 and 1Q13.
Growing U.S. Proved Reserve Tally Stalled in 2012
PIRA’s tabulation of year-end proved reserves for over 30 publicly traded oil and gas companies indicate the total U.S. proved reserve tally likely fell for the first time in over a decade in 2012, owing to significant price-related revisions. However, the markdown is likely to be temporary. A considerable portion of the reserves written off in 2012 could return to producers’ books by end 2013, should gas prices continue to trend higher over the next eight months.
Changing Norwegian Gas Flows Alter Supply Risks
One of the key shifts PIRA sees occurring in the market is the use of Norwegian gas in greater amounts to alleviate any tightness in the U.K. market. While total Norwegian exports are up in April year-on-year, flows to the U.K. are up over six times as much. The incremental volumes flowing to the U.K. are being taken out of flow rates to Belgium, Germany, and France, with the latter two having to rely more on Russian volumes.
United States’ Natural Gas Prices Continue to Incentivize Investment
Australia’s Incitec Pivot intends to construct a new ammonia plant in Louisiana. Industrial users pay prices close to the Henry Hub reference price, which is significantly better than many options, including Australia, where fears of rising prices, driven by unrestricted LNG exports, has driven domestic prices to double those seen in the U.S.
LNG World News Staff, April 24, 2013