PIRA: Australia Poised to Turn Out First of Large Portion of Next Generation Liquefaction

PIRA: Australia Poised to Turn Out First of Large Portion of Next Generation Liquefaction

NYC-based PIRA Energy Group said it believes that Australia is poised to turn out the first of a large portion of next generation liquefaction. With daily demand rivaling all-time highs at times this month, the U.S. storage draw will top the former December record of set in 2000. In Europe, PIRA is bearish on the front end of the price curve.

Specifically, PIRA’s analysis of natural gas market fundamentals has revealed the following:

Australia is poised to turn out the first of a large portion of next generation liquefaction within the next six months, even as key Japanese buyers Mitsui and Mitsubishi decide to cancel a preliminary deal to buy some 2-bcm/yr of LNG from the proposed Browse project. Initially a 16-bcm/yr onshore proposal backed by a Woodside-led consortium that includes the two Japanese buyers as well as Chinese CNPC, BP, Chevron and Shell, the project is transitioning to a much smaller-scale floating liquefaction project utilizing Shell technology. It remains unclear when the project will make FID – it is now provisionally set for mid-2015 – or what exactly the scale will be, but either way, the Japanese customers maintain they will remain involved in the marketing of the project.

Daily Demand Rivaling All-Time Highs

With daily demand rivaling all-time highs at times this month, the U.S. storage draw will top the former December record of set in 2000. Henry Hub weathered this “storm” in a markedly different manner than 2000 when the benchmark price breeched ~$10/MMBtu. While Henry has remained comfortably below the $5 mark so far, many regional prices around the country spiked. Indeed, basis has been much more dynamic as Marcellus-led production growth and high U.S. storage ahead of the jump in heating demand helped to insulate Henry Hub from even stronger upward price pressures.

Bearish On Front End of Price Curve

We have revised downward our outlook for European prices. The cuts for day-ahead prices are heavier on the front end than the back end. The price spike that PIRA forecast as far back as June has come and gone slightly ahead of our schedule, arriving late in the fourth quarter rather early in the first. Therefore, we are shifting down PIRA’s outlook for spot prices in the months ahead, being well aware that another cold snap could temporarily change things. For now the PIRA 10-day daily gas demand outlook remains significantly weaker at an average of 217-mmcm/d below normal. On a country level basis, the portion of this weakness tied to the Continent is increasing while the portion tied to the U.K. is smaller.

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LNG World News Staff, January 8, 2013; Image: Woodside