PIRA Energy: New LNG Terminals Offer More Demand Options

PIRA Energy Group reported that the past six weeks have brought forth a slew of new LNG import terminals around the globe. In the U.S., the EIA’s gas production estimate for February came in unexpectedly strong. In Spain, the new posting of June pipeline imports from Algeria shows a significant downturn in upcoming June volumes.

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

The past six weeks have brought forth a slew of new import terminals around the globe, creating a wider base for the call on supply. The newly commissioned terminals and expansions in Asia will play a supportive role in offsetting some of the region’s current 2Q/3Q seasonal demand slump as soon as this month. PIRA forecasts that the region could see monthly incremental cargos through the end of the year from these new additions alone, which are located in regions less influenced by the number of heating and cooling degree days.

EIA Production Surprise

The EIA’s production estimate for February came in unexpectedly strong, leading PIRA to upwardly revise estimates of Lower 48 production going forward. So far in 2Q13, production is tracking slightly above last year’s monthly peak rates in late 2012, owing to robust growth in the Northeast, recovering Rockies output, and slowing Haynesville declines. Higher gas prices clearly have played a role.

Algerian Pipeline Supply Decreases

In Spain, the new posting of June pipeline imports from Algeria shows a significant downturn in upcoming June volumes. Algerian pipeline flows to Italy have plummeted in recent months and now reside below volumes to Spain for the first time since PIRA started recording data in 2005. Stepping into the Italian breach is Russian supply, which appears to be benefitting from better prices under revised terms to two of Italy’s larger importers

More Canadian Exports Expected

On top of the resurgence in Lower 48 production, net Canadian exports can also be expected to mitigate upward pressure on Henry Hub prices in the months ahead. Weak summer-winter contango will remain a deterrent to filling Canada’s merchant operator-dominated storage, boosting exports to the U.S. in the wake of more resilient Canadian production. Yet, incremental year-on-year exports to Mexico driven by the power sector still stand to inflate the overall U.S. trade deficit.

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LNG World News Staff, May 15, 2013