Saturday, March 21, 2009

Do You Smell Dimethyl Sulfide?

The New York Times was a little slow being the "liberal media" during the lead up to the Iraqi War; it's been a slow smelling the upcoming American gas glut, so I took the responsibility and reported it last February. The New York Times, however, recently caught whiff of the global gas glut, and reported this:

The decline in crude oil prices gets all the headlines, but the first globalized natural gas glut in history is driving an even more drastic collapse in the cost of gas that cooks food, heats homes and runs factories in the United States and many other countries.

Six giant plants capable of cooling and liquefying gas (Ghawar Guzzler: My post reported seven... whatever) for export are due to come on line this year just as the economies of the Asian and European countries that import the most gas to run their industries are slowing.

Energy experts and company executives say that means loads of gas from Qatar, Egypt, Nigeria and Algeria that otherwise would be going to Japan, Korea, Taiwan and Spain are beginning to arrive in supertankers in the United States, even though there is a gas glut here, too.

According to a previous post, Platts mentioned natural gas averaging $3.50/MMBtu, with a possibility it may drop to $2.00/MMBtu. The New York Times takes a contrarian view to the $2.00 possibility; however...

With industrial and utility use of natural gas declining, gas prices in the United States have already declined by two-thirds since the summer. Prices are not likely to go down much more, experts say, but an increase in imports is likely to keep them low until the global economy recovers and drives demand back up.

Imports may hurt domestic producers:

That is good news for American consumers and many businesses, since gas provides about a fifth of the power generated by electric utilities and is a vital component for fertilizers, plastics and other industrial products. But it is bad news for proponents of energy independence, who cheered the boom in domestic gas drilling and production over the last four years.

Gas industry executives expect that liquefied gas imports into the United States will at least triple in the second half of this year. That comes as domestic producers have lowered their rig count in natural gas fields around the country by 50 percent in the last several months because of the fall in prices, leading to an expected drop in production by the end of the year.

Back to good news...

Natural gas is becoming a world commodity like oil. It is still loosely connected to world oil benchmark prices and its price, usually set by longer-term contracts everywhere except for the United States and Britain, can diverge widely from one continent to another. Until the last few years, liquefied natural gas was a high-priced necessity for countries that did not produce their own gas supplies or have access to piped reserves; but it now has become a cheap economic driver for countries like Japan with few energy resources.

But as more terminals have been built, the amount of gas that is shipped from one continent to another in giant tankers has climbed. And now the emergence of the global market in gas is about to take a giant leap.

The global capacity for liquefied natural gas exports of 200 million tons a year will increase by 25 percent with the completion of six new plants in Qatar, Russia, Indonesia and Yemen, totaling $48 billion in investments, and the upgrading of a seventh plant in Malaysia. National energy companies in those countries, assisted by ExxonMobil, Total, BP and Shell, rushed construction of those projects in recent years to satisfy the mushrooming appetite for energy around the world. More large plants are due on line in 2010 and 2011.

- Brewskie

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