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Page added on August 8, 2016
How to see new exports of US natural gas to the Middle East
In the last 30-40 years the Gulf region has been the world leader in the supply of energy. But now we are seeing gas supplies from the US to the Middle East. We dare to suggest that in the future the United States will only increase these supplies. With a request to comment on this issue, we turned to the Paul Williams, Energy & International Affairs Specialist from Washington DC.
In your opinion, what does it lead to? Does the US want to swap roles with exporters from the Middle East? Or is it an integral part of a more global plan?
With an American-made revolution in the use of hydraulic fracturing (“fracking”) to command increased volumes of oil and gas from shale formations, US oil and gas output reached record highs in 2015, reducing America’s net oil imports to their lowest levels since 1985 and putting downward price-induced pressures on American gas producers to expand abroad. The US had been sending liquefied natural gas (LNG) from Alaska to Japan (and now also to Taiwan) for nearly 40 years, but the recent opening in Louisiana of Cheniere Energy’s Sabine Pass (with a reported 31-billion cubic meter capacity) has allowed new gas to travel elsewhere as well, including Kuwait and the United Arab Emirates (UAE).
US LNG exports to the Middle East might seem odd at first glance. The fact that exports from conflict-wracked Yemen dropped by three quarters in 2015 may explain some of the near doubling of regional demand for imported LNG. Yet, the Middle East as a whole still has 40% of the world’s proved reserves and Qatar exports the world’s single largest quantities of LNG and smaller amounts via pipeline to neighboring Oman and the UAE. Still, Middle East economies at home are truly gas-driven, with subsidies or depressed market prices (which hit lows in early 2016 not seen since August 1998) allowing electricity producers to keep using nearly 65% of gas. Moreover, with urban populations getting richer and seeking cleaner fuels, gas consumption is set to double over the next quarter century.
As such, via LNG exports, local American gas producers have found more lucrative outlets in the emerging markets. But major energy powers like Russia have also entered the LNG game in a big way, responding to the “pull” of the Asian market and the “push” of EU supply diversification—some but not all of it policy driven—away from Russian gas. More LNG is making the gas market more global like oil and thus prone to similar gluts and market competition. Although it might be tempting to see oversupply of gas via LNG exports as an integral part of some larger US plan to keep countries like Russia (and, despite improved relations, possibly Iran) down along with household energy bills, this threatens to knock smaller US producers out of the game, making it a seller’s market. For now, US LNG exports to the Middle East seem to reflect a fortuitous, albeit unusual, source of foreign relief for surplus gas.
48 Comments on "How to see new exports of US natural gas to the Middle East"
makati1 on Mon, 8th Aug 2016 7:44 am
“How to see new exports of US natural gas to the Middle East”
With a skeptical eye… lol
When LNG is cheaper to ship to the buyer than pipelined NG, it may happen. Until then….
rockman on Mon, 8th Aug 2016 8:37 am
“…local American gas producers have found more lucrative outlets in the emerging markets.” Perhaps I missed it but I’m not aware of any PRODUCER selling LNG to overseas buyers. Anyone else seen such reports? The only exports so far have been by Chenier and their contracts are fixed to the price at the Henry Hub. IOW producer has or is exporting LNG. Only Chenier and they don’t produce one sniff of methane.
The problem with any US producer is two fold. First, no US producer owns an LNG train so they can’t make it. Second, in order to cut a deal with a foreign LNG buyer a seller has to have a PROVEN 20 to 30 year supply of the contracted volume. Which is why Chenier bugs its price benchmarked NG from the HENRY HUB because it has access to a huge volume of Gulf Coast NG.
Why the UAE: Proven natural gas reserves are estimated at 215 trillion cubic feet. However, since most of the natural gas produced is associated with oil – so-called “associated gas” – natural gas availability is dependent on the production of crude oil for export. Unsurprisingly, rapidly rising energy consumption coupled with slow production growth made the UAE a net natural gas importer since 2008.
Moreover, the UAE re-injected around 26% of gross natural gas production from 2003 to 2012 into its mature oil fields to boost production levels and exploit the known reservoirs more efficiently. Here, the objective was clearly to free up additional volumes of crude oil for export to the high-priced global oil market.
So essentially the theme of this article is complete BS. First, the UAE is not buying LNG from US producers at prices higher the current market levels. It has bought one load (3.3 bcf) of LNG from a company that purchased the NG at market price. Second, their NG imports are used for enhanced oil recovery which justifies the expense.
After the first cargo of US LNG exports left Cheniere’s Sabine Pass in February Europe is set to receive its first cargo. The destinations for the first six LNG cargoes loaded thus far have been wide-ranging; while the first cargo headed to Brazil, others heading to UAE and India, and now Europe joins this list.
And if you go to Chenier’s website you’ll see that their purchase of NG to convert to LNG is directly tied to the Henry Hub benchmark price. IOW no US producer is getting 1¢ more for its NG because of LNG exports.
And if it wasn’t obvious the UAE purchase wasn’t part of a long term contract but bought from the spot market. LNG spot market: owners of long term contracts make a secondary sale to a buyer. They don’t offer details but it isn’t even certain that Chenier sold that load to the UAE but instead came from the soot market. Just one more level of separation from US producers.
rockman on Mon, 8th Aug 2016 8:42 am
Mak – Which is why 98.4% of US NG exports are via pipelines.
rockman on Mon, 8th Aug 2016 8:59 am
Mak – And if you wonder why I get so pissed with crappy writers like this: most of the FACTS I posted came from a 10 minute Internet search I did after reading the article. The Rockman does know a lot about the biz. But what he isn’t familiar with is easily found. Perhaps the writer was internationally trying to spin BS. But I suspect it wasn’t deceit but just incompetence.
makati1 on Mon, 8th Aug 2016 9:12 am
Rockman, I suspect that you are correct. Ignorance is ignored by most readers and even writers today. And, it is difficult to use real facts to promote propaganda.
You can see it in the comments here also. It is so easy to check your facts BEFORE you put them in a comment and hit “submit”. A few minutes on the greatest info resource since the printed encyclopedia is at their fingertips. I learn new things everyday, just by checking my facts before I publish them here. Or checking what others offer as facts that sound wrong.
penury on Mon, 8th Aug 2016 9:30 am
We must emphasize that U.S. growth is out pacing the ROW we must show our wonderful improvement. We have an election coming, no bad news allowed. Truth has been banned.
rockman on Mon, 8th Aug 2016 10:27 am
p – Sad but true. The only preelection bad news we’ll hear is one candidate taking shots at the other. The only postelection bad news we’ll hear is one party taking shots at the other.
Old saying: the first casualty of war is the truth. And our political system has mutated into all out war between the two sides some time ago. Logic and common sense have little chance since the country has largely gone “tribal”.
brough on Mon, 8th Aug 2016 10:44 am
The information from ‘Rockman’ is far more interesting than anything from this rubbish article.
Many Thanks
Boat on Mon, 8th Aug 2016 10:56 am
rockman,
The country was tribal from day one. There has never been the good o’l days. Read about the whisky rebellion. This was soon after the revolution fueled by tax protest.
yoshua on Mon, 8th Aug 2016 11:50 am
The Etp-Model shows that the oil industry’s rising production costs determines the rising price of oil… until the energy half way point.
After the energy half way point the opposite occurs, the oil industry starts to track the falling oil price by cutting its expenses (exploration, drilling and workforce).
By cutting its expenses the oil industry is cutting its use of BTU and by doing so it starts to deliver more BTU to the economy. The price of doing this is depletion of its reserves.
Since the oil industry now consumes less oil and delivers more oil to the economy, the market is now flooded with oil and an oil glut appears.
So in a strange way depletion do lead to a glut… although only to a temporary one.
GregT on Mon, 8th Aug 2016 1:42 pm
“The country was tribal from day one.”
Yes it was Boat, long before all of the white immigrants landed there.
Bob on Mon, 8th Aug 2016 3:23 pm
What a poor article. Shipping our gas to the ME is only doable with huge price differences. 1/3 of the gas is wasted by liquification, regasification. Then you have transport losses, not to mention a fully loaded tanker being a terrorist target. 1 RPG could take out any city that the thing unloads in. Good grief! Better idea: use the gas here in the USA.
Anonymous on Mon, 8th Aug 2016 4:05 pm
Easiest job in the world, being a ‘journalist’ in the empire. There is no absolutely no fact-checking requirement at all. Anything you print can be as wildly inaccurate or fanciful as the writer, or his editor, likes. And that goes for hole-in-the-wall 2bit publishers, all the way up to the concentrated kosher media elites.
To rockman: There are no ‘sides’ in the empire, and the only ‘war’ going on is not for the hearts and minds of joe and jane six-pack, but a very real war where Middle-easterners, Russians, asians etc are the victims of uS bombs, bullets and missiles and proxy forces. Often times these murderous proxies are in the employ, knowingly or not, of uS oil and extractive corporations. There is only manufactured mass media drama between the ‘red’ team, and the ‘blue’ team. sparring endlessly over useless hot button issues like gay marriage, abortion etc. Helps maintain the ‘two sides’ fiction for empires masses. But behind closed doors, and often times not even that discreetly, its all one big happy zionist family in the empire of chaos.
onlooker on Mon, 8th Aug 2016 4:18 pm
Well said A. Got us Americans fighting with each other over worthless issues thus distracted from whats important. What a spectacle the country I live in has become. Yes US no. 1 terrorist
Jim on Mon, 8th Aug 2016 4:47 pm
Isn’t the US still a net natural gas importer?
rockman on Mon, 8th Aug 2016 5:10 pm
Jim – Yes…a net importer but just by a tiny bit. About 1% last time I looked. But only about 7 or 8 years ago we imported a great deal more. But the the Marcellus Shale boomed. But that boomed has ended. Now the big question: how far will US NG production slide and imports grow?
Remember Chenier was originally built for $BILLIONS to IMPORT LNG. And then they spent more $BILLIONS to convert to EXPORTING LNG.
Those boys seem to have a problem seeing more then a few years down the road. LOL.
Boat on Mon, 8th Aug 2016 5:56 pm
yoshua on Mon, 8th Aug 2016 11:50 am
Your lost. There was a growing glut before more than 1,000 rigs were taken off line. The glut grew and prices tanked.
Boat on Mon, 8th Aug 2016 6:15 pm
rock,
The Marcellus Shale is still the lowest cost producer in the US. Nat gas has the same problem as oil. Record high storage with very low prices. The same end result is fewer drilling rigs. The buildout of infrastructure is still happening. Pipelines to Canada and Mexico being built. Expect more rapid growth in production.
GregT on Mon, 8th Aug 2016 7:27 pm
“Your lost.”
Wrong Boat. You’re lost.
rockman on Mon, 8th Aug 2016 7:41 pm
brough- You’re welcome. Since I’m stuck in a chair 24/7 I usually have time to do the research some of these energy “experts” don’t have a spare 10 minutes to do. LOL.
GregT on Mon, 8th Aug 2016 8:16 pm
Canada is a net exporter of natural gas Boat, and exports 3 times domestic consumption. 98% of Canadian natural gas exports are to the United States. The US remains a net importer of nat gas, while there is some speculation that this could change by the early 2020s, it remains to be seen.
rockman on Mon, 8th Aug 2016 10:18 pm
Boat – “Expect more rapid growth in production.” And when should we expect to see this “rapid growth in production” to begin? No need to be too specific: in what year? Thanks in advance.
Boat on Mon, 8th Aug 2016 11:03 pm
rock,
That’s three (3) existing pipelines and six (6) proposed pipelines with combined capacity of 6.5 Bcf/d and representing capital budgets in excess of $7 billion. A lot of pipe and money in anybody’s book.
http://info.drillinginfo.com/natural-gas-exports-to-mexico/
http://www.forbes.com/sites/judeclemente/2016/05/08/the-u-s-natural-gas-export-boom-means-pipelines-and-lng/2/#7a62530e5144
http://www.eia.gov/dnav/ng/hist/n9132mx2m.htm
yoshua on Tue, 9th Aug 2016 7:31 am
Boat – I’m trying to navigate the best I can.
The WTI crude price tanked from $100 to $60 in the summer of 2014. The rig count started to collapse in the winter of 2014.
http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/12-overflow/20141219_rig2.jpg
yoshua on Tue, 9th Aug 2016 7:54 am
The world oil rig count was still climbing in November 2014.
https://blog.castlemetals.com/wp-content/uploads/2014/12/oil-rig-count-december.png
yoshua on Tue, 9th Aug 2016 9:19 am
Production vs. consumption in 2014.
https://www.bing.com/images/search?q=world+oil+production+2016&view=detailv2&id=D3306D03C42EDDF26DC29089AF84348D24D2BD28&selectedindex=19&ccid=fSxyRexX&simid=607999514318145060&thid=OIP.M7d2c7245ec572b227bef6875c4ce4c13o0&mode=overlay&first=1
rockman on Tue, 9th Aug 2016 11:01 am
Boat – “That’s three (3) existing pipelines and six (6) proposed pipelines with combined capacity of 6.5 Bcf/d…”. That’s all just fine but pipeline capacity is meaningless if not enough new wells are drilled to fill them. And with an 80% define in rig count not many new wells are being drilled. Which also means the higher initial flow rates of those wells that are being drilled won’t compensate for the lower well count.
So back to my original question: when do you expect the MS drilling boom to start up again? After all they’ll need a lot of wells drilled soon otherwise they’ll likely lose their asses on all those new pipeline investments.
Boat on Tue, 9th Aug 2016 4:19 pm
rock,
As you can tell the boom in exports began in 2011. These additional pipelines are a continuation of the boom. In spite of growing demand in the US market and added Mexico nat gas exports, production has over supplied the market. Those rigs will return when prices rise as a result of added demand. Filling the pipelines is not a problem.
http://www.eia.gov/dnav/ng/hist/n9132mx2m.htm
Boat on Tue, 9th Aug 2016 4:59 pm
yoshua,
“Since the oil industry now consumes less oil and delivers more oil to the economy, the market is now flooded with oil and an oil glut appears”.
If your talking about US production, they have dropped 1.1 mbpd after the glut appeared.
The US drilling rigs that are left are more efficient. I read reports of say a fracked well that costs 6 million now costing 5.5 million. The bigger news is overall production of an average well is going up. This is due to longer laterials, more stages and more sand.
I will find you some good links at a later time. Or you can google…
GregT on Tue, 9th Aug 2016 5:09 pm
“As you can tell the boom in exports began in 2011.”
The US is a net importer of natural gas Boat. Those exports are only possible because they have been imported from somewhere else.
Boat on Tue, 9th Aug 2016 7:01 pm
greggiet,
Yes greggiet, but those dynamics are changing quickly. Google it.
Apneaman on Tue, 9th Aug 2016 7:12 pm
We need to burn more FF and pave more habitat over. There is still life on this planet that needs to be killed. Let’s go you fucking cancer monkeys – pick up the pace.
Video: An eye-opening flight over California’s dying forests
http://www.desdemonadespair.net/2016/08/video-eye-opening-flight-over.html
rockman on Tue, 9th Aug 2016 8:22 pm
Boat – Perhaps I misunderstood you: I thought you were just referring to the Marcellus.
As far as NG exports that surge began 16 years ago. We had been exporting 200 bcf/year for decades earlier. But then a fairly constant rise to the current levei of 1,800 bcf/year.
https://www.eia.gov/dnav/ng/hist/n9130us2a.htm
The surge in NET NG IMPORTS began in 1986. It had run about 850 bcf/year from when the stat stated in 1973. It peaked at 3,800 bcf/year in 2007 and then fell quickly to the current level of 950 bcf/year.
Again that’s NET IMPORTS. In absolute numbers we are currently importing 2,800 bcf/year and exporting 1,800 bcf/year. Both trends appear to be leveling out the last several years. We might hit a low of NET NG IMPORTS of about 500 bcf/year by 2020 but that’s not a very solid projection as the chart shows:
https://www.eia.gov/naturalgas/importsexports/annual/
rockman on Tue, 9th Aug 2016 8:49 pm
Greg – The re-export of NG is a difficult number to study. But it appears we’ve only exported NG (in the form of LNG) that we imported only in 2014 and 2015. A total of only 14.2 bcf for those two years. So far in 2016 its been less then 2 bcf. So it appears most of our NG exports have come from US wells. Good to remember that marketing NG produced in the US is not decided based on patriotism but on profits. Been a while since I reminded folks about the philosophy of the oil patch: we ain’t your momma. LOL.
Pratts – May 2015
US gas exports to NAFTA countries that are intended for commercial re-export to US-denominated non-free trade agreement countries will likely require approval from the US Department of Energy, a department official said.
Deputy Assistant Secretary Paula Gant of the DOE’s Office of Oil and Natural Gas spoke to an audience at the CWC Americas LNG Summit on Tuesday in Austin, Texas.
Responding to questions from a panel moderator, Gant declined to elaborate, citing the agency’s policy on public comments regarding commercial applications for US gas exports that are under review.
Gant’s comments bear directly on several LNG projects currently under development.
rockman on Tue, 9th Aug 2016 9:19 pm
Greg – Here’s some specifics. We currently export mores NG to Mexico the the #2…Canada. In the last 3 years as prices declined the volume doubled to 1,256 bcf/year last May. Just simply logistics: we have a lot of NG in S Texas and northern Mexico is a lot closer then NY.
Mexico’s total energy consumption in 2014 consisted mostly of petroleum (45%), followed by natural gas (40%). Natural gas is increasingly replacing oil in electric power generation. However, because Mexico is a net importer of natural gas, higher levels of natural gas consumption will likely depend on more pipeline imports from the United States or LNG imports from other countries. All other fuel types contribute relatively small amounts to Mexico’s overall energy mix. The country also has growing geothermal and wind energy capacity for electricity generation.
And from the EIA in 2014: A combination of higher natural gas demand from Mexico’s industrial and electric power sectors and increased U.S. natural gas production has resulted in a doubling of U.S. pipeline exports of natural gas to Mexico between 2009 and 2013. Mexico’s national energy ministry, SENER, projects that U.S. pipeline exports to Mexico will reach 3.8 Bcf/d in 2018. This would be more than double U.S. pipeline exports to Mexico in 2013, which averaged 1.8 Bcf/d. This projected growth is driven mainly by higher demand from Mexico’s electric power sector in both the north and interior of the country.
yoshua on Wed, 10th Aug 2016 9:53 am
Boat – Yes, falling production will at some point in the future end this glut. This glut wont last forever.
What happens then ? I don’t know.
The cost of drilling should fall with the falling oil price.
The oil price fell in dollars… but not in rubles. It’s a strange world out there.
https://www.bing.com/images/search?q=oil+price+ruble&view=detailv2&id=048CC73E895F823A9B6F9F5B8AD9FA53938DE59F&selectedindex=16&ccid=lblX99%2BI&simid=608017892477829126&thid=OIP.M95b957f7df88525e898a09f9b730bda5o0&mode=overlay&first=1
Boat on Wed, 10th Aug 2016 11:13 am
Bakken well costs were $7.1 million in 2014, but $5.9 million in 2015.
Eagle Ford wells averaged $7.6 million in 2014, but $6.5 million in 2015.
Marcellus wells were $6.6 million in 2014, but $ 6.1 million in 2015.
Midland Basin wells (in the Permian Basin) were $7.7 million in 2014, but dropped to $7.2 million in 2015.
Delaware Basin wells (in the Permian Basin) cost $6.6 million in 2014 and fell to $5.2 million during 2015.
IHS expects rig rates to fall by 5-10 percent this year, but increase 5 percent in 2017 and 2018
Boat on Wed, 10th Aug 2016 11:13 am
Bakken well costs were $7.1 million in 2014, but $5.9 million in 2015.
Eagle Ford wells averaged $7.6 million in 2014, but $6.5 million in 2015.
Marcellus wells were $6.6 million in 2014, but $ 6.1 million in 2015.
Midland Basin wells (in the Permian Basin) were $7.7 million in 2014, but dropped to $7.2 million in 2015.
Delaware Basin wells (in the Permian Basin) cost $6.6 million in 2014 and fell to $5.2 million during 2015.
IHS expects rig rates to fall by 5-10 percent this year, but increase 5 percent in 2017 and 2018
Boat on Wed, 10th Aug 2016 11:25 am
yoshua on Wed, 10th Aug 2016 9:53 am
Boat – Yes, falling production will at some point in the future end this glut. This glut wont last forever.
What happens then ? I don’t know.
You can read about a lot different scenarios. I trust the market reaction to push prices up when storage is no longer gaining. Higher prices attract drilling rigs. Simple supply and demand.
ghung on Wed, 10th Aug 2016 11:34 am
Gosh, Boat, seems like a case of declining demand driving down prices. Whatever the market will bear, eh? When the building boom in our area crashed, @2008, costs for just about everything building-related dropped a lot; contractors and vendors trying to stay busy. A septic system that cost $7K two years before could be installed for $4k. The per foot cost of drilling a water well dropped almost in half.
Boat on Wed, 10th Aug 2016 12:00 pm
ghung,
Except demand hasn’t gone down. Can you show me an example of declining world demand. You doomers have been preaching that idea for 3 years.
ghung on Wed, 10th Aug 2016 12:07 pm
Sorry, Boat. I guess you needed it spelled out in simple terms.
“North Dakota rig count drops to lowest level in more than a decade
The number of rigs drilling for oil in the Bakken fields has fallen nearly 90 percent from a May 2012 high.”
http://www.startribune.com/north-dakota-rig-count-drops-to-lowest-level-in-more-than-a-decade/375856931/
Demand for drilling rigs has dropped,, a lot. I’m not sure if you think we’re all stupid, or if it’s just you.
GregT on Wed, 10th Aug 2016 12:33 pm
Growth in demand has gone down. Again Boat, you display a complete lack of understanding as to how our economies, our monetary systems, and the exponential function, work.
Questions for you Kevin. Why do you invest in the markets?
A) Are you content with losing money?
B) Do you care whether on not your investments at least make up for inflation?
C) do you expect your investment to keep growing exponentially?
If you answered A, then growth obviously doesn’t matter to you. It does, however, matter to our financial systems, and to our economies. Without exponential growth, they will simply collapse in on themselves in never ending mountains of un-repayable debt.
Boat on Wed, 10th Aug 2016 12:34 pm
ghung,
Just a temporary drop in rigs greggiet. Demand for oil is alive and well. I didn’t know ghung was greggiet till now. They need to take your guns away. Kinda makes you wonder how dangerous this doomer cult is.
GregT on Wed, 10th Aug 2016 12:49 pm
“I didn’t know ghung was greggiet till now.”
And you still can’t quite figure out why almost everyone here thinks that you’re an idiot Boat.
Unbelievable.
ghung on Wed, 10th Aug 2016 1:00 pm
“Just a temporary (HUGE) drop in rigs…” greggiet?!
Jeezz. And a temporary drop in costs of drilling, not so indicative of a big increase in efficiency, if that’s what you’ve been implying. More drillers looking for work = lower drilling costs. Competition at it’s most desperate.
yoshua on Wed, 10th Aug 2016 2:01 pm
Boat – Thanks for the info.
I guess we will just have to wait and see how this plays out in the future. Then we will know for sure. Although I’m also quiet sure that we will argue about what really is going on and why. 🙂
Boat on Wed, 10th Aug 2016 3:41 pm
Well ghung/greggiet,
The cost of a completed well is much lower. But, I repeat, the efficiency and productivity of wells now being drilled has more to do with longer laterals, more stages, more sand, multiple wells per pad etc.
Hundreds of articles covering drilling out there to learn from. Try it.