Gas & LNG in Review: September 18-23, 2016

Alexandra Marie Ferraro's picture
Alexandra Marie Ferraro, Energy Analyst, Guest Reporter
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This week’s natural gas news brought in highs for US natural gas futures, a firm commitment by Engie to LNG, natural gas production plans by Petrobras, and a strong call by creditors to encourage natural gas competition in Ukraine. Take a look at our highlights below.

US Natural Gas Reaches Highest Demand in Over One Year. Natural gas demand surged amid expectations of warm weather, breaking $3 per MMBTU for the first time since January 2015, the Financial Times reported. The Wall Street Journal highlighted that analysts are projecting that the gas surplus is slowly shrinking, also helping to rally the market.

Bloomberg quoted a market research manager who commented, “Right now the [natural gas] market looks unusually strong and it doesn’t want to back off.” Bloomberg called the news a “dramatic comeback” since earlier this year. Without a doubt, US gas firms’ decisions to lower costs and high power demand have helped to rebalance the market in the commodity’s favour.

Are we seeing the dawn of a revitalized natural gas market in the US? Do you expect to see US shale gas firms adjust their strategies in light of this strong demand? Share with us your thoughts below.

Engie Reasserts Commitment to Natural Gas. CEO of France’s Engie Isabelle Kocher affirmed to Reuters on Wednesday that the firm will maintain its LNG assets saying, “Shipping gas to countries…is at the heart of our business.” Kocher also stated that in the meantime Engie will exit from the coal industry as well as oil production in the near future, according to Reuters.

Along similar lines, a senior official from Cheniere confirmed on Wednesday that European firms who are contracted buyers of the company’s US LNG, including Engie, are likely to begin importing their cargos directly into the European market in the coming years thanks to the growing dynamism of the global market, Platts reported.

These are strong signs for an expected increase in the flexibility of Europe’s natural gas market. When exactly do you think the turning point will be for companies like Engie to decide LNG is more profitable in the European market than the markets it is currently supplying? Give us your take on the story below.

Petrobras Re-Aligns Strategy, Eyes Oil and Gas Future. After several challenging months at the heart of a corruption scandal, Petrobras announced newly aligned plans on Tuesday as it transitions away from government-driven priorities, several news sources reported. The new strategy favours natural gas and oil production while significantly cutting spending on other projects such as fertilizer, biofuel, and petrochemicals, Bloomberg cited Petrobras CEO Pedro Parente.

During the Tuesday presentation, Petrobras said investments would amount to $74.1 billion for 2017-2021, down from an original $98.4 billion in a previous five-year plan, according to the Wall Street Journal. Nevertheless, the Brazilian company signalled optimism saying these cuts would facilitate focusing on natural gas and oil production—the Financial Times referred to the announcement detailing a projected total domestic and international oil and natural gas production of 3.41m barrels per day by 2021.

It appears Petrobras understands the value and longevity of the natural gas market with its new focus. Will the firm recover from its most recent challenges with its newly aligned priorities? Leave us a comment below.

 

Ukraine Changes Naftogaz Charter, Creditors Call for Reconsideration. The European Bank for Reconstruction and Development, one of Ukraine’s most significant lenders, on Monday appealed to the Ukrainian government to backtrack on its decision to place state-run Naftogaz’s gas transportation subsidiary Ukrtransgaz under direct control of the ministry of economy, Reuters reported following an interview with EBRD president Suma Chakrabarti. The move could affect financing for Naftogaz under the terms of an IMF bailout package, according to the Financial Times.

The EBRD’s warning seeks to ensure Ukraine abides by financing requirements which are designed to attract investment and spur economic growth. The FT quoted Ukrainian Prime Minister Volodymyr Groysman, “…if this step is contrary to our obligations, the decision will be changed.” EBRD President Chakrabarti also confirmed to Reuters the Ukrainian government was evaluating the decision.

How else can creditors encourage governments to lessen their control over natural gas companies and promote the free market to spur this industry’s growth? Let us know below.

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