Gas & LNG in Review: May 08-13, 2016

Alexandra Marie Ferraro's picture
Alexandra Marie Ferraro, Energy Analyst, Guest Reporter
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This week, natural gas took a blow in Canada, became a central focus in India, and was abandoned in Alaska. In addition, two big companies named new CEOs. Have a look at the week below.

Canada Wildfires Drag Down Natural Gas Prices: After a long week of wildfires gripped the world, natural gas saw its lowest prices ever in Canada on Monday. According to Reuters, shut-ins at oil-sand facilities in Fort McMurray [Canada] resulted in oil producers not being able to purchase the natural gas needed for their own production processes. As a result, the price of natural gas fell to just C$0.05/mcf on Monday. These shut-ins could cause 11 bcf of natural gas to be forced into storage, keeping the Canadian gas benchmark price low for the foreseeable future, wrote the Financial Post.

Reuters reported that prices have since climbed back up from their abysmal lows earlier in the week, reaching C$1/mcf as oil production comes back online. The FP also said that Alberta gas demand had already been decreasing before the blazes broke out and that, combining the recent fires, it sits at its lowest levels in nearly a year, at 3.2 bcf/day, a 13% drop since April. In the meantime, Canada may try to sell its over-stock to an already over-supplied US market.

How much of a hit do you think this represent for Canadian natural gas in the long-run? Join the discussion below.

Cheniere, Golar LNG Name New CEOs: On Wednesday the Wall Street Journal reported that Cheniere Energy will appoint seasoned power industry leader Jack Fusco as its new CEO. Separately, LNG shipping company Golar LNG announced it would appoint Oscar Spieler to replace Gary Smith as CEO. Reuters reports that Spieler had been Golar’s CEO from five years ago and implemented the company’s first floating LNG project.

Mr. Fusco was most recently chairman of Calpine Corp., and his appointment follows the debated departure of Cheniere’s founder Charif Souki. The new CEO was a former trader and power plant operator prior to his position with Calpine, wrote the WSJ. According to Bloomberg, Mr. Fusco’s compensation at Calpine was $1.53 million last year. WSJ said Jack Fusco has agreed to buy $10 million in Cheniere’s shares in 2016.

Will Jack Fusco maintain the momentum behind Cheniere’s distinguished LNG efforts? Give us your thoughts.

India Shifting Toward Gas-Based Economy: India’s oil minister Dharmendra Pradhan told Reuters in an interview over the weekend that India was planning to move toward a gas-based economy, particularly increasing its LNG imports and domestic production, calling it a “sustainable gas economy”. Of note, Mr. Pradhan said in the interview that Iran’s Farzad B gas field was being reserved for Indian companies to develop.

India has recently made several moves to facilitate natural gas exploration and drilling in the country with single license policies. On Thursday, Essar Oil Ltd. said it had plans to take advantage of some of these new policies and explore shale gas production in the Raniganj block in West Bengal, according to Bloomberg. The government’s latest policies have also resulted in a skyrocketing of domestic demand for Liquefied Petroleum Gas, Platts says. India will become dependent on imports for LPG as well, with demand growing 7%-9% in the near future, according to Platts.

All of this seems to point to a new narrative for gas in India. Is this good news for relieving global supply glut? Let us know.

Major Oil & Gas Companies Abandon US Arctic Drilling: Royal Dutch Shell and ConocoPhillips will cease exploration efforts in US Arctic waters, a decision finalized prior to a May 1st payment deadline to maintain their holdings in the Chukchi Sea, according to Bloomberg. The region is expected to hold 132 trillion cubic feet of natural gas, but after spending more than $2.6 billion for rights, companies have now abandoned nearly 80% of the leases purchased from the US in 2008, Bloomberg detailed.

Italy’s Eni and Iona Energy Inc. have also abandoned their leases in the Chukchi Sea, according to The Hill, who also wrote that Shell spokesman Curtis Smith confirmed the decision by his company. The Hill reported that the news came from federal government documents obtained by environmental group Oceana.

It appears that as many companies decide to cut spending, the risk associated with Arctic exploration might not be worth the cost. What is your take on the story? Leave us a comment.

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