NAT. GASQUESTION:
Who are the main NG suppliers to
LNG, their LNG shipping terminals out of Orange, and Corpus Christ,
Texas? Who will benefit most from LNG’s sales?
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The Cheniere facility that’s operational now is tied in to several pipeline systems, so they’re probably able to buy gas from almost anyone. Presumably other ones will also build in some pipeline flexibility, and they’re all on the Gulf Coast where there’s a huge amount of capacity to move and process nat gas.
LNG (Cheniere) should be buying at the market rate, or close to it if they ink some longer term deals — they won’t be paying more for their natural gas than other major customers are paying, and natural gas is pretty fungible in the United States because of good pipeline coverage of the country (meaning it’s worth similar amounts in Houston or Lake Charles or Chicago, excepting transportation costs). Any benefit conferred on the US natural gas producers by LNG is likely to be widely distributed and minor, based just on what the increase in demand for gas to supply the LNG plants does to the price of gas in general… and with supply still huge, and lots of untapped shake supply, price increases of any substantial amount should result in big increases in production, which should bring prices back down.
I think the profit in LNG, if there turns out to be one, will be in either the companies who provide a service where demand is greater than supply (perhaps like the LNG tanker owners at some points in the cycle, though tankers are currently overbuilt, or the construction and engineering companies, though those have all been squashed by the fall in oil prices), or in those who gamble on sustained future price differentials between European/Asian LNG and US natural gas, as Cheniere is effectively doing — if the premium paid for LNG falls over the next five years, Cheniere will have terrible results; if it rises, Cheniere will probably do very well despite their huge debt burden.
There is an interesting piece on the sourcing of gas for LNG projects here, if you’re curious and want to research more.
Europe may stand to benefit handsomely due to Trumps scolding of Germany and others for allowing Russia to build a NG pipeline to bring NG to Europe. The stupidity of that defies all logic when there is ample LNG. Russia could essentially hold Europe hostage if ever there was turmoil. Last I heard Trump had convinced Europe to reconsider and buy American LNG.
LNG costs more than twice as much as “local” pipeline gas, in a normal world, but Europe and Asia have been major LNG importers for 20 years, partly because of the strategic imperative of not being completely reliant on Russian pipelines… not a new thing, this has been a major issue for a decade. More US supply continues to come online, but we’ll
Have to see whether prices are high enough to keep the US LNG exporters solvent.