Introduction….The first export shipment of liquefied natural gas (LNG) produced in Lower 48 states on February 24, 2016 is a milestone reflecting a decade of natural gas production growth puts the U.S. in a new position in worldwide energy trade. (EIA)
The rapid growth of shale gas has increased natural gas production each year since 2006. The resulting decline in natural gas prices has led to rising natural gas exports to Mexico via pipeline, and now to overseas markets via LNG tankers.
Under construction or approved…
Cheniere Energy’s Sabine Pass Liquefaction Project in Sabine Pass, Louisiana, consists of six different liquefaction units, or trains, the first of which began service in February after many delays. The other trains are in various stages of development and permitting. Total permitted capacity by FERC is 4.16 Bcf/d.
Four LNG export terminals are currently under construction:
- Dominion Energy’s Cove Point LNG facility in Cove Point, Maryland, is scheduled to bring one train totaling 0.82 Bcf/d online near the end of 2017.
- Corpus Christi LNG, another Cheniere project, is under construction in Corpus Christi, Texas. The terminal is scheduled to begin service in 2018, with total permitted capacity at 2.14 Bcf/d.
- Sempra Energy’s Cameron LNG terminal, located in Hackberry, Louisiana, is under construction and is scheduled to bring three trains online in 2018. A total of 1.7 Bcf/d has been permitted.
- Freeport LNG‘s terminal planned for Freeport, Texas, has three trains under construction totaling 1.8 Bcf/d. The first two are scheduled to begin service in 2019, and the third in 2020.
Another terminal, Southern Union’s Lake Charles (Louisiana) LNG facility, has been approved by FERC but is not yet under construction. Lake Charles also has an LNG import terminal. Several more LNG export terminals, mostly on the Gulf Coast, have been proposed or have pending applications with FERC.
A lesson from history…You may remember the story off the San Francisco 49ers gold rush where a total of $2 billion worth of gold was extracted during the Gold Rush, which peaked in 1852. The non-native population swelled by 99,000 in the California territory
The company that provided the cloths needed by the 49ers is still in operations today. Levi Strauss & Co. had 2016 sales totaling $4.6 billion. Itls one year sales were more than twice the value of the gold rush that started the company.
Today’s opportunity created by growth in natural gas production?…Some might think today’s opportunity is in building the LNG export facilities. However, that is a major capital expenditure with several years required to get any payback. Many are developing and producing natural gas. That’s not it either.
However, Just as in the 49ers story, the biggest opportunity is in providing the what is desperately needed by the producers. This service is required by the environmental regulators. It’s not salt water disposal either. In fact it’s more profitable. Message me to learn more at email@example.com.
Sources: “Growth in domestic natural gas production leads to development of LNG export terminals” U.S Energy Information Administration (EIA,) 4 March 2016; “Summary of LNG Export Applications of the Lower 48 States,” Energy.gov
U.S. Shale Oil Boom
Introduction…Private equity funds raised $19.8 billion for oil ventures in the first quarter. That is nearly three times the total raised the same period last year.
The accelerating pace of oil private equity, along with hedge funds and investment banks, arrives even as the recovery in oil prices from 8-year low has stalled at $50 per barrel due to stubborn oil glut.
Why the increase investment now? The shale sector has become increasingly attractive to investors not because of rising oil prices, but rather because producers have achieved startling cost reductions – slashing up to half the cost of pumping a barrel in the past two years. Investors also believe the glut will dissipate as demand for oil steadily rises.
The financiers are confident that they can squeeze increasing returns from shale fields – without price gains – as technology continues to cut costs. In addition, “Demand for oil has been more robust than anyone imagined three years ago,” said Mark Papa, chief executive of Centennial Resource Development Inc. (CDEV.O).
What now…This year’s drilling rush could be tested if global supplies grow too fast or if demand cools. The U.S. drilling rig count is rising at its fastest pace in six years and U.S. crude stockpile are close to 533 million barrels – near an all-time high and enough to supply the United States for 25 days.
In summary...”Shale funders look at the economics today and see a lot of projects that work in the $40 to $55 range” per barrel of oil, said Howard Newman, head of private equity fund Pine Brook Road Partners, which last month committed to invest $300 million in startup Admiral Permian Resources LLC to drill in West Texas.
Source: Earnest Scheyder, “Undaunted by oil bust, financiers pour billions into U.S. shale, Reuters, 17 April 2017