Released April 13, 2022 | SUGAR LAND
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--It's a really good time to be in the natural gas business, speakers told about 350 attendees at a conference April 6-7 in Dallas, Texas, sponsored by EnerCom Incorporated Incorporated (Denver, Colorado).
That was true even before Russia invaded Ukraine on February 24. In mid-February, low storage levels and strong demand growth, comprising domestic demand and exports via pipeline to Mexico and liquefied natural gas (LNG) tankers, pushed up U.S. natural gas prices to about $4.50 per million British thermal units (Btus), approximately 60% higher than its year-earlier price. Two years ago, in early 2020, a million Btus barely fetched $2.
Much of that increased demand growth came from the Electric Power and Chemical Processing segments. In the Power segment, generators continue to fuel the switch from coal to gas as a way to reduce carbon dioxide (CO2) emissions. Chemical processors are using gas to meet surging demand, largely from overseas, as the world economy continues its post-pandemic expansion.
Then Russia invaded Ukraine, further lifting gas prices in the face of global uncertainties. LNG tankers were re-routed from Asia to Europe after they began sailing. As the world assessed the war's implications for oil and natural gas supplies, particularly to Germany and Europe, U.S. gas prices shot up another 50%, to the current price of about $6.70 per million Btus.
Last month, prices also received a lift when President Joe Biden promised to significantly boost U.S. exports of LNG to the European Union this year, to at least 15 billion cubic meters (Bcm), or about 529 billion cubic feet (Bcf), this year. Looking farther ahead, European Commission President Ursula von der Leyen spoke of even greater trans-Atlantic LNG trade, up to 50 Bcm, or about 1.8 trillion cubic feet (Tcf), annually through 2030.
The gas industry also was buoyed by last month's decision by the Federal Energy Regulatory Commission (FERC) to suspend its earlier stance that proposed gas pipelines and LNG export projects must include an analysis of their greenhouse gas (GHG) emissions. The agency on March 24 recharacterized its February GHG policy statements as "draft" policy statements and reopened the public comment period on those drafts.
U.S. natural gas inventories began 2022 at roughly their five-year average, but reserves have fallen for three straight months and are now well below their five-year average, Garrett Golding, a business economist at the Federal Reserve Bank of Dallas, told the EnerCom Dallas attendees April 7. "European natural gas and electricity prices exploded in winter 2021-2022,": he said. "Henry Hub gas prices saw multi-year highs, but nothing like other markets.
U.S. gas producers, who have long suffered from an over-supplied market that kept prices down, are welcoming the turnaround, as are investors. Stock prices of gas-weighted producers are soaring: year-to-date share prices are up 50% or more for EQT Corporation (NYSE:EQT) (Pittsburgh, Pennsylvania), Southwestern Energy Company (NYSE:SWN) (Spring, Texas), Chesapeake Energy Company (NASDAQ:CHK) (Oklahoma City, Oklahoma) and Range Resources Incorporated (NYSE:RRC) (Dallas, Texas).
Between 2005 and 2019, as the shale revolution flourished, the U.S. cut CO2 emissions by a world-leading 970 million metric tons, Chesapeake President and Chief Executive Domenic J. Dell'Osso, Jr. told the EnerCom Dallas attendees. More than half of that cut, about 525 million metric tons, came from power producers shifting from coal to gas. During that time, by contrast, China's CO2 emissions rose by about 4.7 billion metric tons. India's CO2 emissions rose about 1.3 billion metric tons over the 2005-2019 period, he added.
The Chesapeake chief told attendees his company's GHG and methane intensities have fallen sharply in recent years. But he added that it was not enough to say that gas emitted half the carbon of coal when combusted. Instead, Dell'Osso urged gas producers to show they were a critical element of energy security, energy affordability and environmental protection. "Society demands an affordable, low-carbon, energy solution," he said, adding that gas was an essential part of that.
Chesapeake operates in the Marcellus, Haynesville and Eagle Ford shales.
Dell'Osso said natural gas' prospects in the U.S. are further heightened by growing exports of LNG to Europe and beyond. He noted that U.S. shipments of LNG to Europe rose from 154 vessels in 2019 to 246 vessels in 2021, a 60% increase. It seems likely that the number of vessels will be growing in 2022 and beyond. He also noted that billions of dollars of LNG export facilities in the U.S. and import facilities in Europe were in various stages of development or construction, suggesting the surge in U.S.-E.U. LNG commerce expected for 2022 and beyond was not a short-term, isolated event.
An executive from another large Hayesville shale operator, Comstock Resources Incorporated (NYSE:CRK) (Frisco, Texas), detailed the favorable supply and demand fundamentals for gas producers. On April 6, Comstock Chair and Chief executive M. Jay Allison told attendees that "long-term price support is expected because of continued sector capital discipline, increased power generation demand, long-term industrial demand and continued coal/nuclear retirements." In addition, he said Appalachian gas pipeline constraints limit the long-term growth prospects of companies operating there. Finally, he cited natural gas storage levels that are 20% below last year.
Turning to exports, Allison pointed out favorable trends there:
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
That was true even before Russia invaded Ukraine on February 24. In mid-February, low storage levels and strong demand growth, comprising domestic demand and exports via pipeline to Mexico and liquefied natural gas (LNG) tankers, pushed up U.S. natural gas prices to about $4.50 per million British thermal units (Btus), approximately 60% higher than its year-earlier price. Two years ago, in early 2020, a million Btus barely fetched $2.
Much of that increased demand growth came from the Electric Power and Chemical Processing segments. In the Power segment, generators continue to fuel the switch from coal to gas as a way to reduce carbon dioxide (CO2) emissions. Chemical processors are using gas to meet surging demand, largely from overseas, as the world economy continues its post-pandemic expansion.
Then Russia invaded Ukraine, further lifting gas prices in the face of global uncertainties. LNG tankers were re-routed from Asia to Europe after they began sailing. As the world assessed the war's implications for oil and natural gas supplies, particularly to Germany and Europe, U.S. gas prices shot up another 50%, to the current price of about $6.70 per million Btus.
Last month, prices also received a lift when President Joe Biden promised to significantly boost U.S. exports of LNG to the European Union this year, to at least 15 billion cubic meters (Bcm), or about 529 billion cubic feet (Bcf), this year. Looking farther ahead, European Commission President Ursula von der Leyen spoke of even greater trans-Atlantic LNG trade, up to 50 Bcm, or about 1.8 trillion cubic feet (Tcf), annually through 2030.
The gas industry also was buoyed by last month's decision by the Federal Energy Regulatory Commission (FERC) to suspend its earlier stance that proposed gas pipelines and LNG export projects must include an analysis of their greenhouse gas (GHG) emissions. The agency on March 24 recharacterized its February GHG policy statements as "draft" policy statements and reopened the public comment period on those drafts.
U.S. natural gas inventories began 2022 at roughly their five-year average, but reserves have fallen for three straight months and are now well below their five-year average, Garrett Golding, a business economist at the Federal Reserve Bank of Dallas, told the EnerCom Dallas attendees April 7. "European natural gas and electricity prices exploded in winter 2021-2022,": he said. "Henry Hub gas prices saw multi-year highs, but nothing like other markets.
U.S. gas producers, who have long suffered from an over-supplied market that kept prices down, are welcoming the turnaround, as are investors. Stock prices of gas-weighted producers are soaring: year-to-date share prices are up 50% or more for EQT Corporation (NYSE:EQT) (Pittsburgh, Pennsylvania), Southwestern Energy Company (NYSE:SWN) (Spring, Texas), Chesapeake Energy Company (NASDAQ:CHK) (Oklahoma City, Oklahoma) and Range Resources Incorporated (NYSE:RRC) (Dallas, Texas).
Between 2005 and 2019, as the shale revolution flourished, the U.S. cut CO2 emissions by a world-leading 970 million metric tons, Chesapeake President and Chief Executive Domenic J. Dell'Osso, Jr. told the EnerCom Dallas attendees. More than half of that cut, about 525 million metric tons, came from power producers shifting from coal to gas. During that time, by contrast, China's CO2 emissions rose by about 4.7 billion metric tons. India's CO2 emissions rose about 1.3 billion metric tons over the 2005-2019 period, he added.
The Chesapeake chief told attendees his company's GHG and methane intensities have fallen sharply in recent years. But he added that it was not enough to say that gas emitted half the carbon of coal when combusted. Instead, Dell'Osso urged gas producers to show they were a critical element of energy security, energy affordability and environmental protection. "Society demands an affordable, low-carbon, energy solution," he said, adding that gas was an essential part of that.
Chesapeake operates in the Marcellus, Haynesville and Eagle Ford shales.
Dell'Osso said natural gas' prospects in the U.S. are further heightened by growing exports of LNG to Europe and beyond. He noted that U.S. shipments of LNG to Europe rose from 154 vessels in 2019 to 246 vessels in 2021, a 60% increase. It seems likely that the number of vessels will be growing in 2022 and beyond. He also noted that billions of dollars of LNG export facilities in the U.S. and import facilities in Europe were in various stages of development or construction, suggesting the surge in U.S.-E.U. LNG commerce expected for 2022 and beyond was not a short-term, isolated event.
An executive from another large Hayesville shale operator, Comstock Resources Incorporated (NYSE:CRK) (Frisco, Texas), detailed the favorable supply and demand fundamentals for gas producers. On April 6, Comstock Chair and Chief executive M. Jay Allison told attendees that "long-term price support is expected because of continued sector capital discipline, increased power generation demand, long-term industrial demand and continued coal/nuclear retirements." In addition, he said Appalachian gas pipeline constraints limit the long-term growth prospects of companies operating there. Finally, he cited natural gas storage levels that are 20% below last year.
Turning to exports, Allison pointed out favorable trends there:
- LNG exports have reached record levels, with 2022 year-to-date volumes averaging about 12.4 billion cubic feet per day (Bcf/d) so far this year, with an additional 1 Bcf/d of flow rate capacity
- Additional LNG terminal export capacity of 4.4 Bcf/d is currently under construction
- Strong Mexican pipeline exports that have reached an average of 6.3 Bcf/d so far this year
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
