Tuesday, December 10, 2019

Notes From All Over, Part 2 -- More On Natural Gas - Crude Oil Pricing Linkage -- December 10, 2019

Quesqui: the new "find" for Pemex -- from Rigzone -- some figures rounded --
  • the Quesqui deposit
  • 500 million bbls of 3P reserves (proven, probable, and possible)
  • most important Pemex discovery since 1987
  • previously, touted as the largest find in 25 years, onshore Ixachi, 1.3 billion bbls 3P reserves
  • expected to reach 70,000 bopd / 300 million cfpd by end of 2020
  • could increase by as much as 200 million bopd (I will believe it when I see it -- or read about it)
Pricing: Crude Oil and Natural Gas

Pricing disconnect between natural gas and crude oil. In response to this post, a reader who knows this stuff very, very well wrote:
I do not think it is yet widely recognized just how profound - and widespread - are the effects of the divergence of Henry Hub pricing (aka US production) and benchmarks for crude (WTI, Brent, amongst many).
Focusing only upon the cost/price impacts on US LNG exports, get a load of these ...
  • Algeria is cutting back on piped gas exports to Europe 
  • Cyprus is mulling over an LNG terminal (FSRU to start) rather than commit to a short, 12 inch pipeline from the nearby Israeli gas field as the ~$5.50/mmbtu LNG price is cheaper than the ~$6/mmbtu price of the piped gas 
  • Singapore is on track to completely end its imports of piped gas from nearby Malaysian and Indonesian fields when contracts expire in 5 years as imported LNG will be substantially cheaper 
  • New, massive Siberian/China gas pipeline may not provide cheaper gas than LNG in southern regions of China due to cost of transportation 
  • Turkey was importing LNG via the world's largest FSRU rather than increasing purchases of Gazprom's piped gas as the LNG was almost 2 bucks/mmbtu cheaper. 
One common thread to these developments is that historical pricing for piped gas is tied to indexed crude oil pricing
As the US-centric Henry Hub pricing continues to maintain a surreal level of rock bottom numbers, traditional LNG or piped gas suppliers are simply getting rocked out of their boots. These players include Australia, Qatar, Algeria, Russia ... virtually any existing or emerging country looking to export natural gas.

Note ... just as political and social factors come into play with oil revenues vis a vis domestic monetary distribution, the natural gas producers are in the same boat.
With LNG module fabrication yards in China and Italy affiliated with McDermott, Fluor, BHGE, et al, cranking out ready-to-assemble components ...
With small and mid scale operators plunging in with innovations at blinding speed ...
It is simply incontestable to state that the global order in the energy world will see upheavals in the coming years unlike anything witnessed in years gone by.

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