2013-09-22 09:05:20 - New Energy research report from Business Monitor International is now available from Fast Market Research
We have upgraded our net LNG export forecasts to reflect capacity coming online from the Freeport and Lake Charles LNG terminals, the two latest ones approved for non-FTA exports, which opens up the European and north Asian markets. We anticipate that more liquefied natural gas (LNG) export projects will be approved in the coming months. We note a strong upside risk to our forecasts stemming from the nineteen applications under review by the government (DoE) for non-FTA LNG exports.
Natural gas consumption surged in the first three months of the year during snowstorm Nemo in the Northeast. However, over the second quarter, natural gas consumption has been tapered by higher natural gas prices (to a large extent a result of snowstorm
Nemo), which prompted a swift switch by utilities to cheaper coal. We have therefore had to revise down our expectations for natural gas consumption. Our new natural gas price forecast for the Henry Hub price anticipates that prices will remain around current levels of US$4/mnBTU to 2015, after which point the combination of ramp up of LNG exports and a large influx of new petrochemicals complexes will alter the dynamics creating a push-pull environment that will result in a new, higher price equilibrium of around US$7mnBTU.
Full Report Details at
- www.fastmr.com/prod/684750_united_states_oil_gas_report_q4_2013. ..
The main trends and developments we highlight in the US oil and gas sector are:
* According to our forecasts, the boom in US unconventional liquids production is set to combine with higher output from the Gulf of Mexico (GoM) to push total liquids supply (crude oil, natural gas liquids, other liquids and refinery gains) to 12.1mn barrels per day (b/d) in 2013. By 2016, we anticipate that total liquids output will have hit 13.3mn b/d, compared to our previous forecast of 12.6mn b/d.
* Crude oil production in the United States has surpassed the 7mn b/d mark and we forecast that it will reach 7.25mn b/d in 2013. We believe that the consumption patterns in the US have gone through a structural shift over the past four years towards much greater fuel economy and efficiency. We forecast that oil consumption growth in the US will stagnate and over the longer end of our forecast actually begin a decline. The main driver of this trend will be the reduction in the growth rates of gasoline and diesel (distillate fuel oil) consumption. Strong summer demand has prompted a slight upward revision to our consumption 2013 estimate.
* Over 2012 shale gas represented 44% of total dry natural gas production in the US, equivalent to nearly 300bcm. This was up from just 7% in 2007. However, this unconventional boom has created a supply glut, forcing prices down to 10-year lows. Gas producers have therefore shut-in non-associated wells and are endeavouring to channel capital expenditure (capex) towards liquids-rich plays where possible. We therefore estimate the fall in gas production growth in 2012 to accelerate over 2013. We forecast gas production to moderate to 0.5% growth for 2013 and reach 685bcm, up from 681bcm in 2012.
* Our new Henry Hub 10-year forecasts see this dynamic persisting at least until 2015, with prices hovering around the US$4/mn BTU. From 2016 onwards we see a rise in prices, which can be quite dramatic if a number of new LNG export terminals come online at the same time as major petrochemicals complexes that are in construction currently. Under our current scenario, we factor in only the three LNG terminals (Freeport, Lake Charles and Sabine Pass) coming online to the end of our forecast period, which will create enough tightness in the market to push prices slightly above the US$7/mn BTU mark. We note upside risks as there could be far greater demand for US gas if a much larger number of terminals comes online than what we factor in.
* Changing dynamics in the US gas and oil production have drastically reduced the US's import burden. We expect the total oil and gas net import bill to hit US$267bn in 2013, falling to just US$211bn by 2016 and US$118bn in 2022.
* There has been a great deal of activity in the US midstream segment as operators react to changing North American supply dynamics. The opening of new capacity from Cushing to the Gulf coast refineries in July cause a rapid uptick in WTI prices (and an upward revision to our forecasts) as they settled into a new equilibrium. According to our calculations, we currently expect that nearly 1.2mn b/d of additional crude will feed into Cushing by 2015. There will be sufficient pipeline capacity to transport nearly all of this at a low cost to the Gulf Coast therefore suppressing the spread with Brent. On the natural gas side, 175bcm of new, internal, pipeline capacity is at various stages of the planning process.
* In the downstream segment, the surge in the price of WTI over July and August 2013 has trimmed the margins of the refiners across the country, though they remain elevated by historical standards. This could put a damper on refining capacity additions going into 2014 (when we forecasts a higher average WTI prices), which is something that we have factored in our forecasts, with a -0.4% decline in capacity over the year.
* At the time of writing, we assumed a WTI price of US$99 per barrel (bbl), rising to US$101/bbl in 2014.
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