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Global gas prices will start to converge soon, expert predicts

Unprecedented price volatility and market changes coming faster than ever are making it tougher to accurately forecast oil prices and market demand, Edward Chow, a senior fellow at a Washington, D.C.-based think tank told the Alaska World Affairs Council May 12 in Anchorage.

He did suggest, however, that global natural gas prices will start to consolidate, moving away from separate pricing in North America, Europe and Asia markets. “We will see a gas market in the next 10 to 15 years that will look a lot more like the globally connected oil markets,” said Chow, who has 30 years experience in the oil industry, with 20 years at Chevron in the United States and overseas. He currently serves as a senior fellow at the Center for Strategic & International Studies in Washington.

With so much natural gas available worldwide, Chow said, over time price will be determined by gas-on-gas competition rather than gas-on-oil as is the historical norm in Japan where LNG is priced as a percentage of the price of oil.

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LNG industry eyes U.S. gas developments

The North American gas-price collapse caused by the shale-gas boom is simultaneously battering producers while exciting global buyers that some lower-cost liquefied natural gas might soon be available to them.
Those were take-away messages from the World LNG Americas Summit held April 25-26 in San Antonio. Delegates from across the United States and around the world tried to make sense of what is occurring in the North American natural gas industry. They discussed whether the advent of U.S. exports will soften world LNG prices and, if so, by how much. And they wondered how much today's low U.S. natural gas price will impair production.
But this much was clear: Buyers across the world are eager for significant U.S. LNG exports to begin.

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State formalizes shift to look at Alaska LNG export project

Alaska on Wednesday formally endorsed an effort by TransCanada and three North Slope producers to shift their focus to a pipeline project that could export liquefied natural gas to Asian markets.

The state commissioners of revenue and natural resources agreed[link to the commissioners’ letter] to amend TransCanada’s gas pipeline project plan adopted in 2008 under the Alaska Gasline Inducement Act. While giving the companies time to look at and possibly develop an LNG export project, the commissioners postponed for two years TransCanada’s October 2012 deadline to apply to the Federal Energy Regulatory Commission for authority to build and operate a pipeline that would send North Slope natural gas to Lower 48 markets via Canada.

Last fall, Gov. Sean Parnell asked TransCanada, ExxonMobil, Conoco Phillips and BP to give a new look at an LNG export project in light of low North American natural gas prices and high prices in Asia. On March 30, the companies told Parnell[link to March 30 letter] they were considering an LNG project.

The commissioners said Wednesday the oil companies and TransCanada have committed to completing a serious assessment by Dec. 31, 2012, of interest among producers, explorers, LNG terminal developers and others in the possible export project. Under AGIA, the state will reimburse up to 90 percent of costs incurred in coming months for work on the export proposal.

 

 

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Pipeline Topics

Exhaust plumes rise from structures during another sub-zero sunrise as seen from an overlook at the University of Alaska Fairbanks on Nov. 18, 2011.

Credit: Eric Engman/Fairbanks Daily News-Miner

The challenges of distributing North Slope gas to Alaskans

A large-volume North Slope natural gas pipeline could supply gas to Alaskans for decades, but delivery would come with an upfront cost of over a billion dollars.

A variety of studies in recent years suggest it would be possible to deliver gas from a large pipeline to the state's population center in Anchorage and surrounding areas for about the price consumers there now pay for gas – possibly less.

It also suggests that many Fairbanks residents in the state's Interior might see their cost of heating and electricity fall – possibly a lot.

For the vast but sparsely populated rural Alaska – whether far from a major North Slope gas pipeline corridor or even along the route – the price of natural gas or propane extracted from the gas could be too high to win customers without state help in covering construction costs.

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