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Rising US Gas Prices May Make Exports Less Competitive -Energy Firm Executives

Rising US Gas Prices May Make Exports Less Competitive -Energy Firm Executives
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Δευ, 14 Οκτωβρίου 2013 - 17:19
The price of U.S. natural gas is set to rise in the long term on higher production costs and stronger demand, making exports less competitive on the global marketplace, executives of energy companies said Monday.
The price of U.S. natural gas is set to rise in the long term on higher production costs and stronger demand, making exports less competitive on the global marketplace, executives of energy companies said Monday.

Asian gas consumers like Japan , South Korea , China and India have been banking on low U.S. gas prices to feed growing energy needs, with several companies investing billions in gas projects in the U.S. and Canada .

But some experts say U.S. gas may not end up being as cheap as widely expected.

"Today Henry Hub prices are in one of the low price cycles and below replacement costs, and if history is any indication this cannot be maintained in the long term," Richard Guerrant, Global Vice President for LNG at ExxonMobil, said at an industry conference. Henry Hub is the major price benchmark for gas in the U.S.

Mr. Guerrant said new gas export projects will face rising costs due to the need for highly specialized equipment, limited construction facilities and the remote location of resources.

New gas finds across the world, including North America , have been in inaccessible areas lacking transport infrastructure.

"North American LNG will be competitive but it does have to compete with sources of supply from Australia , East Africa , the Yamal Peninsula , Eastern Siberia and other places around the world," said ConocoPhillips (COP)'s Executive Vice President of Commercial, Business Development and Corporate Planning Don Wallette.

Looking forward to 2020-2025, producing only the dry shale gas without the associated oil won't be profitable at $4 or $5 per million metric British thermal unit, Mr. Wallette said.

Liquefied natural gas on the Asian spot market costs around $15-$16 per mmBtu, almost five times the $3-$4 per mmBtu it costs in the U.S. , where the shale gas boom has lowered energy prices.

"Shale gas companies in the U.S. at the moment are not making acceptable rates of return. This will rise over time because investors will demand acceptable rates of return or those companies may not exist," said Peter Coleman, CEO and Managing Director of Australia's Woodside Energy.

Australia, a key gas producing region that was widely expected to be the world's largest LNG exporter by the end of this decade, has also been hit by growing competition from new suppliers.

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