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the 2015-2020 period is likely to be one in which natural gas prices in Japan plummet as LNG imports from the US resume

What amounts are we speaking about? I tried to look, and found these figures:

  • There is one US LNG terminal project connected to Japan with a planned capacity of 8 million tons a year,
  • one billion cubic feet of natural gas generates 0.1 TWh,
  • 1 million tonnes of LNG is 48.7 billion cubic feet,
  • if I calculated right, these LNG imports would give Japan 40 TWh of electricity annually.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sun Jun 24th, 2012 at 06:43:11 AM EST
[ Parent ]
The base issue is that the cost of gas fired  electricity generation in Japan is much higher than in Europe and particularly the US.  Oil is generally sold at roughly the same price globally.  Gas prices differ greatly As of May 2012, $2.44/mmbtu in the US, $11.64/mmbtu in Europe, and $16.75/mmbtu in Japan. There's a huge incentive to export gas from North America to Europe and Asia.

And the rush is on. There are 18 bcfd of export projects here.  On the West Coast alone there are 4.1 bcfd of proposed project, which are likely going to go to Asian markets. Using your conversion factor, that's 0.41 TWh daily. Divided by 24, you get something 17,000 MW of capacity. Or ~15% of total electrical generation.

Even if the Japan isn't supplied entirely from North America, this is going to seriously drive down costs.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sun Jun 24th, 2012 at 04:00:15 PM EST
[ Parent ]
If this could be realised, that would be some impressive development. However, there are some other factors:

  • Some of the above projects are rivals.
  • Export potential should be limited by domestic consumption. Even moreso if the export possibility leads to rising domestic prices and with that a backlash, as is happening now:

Who's Winning The Natural Gas Game? - Domestic Critics Slow Potential LNG Export Boom - US Business News - CNBC
Heated debate over the impact of liquefied natural gas exports on domestic prices is threatening to derail them at a crucial time for the U.S. industry.

...Massachusetts Rep. Edward Markey, a top Democrat on the House Natural Resources Committee, is pulling out the stops to slow exports.

He began worrying about the impact of liquefied natural gas (LNG) exports on U.S. prices, when he saw permit applications piling up at the Department of Energy.

So, Markey and Sen. Ron Wyden, D-Ore., another key voice on U.S. energy policy, introduced bills requesting a timeout on LNG permit approvals until 2025.

...As a result, only one U.S. terminal has been given the go-ahead. A dozen-plus others are on hold, any regulatory action delayed until an Energy Department study on the economic impact is completed later this the year.

  • For the effect on Japan, one also has to assume that Japan's current LNG suppliers will be able to maintain their export volumes until the US projects go on-line. (It's still rising though: Japan imported 78.5 million tonnes last year, that would be 10.5 bcfd on average; and this February it was 7.67 million tonnes or 12.9 bcfd.)
  • US LNG export terminals seek permanent agreements with importing countries, so instead of summing up projects on the Atlantic coast, I searced for these planned agreements. There is Cove Point, MD (11 on map) for 2.3 million tonnes/year from 2017; Hackberry, LA (8 on map) for 8 million tonnes/year from 2016 [I omitted the link for this earlier]; Sabine Pass, LA (not on the map as it is the one already approved) with some portion of 5.5 million tonnes/year from 2015; and Lake Charles is mentioned in relation to Japan in news articles but with nothing specific. Further agreements are certainly possible, but I think imports on the basis of those would start at a later date.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Mon Jun 25th, 2012 at 05:45:23 AM EST
[ Parent ]
If critics are correct investment in shale gas may be about to be revealed as a giant Ponzi scheme.

Shale Gas Reality Begins to Dawn  SUNDAY, JUNE 24, 2012  The Automatic Earth

It has long been our position at The Automatic Earth that North America is collectively dreaming with regard to unconventional natural gas. While gas is undeniably there, the Energy Returned On Energy Invested (EROEI) is dramatically lower than for conventional supplies. The critical nature of EROEI has been widely ignored, but will ultimately determine what is and is not an energy source, and shale gas is going to fail the test.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Jun 26th, 2012 at 08:10:53 AM EST
[ Parent ]
Based on prices, rig counts and production levels, shenanigans with future hedging and land leaves, and internal emails contradicting the official optimism, the article and its sources make a pretty good case that the current boom is a bubble. However, IMO that doesn't exclude the possibility that there could be another boom (bubble) fuelled by foreign investors willing to pay higher prices in long-term agreements. The key issue then is, it appears to me, that of depletion rates: if it is exponential on the long term like critics claim, it will be another short bubble; if depletion flattens out over a period of decades like advocates claim, then the price will decide.

By the way, the New York Times article with the internal memos is here (the article at The Automatic Earth only links to the document viewer itself).

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Tue Jun 26th, 2012 at 01:24:04 PM EST
[ Parent ]
but LNG exports from the US are going to remain marginal, or will suffer fro ma massive political backlash as they lead to increased prices domestically.

Prices for gas in the US have been exceptionally low lately, due to a combination of really weak demand from the recession and a burst of production from fields where investment took place during the high price years and which are selling gas at marginal cost today (which are largely unsustainable in the medium term). The volumes from shale gas are not so big as to allow for a lot of exports before you run into serious price hikes.

So the early LNG export projects will make a killing, but not many will be built in the end. The people really making money are those that had contracts to export LNG to the US and have the physical capacity to turn these cargo to Europe or Asia (i.e. the contractual right to send the gas elsewhere on a spot basis and share the profits with the US importer, and the availability of LNG tankers to do so).

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sun Jul 1st, 2012 at 06:23:24 AM EST
[ Parent ]


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