Cheniere’s Push For Montney/Horn River Gas Makes Us Think About BC LNG Implications

It may have gone under the radar but we had to think about the potential BC LNG implications from Cheniere Energy’s efforts to source as much Montney and Horn River as possible for its Sabine Pass and Corpus Christi LNG export projects.  We can see the case for more Montney natural gas producers that aren’t part of an integrated BC LNG project to commit to a GoM LNG and receive HH linked prices.  Its not necessarily that BC LNG may not get going.  Rather, it’s hard to see BC LNG getting a big natural gas price lift relative to HH pricing, so why not deliver Montney gas to GoM LNG today?

Continue reading “Cheniere’s Push For Montney/Horn River Gas Makes Us Think About BC LNG Implications”

Every Year Oil Demand Is Up In H2 Vs H1, Expecting +50 Million Barrels Per Month In H2/17

There is a strong logical case for oil hitting $60 before year end if OPEC/non-OPEC extend their ~1.8 million b/d and can manage reasonable (ie. >80%) compliance, even if US oil production continues to grow.  Why? EVERY YEAR, oil demand is ALWAYS up strongly in H2 vs H1.  Every year, oil demand follows a seasonal pattern. The low demand period every year is Q1. Then oil demand starts to pick up slightly in Q2, but the big increases in oil demand are every year in Q3 and Q4.  Oil demand in H2 is expected +~1.7 million b/d, or ~50 million barrels per month of increased oil demand vs H1/17.

Continue reading “Every Year Oil Demand Is Up In H2 Vs H1, Expecting +50 Million Barrels Per Month In H2/17”

Wider AECO Differentials In Q3, Its Good That The New AECO $2.50 Is The Old AECO $3.25

It looks like the HH less AECO differential will widen this summer, in part due to the NGTL planned outages this summer to expand the system capacity.  This week, NGTL provided its new monthly outage forecast [LINK] and it now looks like every month this summer will have a significant outage in the key region impacting the Montney.  However, it doesn’t look like any additional outages, just a shifting of some of the smaller ~0.6 bcf/d Aug outage into July.  The big NGTL outage is still ~1.8 bcf/d in Aug, then ~0.6 bcf/d in June, and now, with the shift, another ~0.6 bcf/d in July.  These outages are needed to allow NGTL to expand capacity on the key Upstream James River Receipt area that is the core of the Montney growth.       Continue reading “Wider AECO Differentials In Q3, Its Good That The New AECO $2.50 Is The Old AECO $3.25”

Under Construction US LNG Export Projects To Add >2 Tcf Of Incremental Demand In 2017 Thru 2019

Oil price volatility is primarily driven by supply factors (ie. OPEC compliance), whereas Henry Hub (HH) price volatility is primarily driven by demand factors (ie. winter weather).  There are fundamental changes to non-weather natural gas demand that are happening and do not require future changes to have a material demand impact relative to swings in winter weather demand.  Under construction LNG export projects alone are expected to add >2 tcf of demand per year by the end of 2019  (relative to 2016), and this is before increasing pipeline exports to Mexico.  There are no “what if’s” required to keep these non-weather natural gas demand factors on track, which means there should be an outlook of better downside HH price protection in the winter, and better HH prices in 2018 and 2019 compared to the current HH strip of ~$3. The primary risk to better HH prices is a return of strong US natural gas production from natural gas drilling and from associated natural gas from oil drilling.   Continue reading “Under Construction US LNG Export Projects To Add >2 Tcf Of Incremental Demand In 2017 Thru 2019”

Is The White House/Exxon Statement A Signal For No Border Adjustment Tax On Oil And Gas?

It may well turn out to be an excellent CERA week for the Cdn oil and natural gas sector to start the turn in sentiment from negative to positive. The #1 issue for relative underperformance of Cdn oil and gas stocks to the US peers is the fear of Border Adjustment Tax (BAT) including US imports of Cdn oil and gas.  Two events yesterday seem to be more than coincidence.  Yesterday’s White House statement on ExxonMobil (XOM) looks to be a signal pointing to NO BAT on oil and gas.  And XOM’s CERA speech yesterday looks to be the finishing thought or closer to the argument that links the reality of oil and gas logistics to be a key contributor to Trump’s priorities of growth, jobs, manufacturing, and exports.  Continue reading “Is The White House/Exxon Statement A Signal For No Border Adjustment Tax On Oil And Gas?”

We Should Watch: Is Key Energy Right And US Service Costs Will Return To 2015 Levels in 2017?

The who’s who of the energy world are in Houston for CERA week.  The reporting has started and it is on the global view of oil and gas being said by OPEC, supermajors, politicians, and major energy agencies in their speeches or on the sidelines.  But we expect energy followers will walk away with a major impression on something that isn’t a focus of the speeches – the US oil and gas service sector is running at full tilt.  CERA is in Houston, the center of the US oil and gas industry and that means the day to day oil and gas buzz will be evident to anyone. And the buzz of a full speed ahead US service sector will then focus on how much capacity is there to expand, in what time period, and are service prices (costs to the producers) going to break out.

Our March 5, 2017 Energy Tidbits highlighted “the first service sector warning heard to date (by Key Energy) that service sector prices will return to 2015 pricing levels by year end 2017.”  We have not seen other US service companies or producers come out with this bold of a prediction for US service costs, but its worth watching.  If Key is even directionally right, higher service costs on the top plays will ultimately flow thru to all US plays and spill over into Canada.  It will change the assumption of modest service price increases in 2017 and continuing in 2018.  Higher service costs can be absorbed by the higher quality plays, but as always happens in rising costs or declining prices, it’s the lesser quality plays that get hit the hardest Continue reading “We Should Watch: Is Key Energy Right And US Service Costs Will Return To 2015 Levels in 2017?”