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Natural Gas Weekly Update

for week ending July 30, 2014  |  Release Date:  July 31, 2014  |  Next Release: August 7, 2014

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JUMP TO: In The News | Overview | Prices/Demand/Supply | Storage

In the News:

Alaska LNG project files for export license

The Alaska LNG Project LLC has asked the Department of Energy for authorization to export 20 million tons of liquefied natural gas (LNG) per annum, the equivalent of 2.55 billion cubic feet per day (Bcfd) of natural gas, for 30 years to both Free Trade Agreement (FTA) and non-FTA countries. The July 18 filing requested that the 30-year LNG export period begin when the project begins operations, which will be no later than 12 years from the date of authorization.

Project participants include the state-owned Alaska Gasline Development Corporation plus affiliates of TransCanada, BP, ConocoPhillips, and ExxonMobil. Alaska Gasline is chartered to maximize the state's economic benefits from LNG exports, including the possibility of becoming an equity partner in the project.

The Alaska LNG project is expected to cost between $45 billion and $65 billion. A large portion of this capital cost would be used for the construction of an 800-mile, 3.5 Bcfd natural gas pipeline that would extend from the North Slope gas production fields to Nikiski in south-central Alaska (see map). A new LNG export terminal would be built at Nikiski. The proposed pipeline capacity exceeds the LNG export request so that it can transport natural gas to Alaskan gas customers and provide the energy required to convert the methane gas into a liquid at the export terminal. Other facilities that would be built as part of the project include natural gas gathering pipelines and a gas treatment plant on the North Slope.

The filing anticipates that construction would take 9 to 12 years. During the first two to three years, project sponsors would determine the project's initial commercial feasibility; that period also would be spent getting permits and land use authorizations. The next two to three years would be devoted to front-end engineering and design and making a final determination of commercial feasibility. The actual construction of the project would encompass the final five to six years.

Project sponsors estimate they will need 47.5 trillion cubic feet (Tcf) to support both exports and increased Alaska consumption. The website of the Alaska governor's office says that the state holds "roughly" 200 Tcf of natural gas. Key areas for Alaskan natural gas include the North Slope's Prudhoe Bay and Point Thomson fields. The project website says that Prudhoe Bay is expected to contribute 75% of the total gas needed, while Point Thomson would contribute 25%. Point Thomson, located 60 miles east of Prudhoe Bay, is Alaska's largest undeveloped oil and gas field, holding an estimated 8 Tcf of natural gas and hundreds of millions of barrels of oil and gas liquids, according to Alaska's Department of Natural Resources.

Alaska has exported LNG for almost 50 years, starting in 1967 from the existing Kenai LNG export terminal in Nikiski that is currently owned by ConocoPhillips. The Kenai facility exported its largest volumes from 1994 through 2006, when exports averaged more than 60 Bcf per year. After the Kenai LNG Plant export license expired on March 31, 2013, ConocoPhillips Alaska was granted a new license on April 14, 2014, and was approved to export the equivalent of 40 Bcf of LNG over a two-year period.

Overview:

(For the Week Ending Wednesday, July 30, 2014)

  • Natural gas prices generally fell at most market locations this report week (Wednesday, July 23—Wednesday, July 30). The Henry Hub spot price declined from $3.79 per million British thermal units (MMBtu) last Wednesday to $3.76/MMBtu yesterday.
  • At the New York Mercantile Exchange (Nymex), the August 2014 contract began the report week on July 23 at $3.762/MMBtu. September took over as the front-month contract yesterday, supplanting the August contract, which settled at expiration on July 29 at $3.808/MMBtu. The September futures contract closed at $3.786/MMBtu yesterday. The price of the 12-month strip increased, from $3.855/MMBtu last Wednesday to $3.863/MMBtu yesterday.
  • Working natural gas in storage rose to 2,307 Bcf as of Friday, July 25, according to the U.S. Energy Information Administration (EIA) Weekly Natural Gas Storage Report (WNGSR). A net increase in storage of 88 billion cubic feet (Bcf) for the week resulted in storage levels 18.7% below year-ago levels and 21.7% below the 5-year average for this week.
  • The Baker Hughes rotary rig count increased by 12 to 1,883 active units this week. Natural gas rigs increased by 3 to 318, and oil rigs increased by 8 to 1,562. Gas rigs are 51 units below last year's level, and oil rigs are 161 units greater than last year's level.
  • The average daily Mont Belvieu, Texas, natural gas plant liquids composite price for the week covering July 21 - July 25 decreased by 7 cents/MMBtu (0.7%) to $9.61/MMBtu. An 8.4% decline in the price of ethane lead the overall decline. Butane and isobutane fell by 1.0% and 0.4%, while propane and natural gasoline rose by 0.2% and 1.9%.

more summary data

Prices/Demand/Supply:

Prices generally lower as temperatures stay cool. The Henry Hub spot fell from $3.79/MMBtu at the beginning of the week to $3.76/MMBtu yesterday, continuing a several week decline. On average, prices at trading locations across the country fell by 15 cents/MMBtu, with unseasonably cooler temperatures at the end of the report week in the Northeast, Midwest, and Midcontinent. Significant price decreases occurred in the MidAtlantic, with the biggest decline (38%, or 91 cents) at Transcontinental Pipeline's Leidy Line delivery point in Pennsylvania. At this location, the spot price started the report week at $2.40/MMBtu, falling by 9%, or 22 cents/MMBtu, by Tuesday, and dropping another 69 cents/MMBtu by Wednesday.

Transcontinental Pipeline's Zone 6 delivery point, serving New York City, experienced a 17% decline in prices during the report week, decreasing 47 cents/MMBtu to end of the report week at $2.24. However, prices at the Algonquin Citygate, serving Boston, did not follow this trend. Boston prices started the report week at $2.90/MMBtu and decreased to $2.64/MMBtu, or 9%, on Friday. Prices rebounded Monday through Wednesday, ending the week at $2.95/MMBtu, a slight increase from last Wednesday. Nationwide, an outlier was Florida Transmission Citygate, which serves Florida, where prices increased by 7% over the previous week, reflecting an increase in temperatures on the Florida Panhandle over the week before.

Nymex August prices increase, September prices open slightly lower. Nymex prices increased this week, from $3.762/MMBtu last Wednesday to $3.808/MMBtu when the August contract expired on July 29. The September futures contract opened as the front month contract yesterday, when it closed trading at $3.786/MMBtu. The price of the 12-month strip (the 12 contracts between August 2014 and July 2015) increased from $3.855/MMBtu last Wednesday to $3.863/MMBtu yesterday. Weather forecasts are predicting more typical summer temperatures over the next week, which may push prices up.

Both supply and consumption increase. Dry natural gas production decreased by 0.2 Bcf/d, or 0.2%, from the previous week, to 68.5 Bcf/d. Imports from Canada increased 6.4% from last week. U.S. consumption rose 5.6%, mainly driven by an 11.3% increase in the power sector as temperatures warmed somewhat in most areas east of the Rockies. The biggest decline in power burn was in the Midwest, at 29.5%, followed by the Rockies (5.3%) and Northeast (2.8%).

more price data

Storage

Working natural gas in storage rose to 2,307 Bcf. The net injection reported for the week ending July 25 was 88 Bcf, 42 Bcf larger than the 5-year average net injection of 46 Bcf and 31 Bcf larger than last year's net injection of 57 Bcf. Working gas inventories totaled 2,307 Bcf, 530 Bcf (18.7%) less than last year at this time, and 641 Bcf (21.7%) below the 5-year (2009-13) average.

Storage build is lower than market expectations. Market expectations called for a build of 93 Bcf. When the EIA storage report was released at 10:30 a.m., the price for the September natural gas futures contract increased 8 cents to $3.84/MMBtu on the Nymex.

From the week ending on April 4 through the week ending on July 25, net storage injections have totaled 1,485 Bcf, versus 1,137 Bcf for the same 17 weeks in 2013, and 1,134 Bcf for these weeks between 2009 and 2013, on average. The average unit value of what storage holders put into storage from April 4 to July 25 was $4.49/MMBtu, 15% higher than the average value for the same 17 weeks last year of $3.92/MMBtu. The highest winter-month Nymex price (for the January 2015 contract) in trading for the week ending on July 25 averaged $4.06/MMBtu. This is 22 cents more than the current Nymex August contract price. A year ago, the difference was 32 cents/MMBtu, providing a bit more financial incentive to buy and store gas in the summer for sale in the winter.

There are currently 14 more weeks in the injection season, which traditionally occurs April 1 through October 31, although in many years injections continue into November. EIA forecasts that the end-of-October working natural gas inventory level will be 3,431 Bcf, which, as of July 25, would require an average injection of 80 Bcf per week through the end of October. EIA's forecast for the end-of-October inventory levels are below the 5-year (2009-13) average peak storage value of 3,851 Bcf. To reach the 5-year average peak value, average weekly injections through the end of October would need to be 110 Bcf.

All three regions post larger-than-average builds. The East, West, and Producing regions had net injections of 57 Bcf (17 Bcf larger than its 5-year average injection), 12 Bcf (8 Bcf larger than its 5-year average), and 19 Bcf (18 Bcf larger than its 5-year average), respectively. Storage levels for all three regions remain below their year-ago and 5-year average levels.

Cooler temperatures during the storage report week support larger-than-average build. Temperatures in the Lower 48 states averaged 74.0 degrees for the week, 1.4 degrees cooler than the 30-year normal temperature and 3.6 degrees cooler than during the same period last year.

more storage data

See also:



Natural gas spot prices
Spot Prices ($/MMBtu)
Thu,
24- Jul
Fri,
25-Jul
Mon,
28-Jul
Tue,
29-Jul
Wed,
30-Jul
Henry Hub
3.80
3.79
3.82
3.75
3.76
New York
2.56
2.36
2.54
2.31
2.24
Chicago
3.87
3.84
3.87
3.79
3.76
Cal. Comp. Avg,*
3.41
3.33
3.41
3.28
3.25
Futures ($/MMBtu)
August Contract
3.847
3.781
3.747
3.808
Expired
September Contract
3.850
3.787
3.765
3.824
3.786
October Contract
3.859
3.797
3.776
3.836
3.805
*Avg. of NGI's reported prices for: Malin, PG&E citygate, and Southern California Border Avg.
Source: NGI's Daily Gas Price Index
Natural gas futures prices
Natural gas liquids spot prices


U.S. Natural Gas Supply - Gas Week: (7/23/14 - 7/30/14)
Percent change for week compared with:
 
last year
last week
Gross Production
5.17%
-0.23%
Dry Production
5.12%
-0.22%
Canadian Imports
-4.90%
6.36%
      West (Net)
-13.32%
7.77%
      MidWest (Net)
10.81%
3.16%
      Northeast (Net)
-801.09%
-27.45%
LNG Imports
-41.66%
-12.75%
Total Supply
4.23%
0.15%
Source: BENTEK Energy LLC
U.S. Consumption - Gas Week: (7/23/14 - 7/30/14)
Percent change for week compared with:
 
last year
last week
U.S. Consumption
4.3%
5.6%
Power
8.2%
11.3%
Industrial
0.2%
-0.8%
Residential/Commercial
2.0%
3.2%
Total Demand
4.7%
5.4%
Source: BENTEK Energy LLC
Natural gas supply


Weekly natural gas rig count and average Henry Hub
Rigs
Fri, July 25, 2014
Change from
 
last week
last year
Oil Rigs
1,562
0.51%
11.49%
Natural Gas Rigs
318
0.95%
-13.82%
Miscellaneous
3
50.00%
-50.00%
Rig Numbers by Type
Fri, July 25, 2014
Change from
 
last week
last year
Vertical
361
-1.37%
-14.45%
Horizontal
1,293
0.39%
21.18%
Directional
229
5.53%
-20.21%
Source: Baker Hughes Inc.


Working Gas in Underground Storage
Stocks
billion cubic feet (bcf)
Region
2014-07-25
2014-07-18
change
East
1,157
1,100
57
West
381
369
12
Producing
769
750
19
Total
2,307
2,219
88
Source: U.S. Energy Information Administration
Working Gas in Underground Storage
Historical Comparisons
Year ago
(7/25/13)
5-year average
(2009-2013)
Region
Stocks (Bcf)
% change
Stocks (Bcf)
% change
East
1,344
-13.9
1,459
-20.7
West
460
-17.2
453
-15.9
Producing
1,033
-25.6
1,035
-25.7
Total
2,837
-18.7
2,948
-21.7
Source: U.S. Energy Information Administration


Temperature -- Heating & Cooling Degree Days (week ending Jul 24)
 
HDD deviation from:
 
CDD deviation from:
Region
HDD Current
normal
last year
CDD Current
normal
last year
New England
2
0
2
38
-6
-45
Middle Atlantic
2
0
1
52
-7
-42
E N Central
8
5
4
39
-19
-37
W N Central
3
-1
1
59
-13
-18
South Atlantic
0
0
0
88
-10
-19
E S Central
1
1
1
71
-24
-25
W S Central
1
1
1
107
-19
-17
Mountain
0
-3
0
97
17
10
Pacific
2
-2
2
50
5
-10
United States
3
1
2
66
-9
-23
Note: HDD = heating degree-day; CDD = cooling degree-day

Source: National Oceanic and Atmospheric Administration

Average temperature (°F)

7-Day Mean ending Jul 24, 2014

Mean Temperature (F) 7-Day Mean ending Jul 24, 2014

Source: NOAA/National Weather Service

Deviation between average and normal (°F)

7-Day Mean ending Jul 24, 2014

Mean Temperature Anomaly (F) 7-Day Mean ending Jul 24, 2014

Source: NOAA/National Weather Service