Natural Gas

‹ See All Natural Gas Reports

Natural Gas Weekly Update

for week ending August 20, 2014  |  Release Date:  August 21, 2014  |  Next Release: August 28, 2014

Previous Issues

Week:  (View Archive)


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

In the News:

U.S. Liquefaction Projects Advance

Earlier this month, after receiving a siting approval from the U.S. Federal Regulatory Commission (FERC) and a conditional export approval from the U.S. Department of Energy (DOE), project sponsors of the Cameron liquefied natural gas (LNG) export project in Louisiana moved a step closer to construction by reaching a final investment decision (FID). Currently, there are three projects, with a total capacity of 6.2 billion cubic feet per day (Bcf/d), that have received FERC approvals and some level of DOE approvals—Sabine Pass LNG in Louisiana, Freeport LNG in Texas, and Cameron LNG—with two of these projects (Sabine Pass and Cameron) having reached FID, while Freeport's FID is expected later this year.

In order to export LNG, projects need an export approval from the DOE, and for onshore facilities, a siting approval from FERC. As of July 31, more than 30 projects totaling 40 Bcf/d in export capacity have been proposed for the Lower 48 states. In comparison, global liquefaction capacity was 39 Bcf/d in 2013, with 18 Bcf/d of additional capacity under construction, according to data from IHS Energy. Global LNG trade amounted to 32 Bcf/d. In addition to the 3 U.S. projects already approved by FERC, 14 other projects, with the total proposed export capacity of 17 Bcf/d, have been proposed at FERC, as of August 15. Four of these projects—Lake Charles, Cove Point, Jordan Cove, and Oregon LNG, with an export capacity totaling 4 Bcf/d—were conditionally approved by the DOE for exports to countries with which the United States does not have a Free Trade Agreement (FTA). Currently, the United States has an FTA covering natural gas with six LNG importing countries, which accounted for 22% of the global LNG imports in 2013.

Most of the liquefaction projects in advanced stages of permitting are being sited at current LNG import terminals. These regasification facilities have been underused, largely due to growth in domestic shale gas production. Although there are some cost savings because of the availability of existing gas infrastructure, including storage tanks, pipeline connections, and jetties at these terminals, the equipment needed to liquefy natural gas is a very expensive part of the supply chain and the cost of these brownfield projects has been estimated in the range of $2 to $12 billion, depending on the size of liquefaction units, known as trains. The majority of the proposed liquefaction projects are located along the Gulf of Mexico coast, which has highly developed pipeline and storage networks and access to domestic natural gas resources (see map).

Today, nearly two-thirds of the proposed liquefaction projects that filed FERC application (including the three approved projects) have been fully or partially contracted. Half of the contracted volumes have flexible destinations, while the rest of the volumes are contracted to energy companies in Japan, India, Europe, and to other countries in the Pacific Basin. (see contracts graph)

Currently, only Cheniere Energy's Sabine Pass facility is under construction, with an anticipated start date in late 2015.

Overview:

(For the Week Ending Wednesday, August 20, 2014)

  • Natural gas prices at most trading locations ended the report week relatively flat. The Henry Hub spot price decreased by 2 cents per million British thermal units (MMBtu), falling from $3.87/MMBtu last Wednesday to $3.85/MMBtu yesterday.
  • At the New York Mercantile Exchange (Nymex), the September 2014 contract decreased by $0.008, opening the report week at $3.831/MMBtu last Wednesday and settling yesterday at $3.823/MMBtu, a 0.2% decrease. The 12-month strip (the 12 contracts between September 2014 and August 2015) also decreased, falling from $3.913/MMBtu last Wednesday to $3.909/MMBtu yesterday, a 0.1% decrease.
  • Working natural gas in storage rose to 2,555 Bcf as of Friday, August 15, according to the U.S. Energy Information Administration (EIA) Weekly Natural Gas Storage Report (WNGSR). A net increase in storage of 88 Bcf/d for the week resulted in storage levels 16.4% below year-ago levels and 17.3% below the five-year average for this week.
  • Active drilling rigs totaled 1,913 as of August 15, an increase of 5 rigs compared with the previous week, according to data from Baker Hughes Inc. The natural gas rig count increased by 5 rigs this week, totaling 321 rigs, and the number of oil-directed rigs increased by 1 to 1,589. Natural gas rigs are 67 units less than last year's level, and oil rigs are 192 units greater than last year's level.
  • After a six-week trend of falling prices, the Mont Belvieu natural gas plant liquids composite price increased for the week of August 11 through August 15, averaging $9.40/MMBtu, a 2 cent increase over the previous week. The spot prices of propane, butane, and isobutane increased by 1.0%, 2.6%, and 2.6%, respectively. The spot prices of natural gasoline and ethane decreased by 0.5% and 4.8%, respectively.

more summary data

Prices/Demand/Supply:

Outside of the Northeast, prices largely unchanged Wednesday-to-Wednesday. At many trading locations, prices dipped with falling temperatures from Wednesday through Friday before gaining Monday and Tuesday along with rising temperatures. Spot price changes on Wednesday were mixed, with several double-digit decreases in the Northeast and Mid-Atlantic regions but more stable prices elsewhere. For example, at the Algonquin Citygate, with delivery into Boston, prices started the report week at $2.69/MMBtu and fell $0.45/MMBtu through Friday to $2.24/MMBtu. The spot price increased by $0.51/MMBtu by Tuesday and then tumbled $0.29/MMBtu on Wednesday. The overall decline in price at the Algonquin Citygate was $0.23 (9%) for the report week. At the Transco Zone 6 New York location, prices fell $0.35/MMBtu through Friday, but increased by $0.58/MMBtu Monday before falling Tuesday and Wednesday. The price at Transco Zone 6 ended the report week at $2.37/MMBtu, a decrease of $0.14/MMBtu (6%) for the week.

Wednesday-to-Wednesday spot price changes in other regions were mostly between plus or minus 1%. Prices at Chicago Citygate followed the same trend as other locations of falling through Friday before recovering. Prices held steady at this location between Tuesday and Wednesday. Chicago Citygate began the report week at $3.91/MMBtu and ended at $3.93/MMBtu, a $0.02/MMBtu (1%) increase.

Average spot prices at Tennessee Zone 4 Marcellus and at the Transco Leidy Line (located in the Marcellus production region) for the report week were below $2.00/MMBtu.

Nymex prices down about a penny. At the New York Mercantile Exchange (Nymex), the September 2014 futures contract price decreased by $0.008, opening the report week at $3.831/MMBtu last Wednesday and settling yesterday at $3.823/MMBtu, a 0.2% decrease. The 12-month strip (the 12 contracts between September 2014 and August 2015) also eased, declining from $3.913/MMBtu last Wednesday to $3.909/MMBtu yesterday, a 0.1% decrease.

Consumption falls modestly as cool temperatures persist in much of the country. U.S. consumption decreased by 0.2%, according to data from Bentek Energy, mainly because of a 1.3% decline in power-sector gas consumption (power burn) as temperatures remained cooler than normal in most areas of the country. The biggest decline in power burn was in Texas, at 9.1%, followed by the Northeast, at 6.8%. These declines in power demand correspond with declines in temperature. The biggest increases in power burn occurred in the Midwest, Southwest, and Pacific Northwest, at 15.3%, 11.2%, and 10.6%, respectively. These three regions had the largest decline in power burn last report week. Temperatures rebounded this week in the Midwest and Southwest, while in the Pacific Northwest, cooler temperatures may have prompted use of natural gas for home heating. Exports to Mexico increased by 1% this week compared with last week and averaged 2.3 billion cubic feet per day (Bcf/d), the same average as last week.

Supply decreases slightly. Dry natural gas production fell by 0.5 Bcf/d, or 0.8%, from the previous week, to 68.5 Bcf/d. Overall U.S. dry production is 5.7% greater than this week last year. Imports from Canada increased by 3.6% to 5.1 Bcf/d, while liquefied natural gas sendout remained at minimal levels.

more price data

Storage

Net injections into storage higher than average. The net injection reported for the week ending August 15 was 88 Bcf, 40 Bcf larger than the five-year average net injection of 48 Bcf and 30 Bcf larger than last year's net injection of 58 Bcf. Working gas inventories totaled 2,555 Bcf, 500 Bcf (16.4%) less than last year at this time and 535 Bcf (17.3%) below the five-year (2009-13) average.

Storage build is larger than market expectations. Market expectations called for a build of 84 Bcf. When the EIA storage report was released at 10:30 a.m., the price for the September natural gas futures contract fell 7 cents to $3.81/MMBtu on the Nymex.

From the week ending on April 4 through the week ending on August 15, net storage injections have totaled 1,733 Bcf versus 1,355 Bcf for the same 20 weeks in 2013, and 1,276 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 August 15 was $4.40/MMBtu, 15% higher than the average value for the same 20 weeks last year of $3.84/MMBtu. The highest winter-month Nymex price (for the January 2015 contract) in trading for the week ending on August 15 averaged $4.17/MMBtu. This is 25 cents more than the current front month Nymex contract price for that week. A year ago, the difference was 43 cents/MMBtu, providing a bit more financial incentive to buy and store gas in the summer for sale in the winter.

There are currently 11 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 3,463 Bcf, which, as of August 8, would require an average injection of 83 Bcf per week through the end of October. EIA's forecast for the end-of-October inventory levels are below the five-year (2009-13) average peak storage value of 3,851 Bcf. To reach the five-year average peak value, average weekly injections through the end of October would need to be 118 Bcf.

All three regions post larger-than-average builds. The East, West, and Producing regions had net injections of 65 Bcf (19 Bcf larger than its five-year average), 9 Bcf (6 Bcf larger than its five-year average), and 14 Bcf (16 Bcf larger than its five-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 73.4 degrees for the week, 1.1 degrees cooler than the 30-year normal temperature and 0.4 degree cooler than during the same period last year. There were 62 population-weighted cooling degree days during the storage report week, eight lower than the 30-year normal and four lower than the same period last year.

more storage data

See also:

Proposed non-FTA LNG export facilities as of July 2014
(Click to enlarge)
United States liquefaction contracts by destination


Natural gas spot prices
Spot Prices ($/MMBtu)
Thu,
14-Aug
Fri,
15-Aug
Mon,
18-Aug
Tue,
19-Aug
Wed,
20-Aug
Henry Hub
3.83
3.76
3.76
3.84
3.85
New York
2.39
2.16
2.74
2.58
2.37
Chicago
3.89
3.81
3.84
3.94
3.93
Cal. Comp. Avg,*
4.15
4.06
4.08
4.14
4.13
Futures ($/MMBtu)
September Contract
3.906
3.776
3.792
3.877
3.823
October Contract
3.930
3.807
3.828
3.908
3.930
*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: (8/13/14 - 8/20/14)
Percent change for week compared with:
 
last year
last week
Gross Production
5.77%
-0.77%
Dry Production
5.71%
-0.77%
Canadian Imports
1.30%
3.55%
      West (Net)
-18.89%
3.35%
      MidWest (Net)
39.30%
5.28%
      Northeast (Net)
154.08%
22.69%
LNG Imports
-68.55%
3.59%
Total Supply
5.09%
-0.47%
Source: BENTEK Energy LLC
U.S. Consumption - Gas Week: (8/13/14 - 8/20/14)
Percent change for week compared with:
 
last year
last week
U.S. Consumption
2.7%
-0.2%
Power
4.1%
-1.3%
Industrial
0.7%
0.5%
Residential/Commercial
2.8%
1.8%
Total Demand
3.3%
-0.1%
Source: BENTEK Energy LLC
Natural gas supply


Weekly natural gas rig count and average Henry Hub
Rigs
Fri, August 15, 2014
Change from
 
last week
last year
Oil Rigs
1,589
0.06%
13.74%
Natural Gas Rigs
321
1.58%
-17.27%
Miscellaneous
3
-25.00%
-50.00%
Rig Numbers by Type
Fri, August 15, 2014
Change from
 
last week
last year
Vertical
368
-2.65%
-17.30%
Horizontal
1,329
0.91%
23.40%
Directional
216
1.41%
-19.70%
Source: Baker Hughes Inc.


Working Gas in Underground Storage
Stocks
billion cubic feet (bcf)
Region
2014-08-15
2014-08-08
change
East
1,342
1,277
65
West
407
398
9
Producing
806
792
14
Total
2,555
2,467
88
Source: U.S. Energy Information Administration
Working Gas in Underground Storage
Historical Comparisons
Year ago
(8/15/13)
5-year average
(2009-2013)
Region
Stocks (Bcf)
% change
Stocks (Bcf)
% change
East
1,499
-10.5
1,593
-15.8
West
499
-18.4
467
-12.8
Producing
1,056
-23.7
1,029
-21.7
Total
3,055
-16.4
3,090
-17.3
Source: U.S. Energy Information Administration


Temperature -- Heating & Cooling Degree Days (week ending Aug 14)
 
HDD deviation from:
 
CDD deviation from:
Region
HDD Current
normal
last year
CDD Current
normal
last year
New England
3
-1
-1
22
-17
-3
Middle Atlantic
2
0
1
35
-18
-10
E N Central
7
2
-3
29
-21
1
W N Central
3
0
-6
45
-18
9
South Atlantic
0
0
0
83
-10
-21
E S Central
1
1
0
81
-9
-11
W S Central
0
0
0
125
2
-7
Mountain
0
-4
-2
72
1
-2
Pacific
0
-2
0
57
12
16
United States
3
0
-1
62
-8
-4
Note: HDD = heating degree-day; CDD = cooling degree-day

Source: National Oceanic and Atmospheric Administration

Average temperature (°F)

7-Day Mean ending Aug 14, 2014

Mean Temperature (F) 7-Day Mean ending Aug 14, 2014

Source: NOAA/National Weather Service

Deviation between average and normal (°F)

7-Day Mean ending Aug 14, 2014

Mean Temperature Anomaly (F) 7-Day Mean ending Aug 14, 2014

Source: NOAA/National Weather Service