It’s been eight weeks since the steady flow of crude oil and refined product tankers out of the Persian Gulf ended, and the impacts on refineries and product suppliers in key parts of the world are becoming clearer. In today’s RBN blog, we discuss the state of refining in the U.S., Europe and the Asia-Pacific region.
The U.S. propane market is in a unique position. Production has continued to grow while domestic demand remains stagnant. The only solution for the market to balance is exports; however, those have been constrained by capacity at the dock. Today, we continue our examination of the propane market.
The Trump administration is trying to breathe new life into the long-dormant Alaska LNG project, talking up its strengths and encouraging potential Asian customers and investors to consider it. But the project, a multibillion-dollar plan to pipe natural gas from Alaska’s North Slope to Anchorage and Cook Inlet for liquefaction and export, faces huge financial and administrative hurdles, plus the challenges of building it in Alaska’s rugged terrain and often-harsh climate. In today’s RBN blog, we’ll examine Alaska LNG’s competitive position and whether its reduced shipping costs, coupled with federal support, might be sufficient to outweigh the construction costs and other major obstacles the project faces.
LNG commerce is composed of two primary models. One is the traditional point-to-point model, on which the industry was founded and still accounts for more than 60% of LNG trade. More recently, the portfolio model has emerged, pursued by upstream oil and gas majors, that would allow them to monetize their gas reserves by converting them to LNG and shipping the product worldwide in vessels under their control — an attractive strategy that also would allow them to increase their exposure in the LNG market to take advantage of international arbitrage opportunities. As such, they are always long in LNG and in the ships required to move it. However, the portfolio model is being infiltrated by a buyer community looking to become short-side portfolio players and increasingly committing to long-term offtake agreements or FOB sales, then shipping LNG not only to meet their domestic market needs but to take advantage of regional pricing differentials. In today’s RBN blog, we look at the rise of the short-side portfolio player model and ask who might prevail in a potential clash of titans over market share and dominance.
Many have argued that U.S.-sourced LNG can be instrumental in combating climate change by helping countries around the world replace coal-fired generation with natural gas-fired power. While this argument carries a lot of force in the eyes of many politicians and LNG marketers, the questions of exactly how — and to what extent — LNG can replace coal need to be asked. In today’s RBN blog, we’ll look at the challenges that the expanded use of LNG faces in countries with high coal utilization and the possible means of overcoming them.
Two maritime passages long regarded as essential shortcuts in the complex world of commodity shipping have become a lot more challenging to navigate. Transiting the Red Sea has turned potentially deadly because of geopolitical tensions, while severe drought has critically reduced operations at the Panama Canal. Combined, these issues are being felt across the energy industry, impacting U.S. and foreign producers and shippers, redrawing trade flows, extending voyage times and, ultimately, raising transportation costs. In today’s RBN blog, we’ll examine and quantify the extra time and costs that shippers of U.S. crude and refined products must bear when using alternative routes.
A year ago, as New Year’s Day approached, we were looking ahead into very uncertain market conditions, having lived through a pandemic, crazy weather events, collapsing and then soaring prices, and Russia’s horrific invasion of Ukraine. Our job was once again to peer into the RBN crystal ball to see what the upcoming year had in store for energy markets. We’ll do that again in our next blog. But another part of that tradition is to look back to see how we did with our forecasts for the previous year. That’s right! We actually check our work. And that’s exactly what we’ll do today: review our prognostications for 2023.
U.S. Gulf Coast LPG exports are sky-high, averaging just under 2 MMb/d in October, with nearly two-thirds of those volumes bound for Asia — a straight-shot trip once a Very Large Gas Carrier (VLGC) has passed through the Panama Canal. But an unprecedented dry spell has left the canal’s operators — and LPG shippers — in a real bind. The century-old maritime shortcut, which was expanded just a few years ago to accommodate more and larger vessels, uses massive amounts of fresh water, and to help conserve what’s left in the system’s main reservoir, the Panama Canal Authority (PCA) is ratcheting down how many ships can pass through each day. Worse yet, VLGCs are a low priority compared to other, larger vessels that pay higher tolls. That means that far fewer Asia-bound LPG ships will be using the Panama Canal for who knows how long. Instead, many shippers will need to make far longer, more costly trips through the Suez Canal or around the southern tip of Africa. In today’s RBN blog, we discuss what LPG shippers in particular are up against.
LNG export projects looking to take a positive final investment decision (FID) need to sell a high proportion of their nameplate capacity under long-term contracts to ensure sufficient cash flows to underpin the project and obtain financing. U.S.-based projects (new and expansions) totaling more than 350 million tons per annum (MMtpa, 48.3 Bcf/) — against a current global market of 400 MMtpa (52.9 Bcf/d) — are vying for creditworthy offtakers from multiple markets in their pre-FID deliberations. The sense of urgency among project sponsors has been boosted by the Russia/Ukraine war and a potentially resurgent Chinese economy, both of which should promise a bright future for new projects. Plenty of those have reached FID in the last couple of years, but what is holding others back from taking the same step? In today’s RBN blog, we’ll look at some of the factors impacting those decisions and the long-term implications that flow from them.
2022 was a particularly significant year for the global LNG industry, distinguished by a sharp increase in LNG demand in Europe tied to the reduction in flows of Russian pipeline gas after Putin’s invasion of Ukraine. Whereas Europe had historically been the last market option for many LNG sellers, it became the most highly priced market in the world and pulled in LNG from multiple locations, including a cargo from Australia delivered in October. Paying premium prices enabled European buyers to fill the continent’s underground storage at an unprecedented rate — as of mid-January, storage there was over 80% full. A mild winter, at least to date, coupled with conservation efforts and fuel switching have reduced European natural gas demand by 10% to 15% and helped avoid a gas shortage. Now, gas prices (and LNG cargo prices) have fallen to pre-invasion levels and prompted market observers to suggest that, with China emerging from pandemic-related lockdowns, Asia may start pulling large volumes of LNG its way. In today’s RBN blog, we examine LNG cargo movements within the Asia Pacific and Atlantic regions and what rising Asian demand could mean for European gas supplies going forward.
