Falling Prices

Yesterday (January 14, 2016) Cheniere Energy announced a delay to the first shipment of liquefied natural gas (LNG) out of its Sabine Pass liquefaction/export terminal in Louisiana that was expected this month (January 2016), but is now planned for late February or March of this year. Meanwhile, LNG demand has leveled off. LNG prices have collapsed and stayed low. And a slew of liquefaction capacity planned and committed to years ago—Sabine Pass and other U.S. projects included—is coming online, suggesting an LNG supply glut that could last into the early 2020s. But are the LNG market’s prospects really as grim as all that sounds? Today we begin a review of recent developments in the LNG market, and consider their implications for U.S. natural gas producers, midstream companies, and LNG exporters.

At the end of last year the Department of Commerce Bureau of Industry and Security (BIS) issued clarifications designed to clear the way for greater U.S. exports of processed condensate. More companies have received BIS approvals to export – the latest being Plains All American last Thursday. Last year expectations were that as much as 230 Mb/d would be shipped in 2015. But narrowing price differentials have reduced the arbitrage necessary to make exports economic. Nevertheless midstream companies continue to invest in infrastructure to deliver processed condensate to marine docks. Today we review the state of the export market and ongoing infrastructure plans.