Post 1190: Business Week: China wants to export US nat gas, or, how I learned to stop worrying and love the bomb

[Hans Laetz, Newsgroup Editor]

Editor's note: There is no LNG export capability on the West Coast,
except for a small export plant, dedicated to a Japanese customer, in
Alaska. A consortium of firms is currently in open season, and is
soliciting potential customers, for a large LNG export plant at
Kitimat, British Columbia.

The BC plant would be connected to the North American nat gas grid, so
U.S. gas could conceivably go to China via that outlet.

But there is no export capacity for U.S. methane to be processed into
LNG on the West Coast, the Gulf Coast, or the East Coast of the United
States.

One wonders if the analyst quoted by the Bloomberg/Business Week
writer is aware of this?

U.S. May Sell LNG to China on Surplus, Standard Chartered Says

By Dinakar Sethuraman

April 28 (Bloomberg) -- The U.S. may supply liquefied natural gas to
China as cheaper output costs outweigh transportation charges, making
the U.S.-produced fuel competitive, Standard Chartered Plc said.

China, the world’s second-biggest energy user, may have paid about $10
per million British thermal units in recent LNG contracts compared
with about $6.35 for the three year-average at Henry Hub, the U.S. gas
price benchmark, the bank said in a report today. China has agreements
to buy LNG from Qatar and Australia.

“The likelihood of U.S.-produced gas being shipped to Asia on a
profitable basis is increasing,” said Singapore-based analyst, Han Pin
Hsi. “This is provided Henry Hub prices hover at the three-year
average of $6.35 per million Btu with shipping and other re-gas or
liquefaction costs staying below $3.65.”

China has signed contracts for about 34 million metric tons of LNG a
year, compared with projected annual demand of 40 million tons by
2020, Sanford C. Bernstein & Co. said. U.S. gas output climbed the
past four years, contributing to a glut, as drilling advances unlocked
fuel-rich shale formations from Louisiana to Pennsylvania.

“Our estimates have taken into consideration days of voyage and an
anticipated LNG carrier price of $55,000 a day,” Standard Chartered
said. “The buffer is greater if we factor in current Henry Hub
pricing.”

It takes about 64 days for a ship to sail to Asia from the U.S. Gulf.

U.S. natural gas futures rose 0.6 percent to settle at $4.24 per
million British thermal units on the New York Mercantile Exchange
yesterday.

Gas prices in China may rise in the near term because of higher demand
and government plans to increase prices by as much as 20 percent,
Standard Chartered said.

By 2008, unconventional gas supplies accounted for more than half of
domestic production in the U.S. compared with 15 percent in 1990, with
the volume quadrupling to 300 billion cubic meters a year, the bank
said.

For prices based on crude oil at $80 a barrel, the bank estimated
typical LNG pricing at as much as $13.80 per million Btu, while for
term contracts where crude is part of the pricing, the fuel may cost
as much as $12.60, it said.

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