Movement in the shale gas industry deserves to be watched. Overall, the global market for liquefied natural gas appears strong and promising. On a case-by-case basis, however, certain countries are experiencing, or are approaching, significant shifts in demand and market share.
The United States
The United States is currently experiencing a surplus of natural liquefied gas. In 2015, the U.S. produced 74 billion cubic feet of gas per day. The unusually warm 2015 / 2016 winter has left 2.5 trillion cubic feet of natural gas in storage, setting a record for the largest amount of gas ever left over at the end of a heating season.
Considering the current quantity in storage and available storage capacity, many people in the industry are wondering what the U.S. will do with the presumed surplus.
One solution is to export to Europe, which is what the U.S. plans on doing later this year. However, there are rumors that Russia will start a natural gas share and price war should this happen that would threaten the U.S.’s ability to take advantage of such a lucrative market. (The Future of U.S. Shale Gas Hinges On Our Southern Border).
The U.S. will have to find another buyer, considering that it is expected to have the capacity to export 3.8 billion cubic feet of natural gas per year starting in 2018. (A Natural Gas Price War Is Imminent).
Russia
Russian company Gazprom is to the shale gas industry what the Saudi’s are to oil. It has the world’s largest natural gas reserves, is one of the world’s lowest-cost gas producers, and has the greatest excess capacity (approximately 328 billion cubic feet, or 25% of its output and 3% of global production).
In 2015, Gazprom supplied Europe with 31% of its gas needs and will obviously not want to see the U.S. put a dent in such substantial revenues. Despite denying rumors that it will launch a shale gas share and price war, it would only cost Russia $1.3 billion (less than 1% of its annual sales) to price the U.S. out of the European market. (A Natural Gas Price War Is Imminent)
Mexico
Mexico is emerging as a global manufacturing powerhouse for aerospace parts, flat-screen televisions, and automobiles. Over the next five years, Mexico will be responsible for manufacturing approximately 5 million cars.
Given this economic growth, Mexico’s demand for shale gas is been dramatically rising, and it could be a viable fallback plan for U.S. shale gas exports. (The Future of U.S. Shale Gas Hinges On Our Southern Border)
United Kingdom, Australia, and Asia
In the UK, fracking is set to begin after a five-year hiatus that began in 2011 when fracking caused two small earthquakes, fostering vehement public opposition to fracking. The UK’s recent decision to recommence fracking has many Britons in an uproar.
Fracking is set to take place at an existing well outside of Kirby Misperton village. If the well is conducive to large-scale exploitation, this could lead to hundreds of wells in the area. (Fracking set to restart in UK after 5-year hiatus)
Australia has also built up its liquefied natural gas export capacity and is expected to be the leader in LNG followed by the U.S. (A Natural Gas Price War Is Imminent)
Lastly, it isn’t news that Asia’s demand for LNG has crashed and burned. Prices have fallen over 35% since the beginning of 2016, reaching a record low for this time of year of $4.40 per million BTUs. (The Future of U.S. Shale Gas Hinges On Our Southern Border)
Sources:
A Natural Gas Price War Is Imminent
http://www.wallstreetdaily.com/2016/02/17/lng-natural-gas-price/
The Future of U.S. Shale Gas Hinges On Our Southern Border
https://seekingalpha.com/article/3971578-future-u-s-shale-gas-hinges-southern-border
Fracking set to restart in UK after 5-year hiatus
https://www.ft.com/content/2c8002d4-18e0-11e6-b197-a4af20d5575e
