Seeking Alpha

The Obama administration is telling Japan and other allied countries they must wait (past the...

The Obama administration is telling Japan and other allied countries they must wait (past the election?) before moving forward on plans to buy U.S. natural gas. Several companies are seeking permits to export gas to countries lacking free-trade deals with the U.S., but LNG exports have become a hot-button topic for some lawmakers and environmentalists. (earlier)
Comments (46)
  • Politics trumps the good of America.
    Gotta love it.
    30 May 2012, 06:40 PM Reply Like
  • Just exactly what do you mean by you statement? Do you know something the rest of us don't? Natural gas must be liquefied in order to be exported overseas. The liquefaction plants must be built because none exist in the U.S. at this time other than one plant in Nikiski, Alaska. Cheniere Energy Partners is in the process of constructing a liquefaction plant at Sabine Pass, Louisiana which is the only one under constuction in the U.S. of which I am aware. The process to build this plant began in 2010 and they anticipate being able to export LNG by 2015. The process to get additional plants permitted, built and ready to export will probably take about three years per plant. For the U.S. to become a major exporter of LNG is not something which is going to occur quickly, we are looking at a long-term operation.
    30 May 2012, 08:29 PM Reply Like
  • Any chance of people checking their facts before commenting??? Cheniere is NOT building a liquefaction plant. They are trying to convert their import terminal into an export liquefaction plant, the final decision has not yet been taken.
    31 May 2012, 07:56 AM Reply Like
  • 535 worthless bums in the white house , keep this country from moving forward........
    30 May 2012, 06:47 PM Reply Like
  • runlong
    The 535 are not in the White House. They make up the legislative branch of government.
    30 May 2012, 06:49 PM Reply Like
  • Full steam ahead up in Canada, they already have a head start. Re-election before anything else. What is Washington doing other then Zero. Can't make this stuff up.
    30 May 2012, 07:03 PM Reply Like
  • canada crumbles when the commodity bubble pops-then we''ll see how much those Chinese owned condos in toronto are worth. unless ben shalom prints some more funny money
    31 May 2012, 09:44 PM Reply Like
  • If the American people have the sense to dump this anti-business POTUS (lap dog of the anti-energy environmentalists), then this country will finally start creating jobs at a respectable pace and start growing again.
    30 May 2012, 07:09 PM Reply Like
  • Actually, SoldHigh, keeping fuel prices low by keeping the natgas at home is at least as likely, and maybe more likely, to *increase* jobs as it is to reduce them. Domestic manufacturing benefits enormously from cheap energy. If we export fuels, domestic fuel prices rise, hurting industry.
    30 May 2012, 08:05 PM Reply Like
  • As a country that imports a lot of energy (oil), and exports a decent amount as well (coal, refined products), how wise is it to play the "its in the best interest of our economy not to allow exports of a certain fuel" card? Gas will still be cheaper close to production centers than it is in the world market, meaning the Marcellus Shale should keep prices of nat gas low compared to the RoW in the population centers along the East Coast for decades.
    30 May 2012, 08:55 PM Reply Like
  • This is shortsighted and therefore incorrect. Energy prices will seek stasis, nat. gas will rise to the level of other energy. The cost advantage we have in nat. gas will not last, no matter if we strand it here as you advocate or not. The only real, immutable cost is that in your stranded scenario, we see reduced production and nat. gas left in the ground. Net, we'll spend the same on energy, but send more overseas. It's a fool's game, your logic.
    30 May 2012, 09:46 PM Reply Like
  • Why would natural gas rise to the level of other fuels if it is stranded here, if we can produce it for such a low cost? It'd make more sense for the price of other fuels to come down, since natural gas can be used as a substitute for coal or diesel. The US will have a cost advantage in nat gas until other nations find their own shale reserves, simply because we have gotten so efficient at finding and producing it.
    31 May 2012, 12:11 AM Reply Like
  • Good Q and it's important. Stranding the gas for our low cost use seems enticing. But there are 2 reasons:


    1, nat. gas production falls when its price is lower than other fuels. We've seen dramatic declines in operating wells now, with a 10 year low: Exploration and production interest shifts to higher margin fuels, plain and simple. Price will rise and will reach stasis to oil.


    2, nat. gas demand rises as its low cost appeals, albeit slowly. Peculiar to this is our current lack of infrastructure to use all this gas. That is temporary and dollars are chasing the build out. Check here,, tick "total consumption." Hardly any movement in 10 years.


    So stranding the gas will not lead to lower prices. Production will simply continue to remain low until prices recover. Prices will not stay low. Producers will not produce at this level, period.


    **If we had laws stranding the gas in the first place, we never would have seen these low prices to begin with. In which case we'd never have had the stimulation to convert some infrastructure to use it.**


    So there are two scenarios, long term.


    1, we leave the gas in the ground by stranding it and pay the same for nat. gas as oil, and kill the desire to convert to nat. gas since producers will lose interest.
    2, we extract it and sell some, in which case it will still cost the same as oil, and stimulate nat. gas demand and production as belief in its potential gets attention. It is only for a disruptive early period (like now) where the demand side interest will lead to expensive infrastructure build out.


    Same energy cost in total, but option 2 sees fewer net dollars out flowing.
    31 May 2012, 01:29 AM Reply Like
  • You are ignoring the production costs associated with natural gas production. At $6, companies will rush to produce gas again, since it will be very profitable in plays where the cost to produce is $3, even with gas below the $9 it would need to reach to gain parity on an energy equivalent basis to oil. You cannot ignore costs when discussing the motivations of firms to produce, since the low cost producers will see different returns than the higher cost producers.
    31 May 2012, 08:29 AM Reply Like
  • Another good call from the White House team.
    30 May 2012, 07:18 PM Reply Like
  • To the average American looking for a job, the hostile occupation regime in the WH just made another BAD call.


    More bad leadership from the pathetic campaigner-in-chief. Sad :/
    30 May 2012, 07:26 PM Reply Like
  • @ Terry330


    Does your White House team ever make a bad call?
    30 May 2012, 09:16 PM Reply Like
  • Why? Bet you can't offer one good reason.
    31 May 2012, 08:57 AM Reply Like
  • Yawn all ya'll negative nancys. Meanwhile, US oil and gas production is up dramatically in the last 3 years.


    Obama will get re-elected and will do a great job.
    30 May 2012, 07:41 PM Reply Like
  • Who deserves credit for that? The previous administration was clearly more in bed with the oil industry than this one, and had 8 years to lay the political and economical framework that have seen production trending higher. Its not like Obama got elected and flipped a switch, it took years for the industry to ramp up.


    And he's going to need a miracle to get re-elected.
    30 May 2012, 08:58 PM Reply Like
  • Living proof that the left is anti-U.S. energy, no matter the issue: discovery, development, use, even sending the "nasty stuff" elsewhere.


    Ecologists? What a bunch of fraudsters.
    30 May 2012, 07:43 PM Reply Like
  • Actually Tack, there's equal reason to see this as pro-U.S. energy. Cheaper energy at home, that is.
    30 May 2012, 08:37 PM Reply Like
  • SDNS:


    All one has to do is take a gander at Argentina, right now, to disprove that thesis. If companies are prevented from handling their production as they see best and to generate the highest returns, simply because some government wishes to pander to its electorate or special interests, then, they simply stop producing the asset, preferring to wait, instead, for more amenable conditions.


    In Argentina, the near-communist Kirchner government, which imposed price controls (similar to saying one cannot sell one's production, caused the largest oil company, YPF, to refrain from new exploration and research, so Kirchner simply expropriated the company in a confiscatory nationalization, a la Hugo Chavez. Hopefully, we're not headed the same way, but with the policies of this left-leaning administration, one never knows.
    30 May 2012, 09:13 PM Reply Like
  • What kind of logic is that? Stranded assets do not equal lower costs over time, since supply is reduced for lack of production incentive.
    30 May 2012, 09:14 PM Reply Like
  • dsr:


    Exactly! Economics 101.
    30 May 2012, 09:16 PM Reply Like
  • Gee, Tack, guess I missed that part of the article where it said companies were being nationalized and price controls implemented. What paragraph was that in? And btw, even though that's NOT happening, if this were the Bush administration and it WERE happening, for let's say national security reasons, you'd no doubt be applauding it.
    31 May 2012, 12:14 AM Reply Like
  • SDNS:


    What I am telling you is that companies, if told they cannot market their products, stop producing those products, which creates shortages. In Argentina, they did that by establishing price controls that made production unrewarding, so the oil company stopped development. Here, Obama just says stop, much simpler, but with the same effect.


    In Argentina, what occurred is that because YPF saw no incentive to produce at sub-market prices, Argentina incurred oil shortages and had to ramp up imports, costing them precious foreign exchange. Since, President Kirchner didn't like the logical way the laws of economics work, she nationalized YPF. Now, she won't be able to blame either supply shortages or price increases on "evil" YPF. It will be her own baby.


    If natural gas companies cannot sell and ship their product, they'll, likewise, simply stop production, reducing supplies and ensuring that there is no cheap gas. That's the way economics work.
    31 May 2012, 12:22 AM Reply Like
  • It wasn't Obama that stopped the Alaskan export facility from exporting. The company said they had no foreign customers and shut down of their own accord. Nor does this article say exports are not allowed, just that they don't happen overnight. Equating this to Argentina is sleazy and inaccurate.
    31 May 2012, 12:26 AM Reply Like
  • dsr70, Stranded assets? Really? If you think natgas is no longer used domestically, tell us what's replaced it. Not only is it used, but its use is increasing, not decreasing (as you apparently somehow believe) thanks to new reserves being unlocked. It's being used more and more in electricity generation, transportation, and as feedstock for both fertilizer and for plastics. In other words, it's replacing oil. As long as oil is more expensive or more scarce than natgas, there will be continued and growing domestic demand for natgas.
    31 May 2012, 01:33 AM Reply Like
  • Stranded in this context means the market is fixed in geography, not eliminated. Nat. gas use has not appreciably changed in the past ten years during both the record highs of 07/08 and the record lows of now. The infrastructure moves much too slowly to have even 2 or 3 year price trends affect usage.


    We need a long term understanding of production and prices to give any incentive for the demand side to change. But in your world of apparently a command economy, none of these pesky market issues need matter.
    31 May 2012, 01:43 AM Reply Like
  • Command economy? I bet if the gov't ever stopped subsidizing oil, you'd be screaming your head off. And before you trot out your tired excuses about how oil subsidies don't count...ALL energy is subsidized -- oil, nuclear, gas, hydro. Has been for years and years and years. It's not something new. And its not just in the U.S. A secure energy supply is a national security issue for all nations. Nor is that a "liberal kenyan socialist" agenda. It's as red-state red as it gets.


    "Stranded assets": Ok, so you're hijacking terms now to apply an argument where it doesn't apply.


    "Ten years": How recent is the shale boom? Ten years? I don't think so. The increases in natgas use are recent and they're during an economic down time. The EIA figures show increased natgas use for electricity generation over the past year. Dow has invented and is ramping up processes for using natgas to produce plastics. Fertilizer companies are developing methods to switch from oil to natgas feedstock. The use of natgas as a transportation fuel is rising and will continue to rise further. If you don't believe natgas will replace oil domestically until costs equalize, then you don't believe in the power of supply and demand.
    31 May 2012, 02:01 AM Reply Like
  • --Let's talk subsidies. For the record:


    --I still don't get your point about "stranded asset." It's an accounting term that is casually applied in the commodity markets to goods that can't be shipped from field to market. The literal and figurative analogy is perfect, hence its common usage. What's the problem?


    --I used 10 years since the EIA data is easily found for 10 years and shows in context how demand changes little whether prices are high or low. We've had both extremes in that window. No other reason. The demand is inelastic until the infrastructure can catch up. Lead times are enormous.


    I do believe use will rise but it will take time, and only if there is widespread belief that the nat. gas industry will be robust. Robustness comes from large production, which comes from producers knowing they can export. No more, no less. You have to acknowledge that.
    31 May 2012, 03:42 AM Reply Like
  • Your own definition of "stranded assets" is not the way you used it. So yes, you're hijacking the term.


    The EIA data *clearly* show natgas switching is *already* occurring. You're simply wrong when you claim it's not. Other uses are ramping up. Domestic natgas pipelines are being laid at rapid pace. Repeating to yourself that demand is inelastic doesn't change the fact that it's not.


    From the American Natural Gas Alliance, and industry consortium:
    "Vast new supplies of clean, domestic natural gas has led to rapid pipeline construction, according to EIA. And dramatic growth in shale projections has driven even more pipeline projects that will come online by the end of 2011.
    "This is the continuation of a trend that begin in 2008, when completions of new pipelines and expansion of existing pipelines were higher than they had been in more than a decade, increasing capacity by more than 44 billion cubic feet per day."


    "Nat gas also is vastly underutilized in this country. According to the Congressional Research Service, natural gas combined cycle turbines (the most efficient natural gas power plants running today) are on average run at 42% of their full capacity. This means we can start immediately to transition to cleaner energy and cleaner skies."


    New pipeline project approved March 2012, supplying the metropolitan centers of New York and new Jersey:


    New pipeline project linking Texas and Denver regions, expected to begin operations in 2013:


    New pipeline projects being mapped out from Pennsylvania, to the eastern seaboard and possibly into Canada


    Already under construction:


    And more pipelines.


    A system of natgas refueling stations for cars and trucks coming up in Georgia:


    Exxon is gearing up to use natgas as feedstock for specialty chemicals:
    "The company had said as recently as last year it had no plans to expand chemical production in the United States. However, decades-low natural gas prices proved too much too resist."
    (Can anyone say jobs, jobs, jobs?)


    Dow Chemicals is doing it too:


    And more.
    1 Jun 2012, 01:01 AM Reply Like
  • These are all drops in the bucket to aggregate demand. That's what the graph shows you: large aggregate takes time to move. It's silly to even mention these. We're talking trillions of cubic feet in shale reserves. We need massive infrastructure changes to utilize the quantity and that will take time to build out. What world do you live in? Some recent auctions of wholesale electricity, dominated by nat. gas generation in light of coal's demise, illustrates the point. I'm sure you're aware of them.


    I still literally do not understand your beef about "stranded assets." Did you not notice I said "over time" in the OP? Good lord, your arguments are infantile.


    Finally, if laws are passed to strand our gas, production will taper, price will rise, and all the initiatives you cited will go by the way side anyway. Why can't you understand that?
    1 Jun 2012, 01:59 AM Reply Like
  • 2 weeks later, this analysis...


    "Is the U.S. natural gas glut really that bad? Yes, it is. The EIA Monthly Update came out May 29, 2012. It stated that natural gas use for electricity was up in March by 39.6% year over year. Many people harped on this as a signal that demand was catching up with supply. Not so. This increase amounted to +0.2Bcf greater use of natural gas year over year during the month of March 2012. Some might say this is a lot. However, the data for the first two months of total U.S. natural gas production in 2012 (the third month's data doesn't come out until Thursday May 31, 2012) show that U.S. natural gas production has increased 390 Bcf over the first two months of production in 2011. If every month increased electricity generation use by the +0.2Bcf in March 2012, that would only amount to +2.4Bcf for the entire year. The increase in total U.S. production from 2010 to 2011 was approximately 1.67Tcf. Extrapolating from the first two months' data, the increase for 2012 stands to be about 2.34Tcf. This supply increase is almost three orders of magnitude more than the increase in demand from electricity generation (extrapolated from March's 40% increase for all of 2012)."
    16 Jun 2012, 01:45 AM Reply Like
  • You overlooking that we've had extremely mild weather -- almost no winter at all in 2011-12. That lack of winter weather led to large surpluses in both natgas and coal.
    16 Jun 2012, 02:25 AM Reply Like
  • Weather dictates heating demand in the winter, or lack thereof in this case. This analysis was about electricity gen, but more important supply. The gist being it's just so huge.


    APA's announcement today of a 48 Tcf (!!!) field up in Canada just goes to show there is so much gas we are almost up to our eyeballs and will be for the rest of our lives and beyond. If you find their announcement, notice they said they were unlikely to develop it with prices being so low. Hence back to the original disagreement.


    It's an exciting time for energy, and independence is a real possibility. We just need to get out of the way and let the brilliant geologists and pet engineers do their things w/o govt getting in the way, while industry figures out how to use it and majors figure out how to export it, with everyone having an incentive to do this.
    16 Jun 2012, 04:36 AM Reply Like
  • The apoplectic hate and anger of the tea bagger conservatives is a sight to behold. It defies the law of averages republicans that Obama can be wrong on every matter. This is why you lose in November.
    Do not worry NG in all its manifestations will be exported to the world.
    30 May 2012, 08:46 PM Reply Like
  • Eighty percent of the comments here read like they were made by those who don't know what they are talking about. Many of the comments sound downright dumb! If you read the online WSJ article you would find that T. Boone Pickens is against the U.S. exporting it's natural gas for cheap. The WSJ article has some good information everyone should read instead of just making a dumb comment.
    30 May 2012, 09:00 PM Reply Like
  • Link? Article title?
    30 May 2012, 09:03 PM Reply Like
  • In the Market Current above the reader must click on the "they must wait" link to be taken to the WSJ online article. If that doesn't work for you, below is another link to the article. If the WSJ won't give you access to the article, search for the title online and you my find a link to the complete article
    The people who have commented here don't seem to realize that the Congress is in deadlock and all the politicians, left and right are already absorbed in the battle leading up to the election. Virtually nothing can be accomplished before the election because of the gridlock and because no one knows what the political landscape will look like until after the General Election in November. There will not be much legislation of any kind until the election is over. Once the election has passed there should be some political certainty in Washington.

    30 May 2012, 10:38 PM Reply Like
  • True I did see that article today. Thanks for the link!
    31 May 2012, 12:07 AM Reply Like
    30 May 2012, 10:33 PM Reply Like
  • What is this administration trying to beat us back into the stone age, first it's anti coal, then anti drilling for oil, then anti natural gas for sale globally. What does he want, I don't know if we can survive until the election. The debt is rising,and the economy is shrinking. Heaven help us. Rodbar
    31 May 2012, 01:16 AM Reply Like
  • I know this sounds silly-but when we elected those individuals to office did we think that they would be looking out for us or did we expect them to play politics, ignoring the results back at home. It's pretty simple-if they are not representing us in our best interest then admit we made a mistake and get rid of them. VOTE
    31 May 2012, 01:31 AM Reply Like
  • All you whiners should ask why Americans shouldn't enjoy the benefits of cheap NG a while longer.
    31 May 2012, 01:36 AM Reply Like
DJIA (DIA) S&P 500 (SPY)