Royal Dutch Shell (RDS.A, RDS.B) is still interested in entering Mozambique despite losing out...

Royal Dutch Shell (RDS.A, RDS.B) is still interested in entering Mozambique despite losing out on a deal earlier this year that would have given it access to East Africa's huge gas reserves, its exploration chief says. Gas finds in the region have led to jostling between companies such as Anadarko (APC) and Eni (E), both of which already have made significant discoveries.
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  • Southerness
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    I think we have to be careful on the LNG gravy train front. Recent research suggests LNG could be oversupplied out of Australia due to increases in Chinese pipeline and shale gas resources. Although it has been quiet, don't forget about COP's deal in India. Today APA is delaying Kitimat because of Cheniere's price-to-HH structure. This is actually a big deal because there is no doubt that Kitimat LNG should be significantly cheaper than Cheniere's over time. I don't think the LNG is worthless, just that it is still a commodity at the end of the day and the market tends to find ways to drive the cost down to lowest acceptable returns, not premiums. Investors should not assume the LNG to oil ratio will necessarily be preserved. Of particular importance, it was always the customers that wanted this structure since they could hedge oil and could not hedge LNG. Cheniere benchmarking has changed things because HH gas can also be hedged and is obviously a lot cheaper than global oil benchmarks. Eventually when enough LNG is running around, we should expect that the liquid gas can be directly hedged by itself. Whatever the final result, the likelihood is that it pushes the price down, not up.
    19 Oct 2012, 03:17 PM Reply Like
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