LNG Projects Grabbing Attention Amid Sagging Natural Gas Prices ... - Natural Gas Intelligence

LNG Projects Grabbing Attention Amid Sagging Natural Gas Prices - Mexico Spotlight - Natural Gas Intelligence

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LNG Projects Grabbing Attention Amid Sagging Natural Gas Prices – Mexico Spotlight

North American natural gas futures prices dropped for four straight sessions this week in a market flush with supplies.

On Thursday, the June New York Mercantile Exchange gas futures contract fell 6.9 cents day/day and settled at $2.101/MMBtu. July lost 6.3 cents to $2.297.

“Lower natural gas prices…are beginning to temper activity and growth in dry natural gas plays such as the Haynesville and Eagle Ford” shales, said Enterprise Product Partners LP Co-CEO A. J. Teague during the first quarter earnings call.

While the situation right now is aggressively bearish, gas players seem to think a combination of lower production and strong demand from LNG facilities may change the picture next year.

In quarterly earnings calls, Chesapeake Energy Corp. CEO Nick Dell’Osso said “we want to maintain our productive capacity for 2024” when prices rise. CFO Roland Burns of Comstock Resources Inc. called the price slump “a short-term phenomenon.”

Mexico Demand Wildcard

Mexico also plays a part in the potential future tightening of the market.

Imports via pipeline are starting to rise as North America moves into its hot summer months. The 10-day average pipeline flows to Mexico from the United States through Thursday was 5.45 Bcf/d. The largest flow day in this period was last Thursday (April 27), at 5.73 Bcf, according to NGI calculations.

“West Texas flows are making the difference now as they are on average 20% of the total mix, while last year for the same 10-day period they were only 13.5% of the total mix,” according to NGI analyst Josiah Clinedinst.

South Texas flows were 73% of Mexico border flows over the last 10 days, compared with 79% of total flows in the comparable period last year.

[ Mexico Matters: Cross-border energy trade between the U.S. and Mexico reached $42 billion l a s t y e a r . Understand this burgeoning trade flow — the projects, politics and natural gas prices — with NGI’s Mexico Gas Price Index. Know more.]

LNG Boost

This week, there was plenty of buzz around liquefied natural gas exports from Mexico that would source U.S. natural gas.

New Fortress Energy Inc. (NFE) expects sendout from a fast LNG project offshore Altamira in Mexico this summer. The project has a liquefaction capacity of 1.4 million metric tons/year (mmty). NFE also is planning a 2.8 mmty onshore LNG complex at Altamira, management said on Thursday.

“We’re very excited about the onshore Altamira project for reasons similar to the one offshore,” said CFO Christopher Guinta during an earnings call. He likened the project to “Sabine Pass 10 years ago.”

Analysts at Evercore ISI said, “we see promising signs that the highly anticipated first offshore LNG production will start on time.”

Meanwhile, Mexico President Andrés Manuel López Obrador said Tuesday he had met with Mexico Pacific Ltd. LLC (MPL) management about plans for an LNG plant on the country’s west coast. “We were given the good news that” Mexico Pacific “is going to construct in Sonora a pipeline and a liquefaction plant, for an investment of $14 billion,” the president tweeted.

There was no confirmation from MPL on the sanctioning timeline.

“I don’t think this will change prices right now because this project has been ongoing,” Norberto Catalán, director of Trading and Origination at Énestas, an electricity and natural gas boutique trading shop in Mexico City, told NGI’s Mexico GPI. “But this is a formalization of the project and what they are going to invest and assurance from the Mexican side.”

MPL’s three-train, 14.1 mmty project has been seeing a lot of commercial activity lately. In late March, MPL and Shell plc signed another offtake agreement for MPL’s Saguaro Energía LNG export terminal proposed for Puerto Libertad in Mexico’s Sonora State. Sempra’s Energía Costa Azul project in Baja California, meanwhile, is aiming to begin LNG production from the roughly 3 mmty first phase by the end of 2024.

Mexico Prices

In Mexico on Wednesday, natural gas cash prices at Los Ramones fell 6.0 cents day/day to $2.350, according to NGI Data. Monterrey via the Mier-Monterrey system fell 6.0 cents to $2.161. Tuxpan in Veracruz via Cenagas saw the spot price fall 5.6 cents to $2.948.

Out West, the Guadalajara natural gas price was down 9.7 cents to $2.853 on Wednesday. Farther north in El Encino, prices via Tarahumara were $2.073, 14.3 cents lower than the previous day. On the Yucatán Peninsula, the cash price at Mérida was $3.743 on Wednesday, up 5.0 cents.

U.S. Storage

On Thursday, the U.S. Energy Information Administration (EIA) reported a 54 Bcf injection into stocks for the week ended April 28.

The South Central region, close to Mexico pipelines, added a net 6 Bcf, which included a 4 Bcf build in nonsalt facilities and a 3 Bcf build in salts, according to EIA. EIA noted that totals do not always equal the sum of components because of independent rounding.

For the week ended April 28, total working gas in the U.S. South Central region stood at 977 Bcf, up from 715 Bcf for the same time one year ago. The figure was 205 Bcf higher than the five-year average of 772 Bcf.

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