PIRA Energy Group Releases New Multiclient Study, Unconventional LNG: Monetizing North American Gas Exports

NEW YORK, June 22, 2011 /PRNewswire/ -- PIRA Energy Group, a New York City-based international energy consulting firm, recently released a new study on the opportunities for exporting gas from North America entitled, Unconventional LNG: Monetizing North American Gas Exports.

PIRA has seen a radical momentum change in gas fortunes in the United States and Canada over the last decade, emphasizing greater LNG exports from North America, thus creating the emergence of a global market for North American LNG.  In its study, PIRA addresses the questions of where the demand in the world exists, which markets will provide the highest netbacks, and which key markets are indispensable to North American export projects.  Because the answers will affect the relationships among gas suppliers in Australia, Africa and the Middle East and gas buyers in Europe and Asia, PIRA felt the importance of assessing the impact of these forces in a detailed study for any company considering this opportunity.

PIRA sees vast new supplies of pipeline gas and LNG emerging all over the world, and North American gas producers are faced with a highly competitive environment if LNG exports are going to succeed in a sustainable way; and North American LNG marketers will face questions with regard to where the best value can be achieved.  That issue was the impetus for the study, according to Mickey Kwong, PIRA's Director of International Gas and the study's main author.  "Natural gas is like no other energy commodities. It is difficult to store and expensive to transport to distant markets. This is why a wide price difference exists between international markets," says Kwong.

According to PIRA, it was only a short time ago that North America was looking at a vast import bill. Then, unconventional gas development took off and radically reversed the fortunes of all parties. The idea of turning North America into an LNG exporter started in British Columbia, where stranded reserves quickly became a problem. The idea then spread to the U.S. Gulf Coast, where stranded assets — built to manage a wave of LNG imports that never came — are now looking for an alternative use.  Both regions are reflective of a broader trend in North America, where overall demand growth is having trouble keeping up with a rapidly growing proven gas reserve base, which now stands at an all-time high and shows no signs of slowing. With demand growth seemingly constrained by a lack of end-users — even at prices that are by far the lowest in the OECD — PIRA believes that gas producers and marketers have now found common ground with owners of underutilized LNG infrastructure in a quest to find markets overseas for an increasing amount of gas.

According to Kwong, PIRA's study provides a detailed emphasis on three issues. The first is the ability of North American LNG exports to compete with other gas suppliers.  "Many buyers around the world have multiple supply options, which include not only LNG but also pipeline gas. While distance to market is an issue, it is not the only issue.  Equally important to know is how North American LNG export projects will position themselves to capture this opportunity," says Kwong.

The second issue is pricing of gas that will drive future trade, including spot prices, price equivalency, relative gas pricing, and netbacks.  "Although buyer-seller relationships still influence directions of LNG spot trades, all parties are quickly embracing the market's rising transparency and liquidity; therefore, pricing will become the dominant force behind cargo movements. At the moment, many buyers vastly overpay for supplies. Avoiding this mistake in the future will involve understanding relative gas pricing around the world," continues Kwong.

The third issue is the role of gas demand in destination markets.  Kwong states that "not all end-users are created equal. Even within a single country, many pricing points can occur, and understanding where these prices reside allows for a better comprehension of LNG marketing and trading options. Buyers seeking alternatives to oil or coal have a different pricing point than buyers faced with industrial or R/C growth."

According to Ira Joseph, PIRA's Executive Director of International Gas and co-author of the study, "Any assessment that focuses on the numbers alone can tell you that North American LNG exports should work, but that is why we have taken on this study — to dissect the evolving LNG industry and provide details on how these proposed export projects may succeed and how they may fail.  PIRA has always looked forward in its analysis of all energy markets, and this study is no different.  We believe North American LNG exports will re-invent the LNG industry and tens of billions of dollars are at stake."

PIRA Energy Group, founded in 1976, is an international energy consulting firm offering fundamental market research and analysis, as well as customized project consulting, on a broad range of subjects in the global oil, natural gas, electricity, coal, biofuels, shipping and emissions markets.

For more information on this study or PIRA Energy Group, please call Jeff Steele at (212) 686-6808 ([email protected]).

www.pira.com

SOURCE PIRA Energy Group