The Co-op ICM and You Gov polls on shale highlighted in the Guardian earlier this week confirmed my suspicions that the energy debate in the UK outside of shale is open to all sorts of misconceptions, misunderstandings and just plain ignorance.  

The YouGov poll showed that 55% of people want more windfarms, compared to just 17% who want more gas power stations. It also showed that less than one in three people thinks the government should give the go-ahead to fracking. RenewableUK's deputy chief executive, Maf Smith, said: "Support for renewable energy is consistently strong, in this and other independent polls. One stark message from this survey is the public's evident disenchantment with fossil fuels, including the unpopularity of fracking."

This hostility show that the shale debate is now poisoning conventional natural gas as well, which should mean that the entire natural gas industry, including Gazprom and Qatar also need to get involved.  The reality is shale gas molecules can be no more removed from anyone's natural gas supply than one can choose to buy petrol that only comes from the North Sea and doesn't include any refined from Iranian, Venezuelan, Nigerian or anyone else's product.

Although we have yet to produce so much as a molecule in Europe, the time is fast approaching when US shale gas as LNG hits Europe in massive quantities. The moral choice for the shale antis will then be that if they truly believe that Pennsylvania is being poisoned, then they should put their money where their mouth is and stop using natural gas to heat homes or cook food and boycott all businesses that continue to use "just another fossil fuel"

This slide from Bentek Energy at the Platts LNG Forum earlier this month shows the current state of US LNG exports. It was only two years ago that Cheniere Energy proposed exporting shale to LNG from the Gulf Coast and at the time, the conventional wisdom said it would never happen:

I am not sure the economics work out in Cheniere's favor," said Zach Allen at Pan Eurasian analysts in Raleigh North Carolina.

"Cheniere is either projecting some change in the market that is going to force LNG prices up to oil parity or it doesn't work."

But since then Cheniere have actually started construction on two trains, and has proposed four more.But they are not alone with multiple LNG projects on the horizon. We can certainly expect that not all of them will make it, just as few of the projected import terminals in 2004 ever reached Final Investment Decision

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But enough will reach fruition to send very large volumes into world markets. The base case of 6.7 Billion Cubic Feet per day exports translates into 69.2 Billion Cubic Metres per year. How big a number is that?  25.3BCM of LNG was imported to the UK in 2011. The world's single largest customer Korea's Kogas bought 49 BCM,  India bought 17.2 and China 16.6. US exports will inevitably balance LNG markets.

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These slides show the impact on prices, first from the Gulf of Mexico:

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But what has recently developed is the very high likelihood of LNG exports from the Marcellus via the Cove Point terminal near Baltimore:

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When I proposed the inevitability of Cove Point exports to Europe three years ago based on discussions I had had with Statoil,  few people in Europe had even heard of shale gas. Yet now, US shale gas is headed straight to Europe from 2017 onwards.  

LNG costs from North America will depend primarily on distance, which makes two pieces of news out of Atlantic Canada this week even more interesting. First from Reuters this on a project from Nova Scotia:

CALGARY, Alberta (Reuters) - Pieridae Energy Canada said on Wednesday it aims to build a C$5 billion ($5 billion) liquefied natural gas export terminal in Nova Scotia, a first for Eastern Canada, with the aim of exporting the fuel to Europe and India.

The proposed facility would have a capacity of 700 million cubic feet a day and be in service in late 2018, said the privately held company which was founded by its current president, Alfred Sorensen. Sorensen sold his last major LNG plan - on the Pacific Coast - to independent energy companies in 2010.

The site on the southeast coast of Nova Scotia is adjacent to the Maritimes & Northeast Pipeline, which carries gas to Atlantic Canada and the northeastern United States from the Sable offshore gas project operated by Exxon Mobil Corp.

This sounds out of left field but with Sable Island gas that was originally earmarked for New England perhaps by that point getting pushed out of the market by new pipeline capacity from the Marcellus,  this may only sound as nutty today as the other projects were three years ago. It's noteworthy that Alfred Sorensen was the guy behind the Kitimat project.  But the news was quickly supplanted by someone talking up another project that would see the existing Canaport import terminal in Saint John, New Brunswick being converted. New Brunswick shale gas has been talked about for years and gone nowhere although at the time 3 years ago I thought it would only work via exports.  But that was then and this is now. Even with NB shale still stuck in controversy, exports of gas from as far away as Alberta are now posited. In this case, where the gas comes from isn't as important as who it is closest to:

A liquefied natural gas export terminal proposed for Goldboro may have some company.

Indian gas giant GAIL is reportedly eyeing Canaport LNG, a Saint John, N.B., facility co-owned by Spanish oil and gas giant Repsol and Irving Oil Ltd., with plans to convert it from an import to an export facility.

“For half the cost of a new export facility, it could be turned around,” said Phillip Knoll, who headsCorridor Resources Inc.

 New Brunswick or Nova Scotia is up to a week closer to the UK than Qatar. Qatar cargoes have to pass through no less than four choke points: Straits of Hormuz, Aden, Suez Canal and Straits of Gibraltar.  New Brunswick is only 36 hours further away than Algerian cargoes to the Isle of Grain.

The good news about North American shale LNG exports is that they will knock down dead any fears of either shortage or high prices of LNG. But the bad news is that if we don't start using our own shale resources, we could end up swamped by low priced LNG that would make some shale projects, although not Cuadrilla's I would think, uneconomic. The alternative right now to UK shale is to give the money for the gas we need anyway, to keep Qataris's in Ferraris. It may be more worthwhile to keep the Canadian economy afloat instead, but what have they done for us lately?

 

 

 

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