Posts Tagged ‘Gas price’

Shale gas potential delays new natural gas pieline under the Baltic

November 19, 2013

It will be slower than in the US, but shale gas will also be a game changer in Europe. Even though Russia has huge reserves of shale gas and shale oil, they would also prefer that the transition to shale gas should not go too fast. They have so much invested in the Natural Gas infrastructure that they need to keep the sales of natural gas going to ensure a return. Gazprom has the enviable dilemma of protecting an existing revenue stream by preventing the too rapid establishment of another revenue stream. One problem for Gazprom of course is that shale gas is much more widespread across Europe and their virtual monopoly with Siberian natural gas will be threatened.

In any case the energy scene is changing fast and the planned investment in additional gas pipelines under the Baltic Sea from Russia to Germany have been delayed by Nord Stream.

Swedish Radio News: The gas pipeline consortium Nord Stream are delaying their plans for one or two more pipelines under the Baltic Sea. According to Nord Stream’s adviser, Lars Grönstedt, the shareholders want further analyses of the rapidly changing energy market. 

The USA has quickly become almost self-sufficient in energy because of its own shale gas , and it has led to Europe buying more cheap coal than before. “I can not comment directly on the shareholders’ deliberations. But I can guess that since gas has changed to such an extent just the last twelve months , it needs some deeper analysis” says Lars Grönstedt. 

Nord Stream pipeline image http://russia-media.ru/

Nord Stream’s current pipeline has two channels extending from Vyborg in Russia to Greifswald in Germany under the Baltic Sea to deliver Russian natural gas to Europe.  

Nord Stream had planned to add one or two further gas pipes and held public information meetings last spring –  including on Gotland. It is a project that is expected to cost about $9 billion, and in Sweden alone could create some two hundred jobs during construction. 

Nord Stream’s shareholders, five European energy companies , including Russia’s Gazprom , have postponed these plans. The changes in the energy market as Lars Grönstedt mention, are due in part to America’s increased shale gas . 

I suspect that Gazprom’s best way of maximising revenues is by holding up current natural gas prices but not so high that the development of shale gas is accelerated and not so high that gas users shift to coal (as the large utilities are doing in Germany). A delicate calculation and which would require a slow development of their gas distribution pipelines.

But for the private consumers, the lowest cost would be if shale gas development was speeded up.

 

Benefits of shale gas are real and measurable

January 18, 2012

The advent of shale gas has moved the peak of “peak-gas” into the future by some 250 years. This together with the fact that gas-fired power plant have the shortest construction times and the lowest investment costs of any form of power generation  provides the possibility to hold down electricity generation costs. The increase in generation costs in recent times has been the natural consequence of the subsidy regimes for wind and solar power plants and the opportunistic rush to renewable power. Huge fortunes have been made by “green” developers as the subsidies have been milked – but consumers have only seen rising electricity prices.

Bloomberg  reports:

A shale-driven glut of natural gas has cut electricity prices for the U.S. power industry by 50 percent and reduced investment in costlier sources of energy. With abundant new supplies of gas making it the cheapest option for new power generation, the largest U.S. wind-energy producer, NextEra Energy Inc. (NEE), has shelved plans for new U.S. wind projects next year and Exelon Corp. (EXC) called off plans to expand two nuclear plants. Michigan utility CMS Energy Corp. (CMS) canceled a $2 billion coal plant after deciding it wasn’t financially viable in a time of “low natural-gas prices linked to expanded shale-gas supplies,” according to a company statement.

(more…)

US shale gas challenges Russian natural gas in Europe

November 12, 2010
Natural gas pipelines from Russia to Europe.

Natural gas pipelines from Russia to Europe: image via Wikipedia

“Peak gas”  like “peak food” and “peak resources” and like all “peak scenarios” keeps getting postponed. The US is awash with shale gas and has started re-exporting LNG it had contracted for to Europe challenging the dominance of Russian supplies of natural gas.

Money control reports:

The United States may play a role this winter in loosening Russia’s grip on the European market for natural gas by shipping liquefied natural gas across the Atlantic. Awash with domestic shale gas and with little need to import extra fuel, the United States has started re-exporting LNG cargoes, which firms had previously imported under contract, to countries where gas prices are much higher.

Such shipments could contribute to a growing pool of cheaper LNG going to Russia’s biggest export market this winter. In the longer term, U.S. plans to build plants to liquefy shale gas could create another rival to Russian pipelines. The first re-export cargo from the United States to Britain — a key access point for LNG into northern Europe via an Interconnector pipeline to Belgium — is set to sail over the weekend. “It is a landmark shipment,” said Zach Allen at NATS LNG analysts in Raleigh North Carolina. “LNG has, through the Interconnector, played a major role in reducing intake of Russian gas into western Europe.”

U.S. shale gas has already forced many LNG producers that had hoped to supply the North American market to find alternative buyers, with many cargoes ending up in Europe and driving spot gas prices below the price of oil-indexed Russian gas.

US re-exports to Europe are the latest sign that increases in shale gas production have transformed the global gas market. The International Energy Agency said on Tuesday that a decade-long period of oversupply was likely to push oil-indexed gas sellers to accept lower prices.

In February, Russian gas export monopoly Gazprom postponed it’s Shtokman LNG project because the United States, its target market, did not need more imports. Major European pipeline gas supplier Statoil has been forced to find alternative markets for LNG it had hoped to send to the United States, often selling it into Europe. Qatar, the world’s largest producer and exporter of LNG, has also pushed into both Norwegian and Russian markets by making large deliveries of cheap LNG into Britain and Belgium. US LNG imports have fallen to contractual minimums as gas prices have sagged, forcing importers whose terminals are sitting idle to change strategy and re-export to make the most of higher prices overseas.

US gas at USD 4.1 per million British thermal units (mmbtu) was about USD 3.3/mmbtu below UK prices on Tuesday and just under half the price of Russian gas in Europe in October, according to International Monetary Fund data. About 20 billion cubic feet of gas has already been re-exported from the United States this year, with some sent to Asia, where buyers have paid nearly USD 10 per mmbtu, and some to Latin America and the Middle East.

More of those US loaded cargoes could head to Britain over coming months, given that winter price increases are sharper in northern Europe than in the United States and that imports by South American and Middle Eastern buyers are usually confined to summer.

“US exports to Europe will remain rather exotic, but they underline once again the big risks for Russia of focusing some of its future projects on US markets,” said Valery Nesterov, energy analyst at Moscow-based Troika Dialog brokerage.

Cheniere Energy, operator of the Sabine Pass import terminal in Louisiana, announced plans in June to build a liquefaction plant at the terminal. It said on Tuesday that US bank Morgan Stanley hoped to secure some of its export capacity. Pending approval, the plant would export US-produced shale gas to markets all over the globe from 2015. It would be the first US LNG export plant in 40 years — following the old Kenai facility which supplies Asia from Alaska — and would be well placed to supply Europe. “LNG supplies from the United States can help lower gas prices in Europe and Asia and ultimately help lift prices in the States,” said Mikhail Korchemkin from Pennsylvania-based East European Gas Analysis.


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