Global natural gas supplies that have reached market or will shortly are greater than in a generation, Wood Mackenzie’s Noel Tomnay told OGJ in an exclusive interview at Gastech in London this week.
These new volumes and the diversity of their sources—US shale gas, Western Canada shale, and offshore Mozambique—offer potential buyers a range of supply options they have not had for some time, Tomnay said.
Australia, with its high costs especially for labor, is likely to take a back seat to the new supply arenas, at least until its costs come down. There will be no final investment decisions on Australian LNG projects in the near future, Tomnay said.
What may limit the new supplies, especially from East Africa and to a lesser extent Western Canada, is lack of infrastructure. Mozambique is a country only recently out of civil war, Tomnay said. Canada’s projects, when compared with those in the US, are greenfield, with all the political and investment uncertainties that go with such developments.
There’s enough uncertainty around shipping and AECO (Canadian) hub vs. Henry Hub pricing that it’s “very difficult to know which area’s gas” is going to be the most competitive. “I think it’s US Gulf Coast [that will be] cheaper than Canadian LNG into Japan,” said Tomnay.
In response to a question about historical volatility at Henry Hub, as a Gastech presentation by BG Group had noted in earlier presentation, Tomnay said, “If it’s so uncertain, why are so many players trying to exploit the differential?”
BG’s attitude, he said, is self-serving: “The principal players, with their actions, are saying, ‘We love this arbitrage.’”
Contact Warren R. True at [email protected].
