OTC: US must pay more to attract gas storage supplies

US natural gas markets will have to compete in price in global gas markets if they expect to attract sufficient supplies into storage before the country's gas withdrawal season traditionally begins on Nov. 1.

Warren R. True
Chief Technology Editor-LNG/Gas Processing

HOUSTON, May 9 -- US natural gas markets will have to compete in price in global gas markets if they expect to attract sufficient supplies into storage before the country's gas withdrawal season traditionally begins on Nov. 1.

That was the main message of David Thames, president of Cheniere Marketing, as he spoke to a luncheon audience May 8, the final day of the Offshore Technology Conference in Houston. And he believes historically high prices for this time of the year suggest US markets will respond.

Arguing the primacy of LNG as the fuel most likely to fill the import demand, Thames cited the flat growth in domestic natural gas production despite rising gas rig counts and prospects for falling gas imports from Canada. The result, he said, will be a 5-8 bcfd deficit the US will face.

New shale plays will not be as productive as the Barnett has been, Thames said. Many are requiring years to reach modest levels of a few hundred million cubic feet/day.

LNG, on the other hand, as exemplified by Cheniere's newly opened Sabine Pass terminal stands ready to send out large amounts of gas into storage or electric power market. Again, price is the key, Thames said.

Recent US prices have hit more than $11/Mcf, compared with contracts in Asia-Pacific nearing $20/MMbtu, as US markets respond to growing demand for gas.

Contact Warren R. True at warrent@ogjonline.com.

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