Our Commentary: Today our Aussie O&G energy analyst friend focuses his astute observation on how LNG prices are being reviewed — to the benefit in a buyers market — of buyers.  This observation would tend to support Alaska producers’ and Shell’s (BC) more cautious approach to North American LNG projects targeting major Asian markets.  

Of course, Alaska’s socialist leaning governor is not deterred, continuing to move toward more state control of Alaska’s energy industry, and the multi-billion dollar risks to his citizens which accompanies such Venezuela-like behavior.  -dh

Aussie Oil & Gas Observer

Commodity prices

Crude prices fell overnight, with Brent down ~2% to US$46.20 and WTI down ~2% to US$44.75.  Nothing in particular was identified as a single catalyst for the fall, although some commentators consider that the market took an extra day to considerWednesday’s EIA inventory report as being disappointing.

Henry Hub fell ~1% to close at US$2.63.

LNG and international gas

A few days ago we noted the move by Japan’s competition regulator to review the (prima facie anti-competitive in our view) “destination” clauses in the country’s LNG import contracts.

Bloomberg New Energy Finance has just estimated that the total value of Japan’s contracts which have such clauses is a staggering US$800B.  If Japan removes these clauses it would be untenable for Producers to keep them for other countries such as Korea – so we conclude that the total value of global LNG contracts at risk of being re-opened must be in the rough region of US$1.5 trillion.

International lawyers would see this is an opportunity to have one legendary “field day”.  However, we think it would be prudent for Producers and Buyers to get together and negotiate these things out between themselves rather than resolve them in political and/or legal forums.  For instance, both parties could work together to effectively move from long term traditional contracts to more transparent commodity markets – that is, be the actors not the audience.

One good recent LNG market anecdote that shows the benefits of market liberalisation – the recent sale of US cargoes from Cheniere’s facilities in the Gulf of Mexico to Kuwait and Dubai in the Middle East, reversing the typical long term global perception that energy flows always go the other way.