From Forbes: ‘It was the best of times; it was the worst of
times’ – never a truer word spoken for the gas industry. Whilst Chesapeake is
fighting for its life in the US, spot gas prices are reaching all-time highs in
Asia. In this ‘Tale of Two Cities’ you’ll get $2/MMBtu in New York (Henry Hub)
and around $20/MMBtu in Singapore (Asian spot). The divorce between the
Atlantic Basin and Pacific Basin couldn’t be any starker – the question is
whether these spreads will incrementally narrow under inexorable laws of
economics, or whether politics will throw a spanner in the works. Depending on
how you answer this ‘convergence question’ will have dramatic implications for
hydrocarbon asset prices in the years to come. Not to mention the contours of
international energy relations.
‘Convergence’ makes most sense for the US of course –
Chesapeake’s foibles merely mask a structural problem for American gas players;
they are selling their gas for a pittance in the US when they could be making
an absolute killing overseas, roughly to the tune of $1bn spreads a day in
Asia. Whatever the economic merits of keeping ‘US gas for US consumers’
improving balance of payments, fast tracking coal to gas for emissions, as far
as gas players are concerned, it’s still a damp squib. Great, they’ll get
$5/MMBtu rather than $2/MMBtu with some unfortunate mothballing / defaults in
between. Not exactly the giddy heights of Asian LNG…..
No comments:
Post a Comment