In an interview on E&ETV yesterday, Cheniere CEO Charif Souki said that domestic natural gas prices could drop to $2 per million British thermal units as a result of improved drilling technologies, regardless of whether LNG exports are increased.
“The rationale is this is no longer an exploration play. We know where the resource is. This is now a technology play. Technology plays become better, not worse.
We are learning how to image better, so we know where we have to drill. Our drill bits are getting better, so we know how to manage them and get them to the right place faster and better with less intrusion.
John Berge was talking last week about being able to reduce the amount of water used in the fracking process by 80 percent over the next few years. So, this is going to become a better and better process,” he said.
“We’re very early in the learning curve and we’re going to be able to find this resource more easily, faster and cheaper over a long period of time.
Whatever we can do to export is not going to be sufficient to make any impact at all. Most of the studies talk about 20 cents, I would propose that 20 cents statistically is insignificant, because gas prices can go up or down 20 cents every week. So, over a 20 year period, if our impact by modeling is 20 cents, that’s fine,” he added.
Cheniere of USA is developing a project to add liquefaction and export capabilities to the existing infrastructure at the Sabine Pass LNG terminal.
The Liquefaction Project is being designed and permitted for up to four modular LNG trains, each with a nominal capacity of approximately 4.5 mtpa.
In November 2011, Sabine Liquefaction, a unit of Cheniere, entered into a lump sum turnkey contract for the engineering, procurement and construction of the first two trains of the project with Bechtel Oil, Gas and Chemicals.
Sabine Liquefaction has also entered into four long-term customer sale and purchase agreements for 16 mtpa of LNG volumes, which represents approximately 89 percent of the nominal LNG volumes.
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The head of Chesapeake Energy, one of the biggest U.S. natural gas drillers, does not want the country to ship its huge gas reserves overseas, despite agreeing to supply fuel for a proposed export project.
Record U.S. natural gas production has sparked a debate about whether the resource should be used more at home, potentially for wider use in transportation, or shipped abroad to fetch higher prices on the global market.
“I want the right to export natural gas, but I am really hopeful that we never do,” said Chesapeake chief executive Aubrey McClendon during a panel discussion on natural gas vehicles in New York on Wednesday.
A string of rival liquefied natural gas (LNG) export projects have been proposed in the United States over the past year as unconventional gas production has left the country with a century’s worth of cheap supply, evaporating import needs and thinning producers’ profit margins.
Together, the proposed export plants could export the equivalent of more than 10 percent of U.S. gas needs by the end of the decade.
Chesapeake has pledged to supply U.S.-produced gas for the most advanced U.S. project at Sabine Pass in Louisiana, run by Cheniere Energy, which could be online by 2015, pending regulatory approval. Last month Cheniere signed an agreement with LNG shipper BG Group to supply U.S. shale gas to the world.
“When we first announced the Sabine Pass Liquefaction project, Chesapeake stated publicly that they would provide half a billion cubic feet per day of gas to the Sabine Pass facility,” a Cheniere spokeswoman said.
Still, McClendon hopes that there will be enough demand at home for that not to be necessary.
“An LNG export facility wouldn’t be ready for another four years or so,” McClendon said. “I really hope in the next four years that we embrace natural gas for transportation so we don’t need to export it outside the country.”
Despite massive reserves and nascent efforts, the United States is yet to make widespread progress to turn diesel and gasoline engines over to natural gas.
Much depends on legislation in Washington. There is some optimism surrounding the Nat Gas Act, introduced in the Senate on Tuesday, which provides tax incentives to buy natural gas engines, though past efforts of this kind have been slowed and halted by political wrangling.
In the meantime, McClendon is hedging his bets.
“If for some reason this country refuses to use this wonderful fuel…I have to put my gas up for sale to somebody,” he said.
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“It will cost a little more than expected for environmental reasons… We had originally said $30 billion,” Total Chief Executive Christophe de Margerie told Reuters on the sidelines of a G20 meeting of business leaders in southern France.
The project, developed by Total and Japan’s Inpex , *aims to build offshore facilities to produce natural gas and condensate, and an undersea pipeline stretching 885 km to a liquefaction plant in Australia’s northern city of Darwin.
It is expected to produce 8.4 million tonnes of liquefied natural gas, liquefied petroleum gas and condensate each year.
The project was initially estimated to cost $20 billion but de Margerie said that the company had in recent months been citing the figure of $30 billion in road shows.
Total currently owns 24 percent of the project, a stake the French company would be keen to increase, de Margerie said.
“We would like to have more than that,” he said, giving no details on whether Inpex, which holds the remaining 76 percent of Ichthys, would agree to let Total raise its stake.
The strict environmental conditions imposed by the Australian government to develop the project explain the upward revision in the project’s cost, de Margerie said.
De Margerie said he expected a final investment decision (FID) to be made by year-end, with a view to start production in four years.
He did not comment on the outcome of reported meetings by bankers in Tokyo and Sydney that were aimed at putting together the financing needed for the development.
“In Ichthys like for every big project we have been in, the FID will be made before the financing is in place,” de Margerie said.
LNG project developers typically seek and sign long-term deals to sell their gas before they begin construction. Inpex said earlier this year it had secured buyers to cover the whole annual output of 8.4 million tonnes from the Ichthys project.
Reporting By Marie Maitre (Reuters)