Will Oversupply be a Problem for Liquid Natural Gas?
Friday, March 7, 2014
Producers are eager to get their supplies of liquefied natural gas (LNG) on the market. Now, with a problem developing in Ukraine, producers may have found their in.
GOP lawmakers are calling for action in response to Russia’s recent military actions in Ukraine. But, stopping short of a U.S. military response, lawmakers are urging the Obama administration to help Ukraine and European allies to end their dependence on Russian energy, according to Fox News.
To do this, one senator recommends increasing the United State’s energy exports to compete with Russian exports.
Fox News reported that Senator John Barrasso, R-Wyo., said that LNG is “just waiting” to be exported.
Senator Barrasso is right. What’s good for U.S. gas and oil companies would be bad for Russia. But if America were to export natural gas, wouldn’t it increase prices domestically? It may, but the increase in gas prices would be offset by other economic benefits, according to Department of Energy.
If prices increase, energy companies may experience some backlash from consumers. Yet it’s not only consumers that energy companies need to be mindful of. The law of supply and demand will also come into play.
Exporting natural gas
According to Bloomberg, the glut of infrastructure construction for liquefied natural gas export terminals may lead towards an overbuild that will stifle natural gas prices if it outpaces demand from Asia.
Read it:
“Capacity from proposed North American LNG terminals is more than triple the forecast growth in Asian gas demand by 2020, data from HSB Solomon Associates LLC’s Ziff Energy Group show.”
John Watson, chief executive officer of Chevron, told Bloomberg that the industry won’t overbuild LNG export capacity because the facilities are simply too expensive to build without buyers in place.
If exports did outpace demand it wouldn’t be the first time, according to Bloomberg. “Irrational exuberance” has happened before in the oil and gas industry, evidence being the many U.S. import facilities that became redundant after producers began extracting oil and gas from shale formations.
» Via: Bloomberg › Global Liquefied Gas Market Faces Potential Oversupply
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Shale FAQ
What is fracking?
Fracking is a slang term for hydraulic fracturing. Fracturing is a process by which highly pressurized fluid is pumped thousands of feet into the ground to fracture rock formations. The goal is to release the natural gas that’s locked inside the rock.
Is it safe?
What most concerns people about fracturing is ground water contamination. The worry is that fractures underground, caused by the process, will extending upwards and into aquifers, releasing gas and chemicals into the ground water supply. There’s been no confirmed reports of such a thing happening. Though surface spills and drill site blowouts can lead to localized environmental concerns.
Will my water catch on fire?
Flammable water is caused by the release of methane gas into a drinking water supply. Methane gas occurs naturally and can be released by any kind of drilling, including water wells. In Pennsylvania officials fined Chesapeake Energy $1 million for contaminating ground water with methane. It was determined that the company had not properly cemented it’s boreholes and gas migrated up the well, between rock and into aquifers.