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Doc, If you haven't looked already, Gas Natural Fenosa's (one of...

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sivart

5,940 Posts.

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08/04/15

10:24

Post #: 15048802
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Originally posted by doctornoh ↑

Its interesting to consider as a thought experiment where we would be if oil was still trading at $80.

Back then the big concern in all of the media articles was that there would be so much US LNG export capacity that Henry Hub would rise on increased demand and wipe out the price differential arbitrage and that LNG projects were in jeopardy past the first few projects.

Now its that the world oil price is so low that it wipes out the price differential arbitrage and that LNG project are in jeopardy past the first few projects.

Big thing to note in either scenario is that Maggy is slated to be Top 5 projects to production- this gives us a massive competitive advantage no matter what the oil price or Henry hub is doing. Regardless of the pricing advantage we may have over other projects given the OSMR advantage.

Cllearly however the oil price is a factor but Im sure electricity generators are also looking at diversity of supply base to reduce capacity risk ( do you really want all of your gas coming from Russia) and want exposure to Henry Hub pricing to reduce pricing benchmark risk over the long term. For example, who can say there isnt another Fukushima or other left field event that drives up the Asian LNG price? Wouldnt you actually want some Henry Hub contracts in that instance to diversify pricing risk?

Given the above and regardless of the noise in the media we know directly from Management that there are a lot of players who want to partner with LNG because we have almost all the approvals and funding in place to get to production plus a small thing called a discount on tolling. No one talks about the landed cost of LNG in Chile or Argentina or Spain for instance and whether there is still a arbitrage opportunity there given the fixation on Asia although obviously world spot LNG prices are all effected by what Japan and Korea are buying at.

Bear Head as well is clearly a very shrewd piece of business not only as a greenfield site and the construction and approvals head start this provides but also its close proximity to the under utilised MNP pipeline. Again no coincidence that BH has already applied for import/export approval for US gas which shows a gas supply plan in place.

So I dont think its a coincedence that some large investors look at Maggy and BH as actual projects and see a buy rather than being sucked into the negative vortex that commentators spin.

In any case time will definitely tell.

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Doc,

If you haven't looked already, Gas Natural Fenosa's (one of our original non binding tolling partners, and a binding tolling partner of Cheniere) story is an interesting one in this respect. It would seem they are interested in exactly the case you describe.

LNG Price at posting: $3.78 Sentiment: Buy Disclosure: Held
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0 Great analysis

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