Some thoughts on pricing and profitability from Venture Global. You may be aware that Venture Global is proceeding with a mid-scale LNG project right at the mouth of the waterway where Magnolia is located. They are using Chart technology and plan a mid 2015 FERC submittal. While these comments note an Asian market and we understand Magnolia is focusing on Europe and Latin America it does provide some insight. Also worth noting that Venture Global's approach in much like Magnolia in that they are striving to be a low cost supplier -> $450/tonne or less range. Cheniere on a per tonne basis is much higher.
Venture Global LNG sees Henry Hub-linked pricing still attractive in Asia
Platt’s – April 15,2015
Despite recent decreases in oil prices, US Henry Hub-linked gas prices remain an attractive option to Asian buyers in long-term LNG contracts as buyers seek to diversify and minimize overall price volatility in their supply portfolios, said the head of the US-based Venture Global LNG project in Louisiana. Price is not the only deciding factor in structuring long-term LNG contracts, especially for Japanese buyers, Venture Global LNG CEO William M. Wicker said last week in a phone interview with Platts. “If you are a Japanese consumer of LNG at a large utility, your job is to build a supply portfolio that is not volatile, and the way you do that is to layer in different net pricing mechanisms to that portfolio,” he said. Most LNG contracts in Asia are oil-linked and the recent plunge in oil prices has worked in buyers’ favor. Long-term LNG contract prices could range from $8/MMBtu to $11/MMBtu between February and June, depending on the slope to crude written into term contracts, Platts research unit Eclipse Energy said in February. In comparison, Cheniere’s Sabine Pass in the US is priced at 115% of Henry Hub gas prices, plus liquefaction charges of $2.25/MMBtu to $3/MMBtu and shipping costs of $3/MMBtu, the company has said.
Based on Monday’s settlement of $2.511/MMBtu for NYMEX May Henry Hub gas futures contract, LNG from the Sabine Pass project would land in Asia at $8.14/MMBtu-$8.89/MMBtu. If oil prices bounce back, the competitiveness of Henry Hub-linked contracts would greatly improve, Wicker said. “We think if it gets back to $75-$80/barrel and Henry Hub stays where it is, we think that will create very favorable opening for US LNG exports to Asia,” he said.
LNG Price at posting:
$4.35 Sentiment: None Disclosure: Held
