From The Australian with comments form GV on incoming Trumpt administration ...
Global energy markets are bracing for a hit as the Trump administration makes boosting US shale oil and gas production one of its first official policies, threatening Australian LNG revenues.
Within an hour of the inauguration of Donald Trump as President on the weekend, a new “America First” energy plan was posted on the White House website, focusing on gas and oil production and reviving the coal industry.
“The Trump administration will embrace the shale oil and gas revolution to bring jobs and prosperity to millions of Americans,” the new policy said. “We must take advantage of the estimated $US50 trillion ($66 trillion) in untapped shale, oil, and natural gas reserves, especially those on federal lands that the American people own.”
A $200 billion Australian LNG investment boom over the past decade is expected to catapult Australia into a position as the world’s biggest exporter by 2020.
But US gas prices kept low by shale gas production have sponsored a wave of new US LNG projects, many of which are waiting federal government approval.
The US exported its first LNG last year and by December was exporting most cargoes to Asia because of strong spot LNG prices there, according to Bloomberg. Analysts said higher US gas production would hit global LNG spot prices, while more US oil would weigh on the contract prices received by Australia’s LNG projects, nearly all of which are linked to international oil prices.
“Any policies that Trump implements — lower taxes, less regulation, opening up more areas for drilling — all imply more production, which implies lower US gas prices, which means lower cash costs for US LNG exporters, and lower spot prices in Asia,” Wood Mackenzie analyst Saul Kavonic said yesterday.
Mr Kavonic said Mr Trump’s pro-drilling platform could inspire extra US LNG volumes at the same time that onshore gas restrictions in NSW, the Northern Territory and Victoria could result in more domestic demand for Queensland gas.
“Perhaps Trump’s pro-gas America First policy could help America become the world’s top LNG exporter with time, overtaking Australia, unless Australian policy changes,” he said.
Mr Kavonic said the devil would be in the detail of the policy and stressed many of the regulatory hurdles to more gas production in the US were state-based.
LNG Limited chief executive Greg Vesey, who is trying to build the Magnolia LNG project in Louisiana, said he was encouraged by statements from Mr Trump and his Energy Secretary nominee, former Texas Governor Rick Perry.
“From what Donald Trump has said on trade, he favours exports to bring the balance back into alignment, so you would think he would be supportive on that front,” Mr Vesey told The Australian from Houston yesterday.
“And Rick Perry has come out with some pretty favourable statements on LNG exports.”
Mr Perry reportedly told a Senate hearing the day before the inauguration that his understanding from Mr Trump was that he was a supporter of American energy, including developing and promoting LNG exports.
Magnolia is the only US LNG project not yet in construction that has received Department of Energy approval to export LNG to countries the US does not have a free-trade agreement with. But it still needs to secure offtake agreements to go ahead, something Mr Vesey says he is becoming more optimistic about achieving.
Shares of ASX-listed LNG Ltd are up 58 per cent since the US election on a mix of improved sentiment, achieving the DOE approval and higher Asian LNG spot prices.
Mr Vesey said he would not be surprised if the Trump administration considered quickly increasing a current cap on LNG exports, which the approval of Magnolia means is close to being reached.
The threat of increased US LNG is not just being felt in Australia.
A week before the US inauguration, Russia’s Gazprom acknowledged its dominant position in the European gas market was under threat.
“We see the main source of rivalry from the United States,” Gazprom’s deputy chief executive Valery Golubev told a conference in Moscow.
“We don’t know what the first steps of the new American administration will be, but judging from its previous statements, it is possible that they will boost their production.”
EnergyQuest chief Graeme Bethune said increased US oil production could lower global oil prices, which would reduce Australian contract prices.
I mentioned during the AGM, PM stated Trump would be good for Energy and from what has been stated since (and in this article), mean shovel ready MLNG is extermely well placed.
That's my take on the recent buying. Sustained, measured buying to continue. And I have my suspicions.
