World’s Priciest Gas Is Bound for One U.S. Region This Winter
http://finance.yahoo.com/news/world-priciest-gas-bound-one-180403264.html?soc_src=social-sh&soc_trk=twNovember 1, 2016
The global glut of natural gas still hasn’t reached one corner of the U.S.
The heating fuel may surge to $20 to $25 per million British thermal units in New England this winter, the highest in the world, as pipeline bottlenecks limit supplies during frigid weather, traders including Consolidated Edison Inc.’s ConEdison Energy said. Prices have collapsed across the rest of the globe amid tepid demand growth, rising exports and a plunge in crude oil prices earlier this year.
Competition for pipeline access into New England is poised to intensify as the power grid, already getting more than half of its supply from gas, becomes even more reliant on the fuel as coal-fired plants shut. Opposition from environmental and consumer groups threatens to delay and derail new lines, including a $3 billion Spectra Energy Corp. project.
“New England remains pipeline constrained, so if bouts of very cold weather move in this winter, you could certainly see prices spike,” Alex Tertzakian, an analyst with Energy Aspects Ltd. in London, said in an e-mail Oct. 28. “This would likely make New England briefly the world’s premium market.”
as deliveries on Spectra’s Algonquin line to Boston and other New England cities for January and February were valued at more than $7.60 per million British thermal units Tuesday, according to Bloomberg Fair Value prices. In spot trading Monday, Algonquin settled at $2.76, a 3-cent discount to the benchmark Henry Hub in Louisiana.
“There is going to be a lot of volatility and it’s going to be driven by the weather,” John Borruso, ConEdison Energy’s manager of natural gas trading, said in an Oct. 20 telephone interview. “The number of days you see more than $20 is under three or five days. If it’s super cold for a number of days you might start to stress the infrastructure.”
Globally, prices aren’t expected to approach those levels in major markets. Spot liquefied natural gas for Japan traded below $6 per million Btu as of Sept. 30 and the U.K. NBP benchmark is trading at about $6. Neither region has seen $20 LNG prices in the last decade, according to Bloomberg Intelligence data.
Operating conditions on the six-state grid managed by ISO New England Inc. are already “precarious” during winter periods and beyond 2019 “may become unsustainable” in extreme cold conditions, Chief Executive Officer Gordon van Welie said in late September. The grid started a winter reliability program compensating generators for stockpiling fuel oil and LNG....
