Monday Feb 10

I warned of this in my newspaper column Friday.

From the Energy Journal Today

The coronavirus is wreaking havoc on already-battered liquefied natural gas prices, as a mild winter in the U.S.  combines with concerns that the outbreak in China is eroding overseas demand.

LNG prices hit $3 per million British thermal units late last week, a record low, according to S&P Global Platts. And an array of energy companies—from oil majors Shell and Chevron to export terminal operators such as Cheniere Energy and shale-gas producers like Cabot Oil & Gas—are trying to cope with the fallout, writes Ryan Dezember.

S&P cut its credit ratings on six of Appalachia's highest-volume shale gas producers last week on concerns of a supply glut and weaker projected demand growth. Prices may not rebound for years, the ratings agency said, posing a risk that lenders and investors might avoid funding gas projects.

As the world’s second largest economy—and No. 1 oil and natural gas importer—shows signs of a slowdown, a key price for liquefied natural gas in East Asia also hit an all-time low last week. The price drop rendered the compressed gas too inexpensive for producers to profit from spot cargoes shipped from the U.S., notes Wall Street Journal “Heard on the Street” editor Spencer Jakab.

Even before the coronavirus struck China, Chevron said in December that it was restructuring operations to focus on fewer prospects in the face of persistently low natural gas prices.

In the largest write-down by an energy producer in years, the company said it was cutting the value of several properties, including a planned facility to export liquefied natural gas from Canada.

Around the same time, Shell said it would take an impairment charge of around $2 billion. The company didn’t offer details about the post-tax impairment charge, but analysts said it is likely linked to lower projectionsfor gas prices.

The global gas collapse has broader implications. Many companies see natural gas as an important part of their journey to a lower-carbon future. If gas becomes a less viable business, it could slow the industry’s so-called energy transition.

— John Simons, London Energy Editor

Posted Tuesday Feb 4

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