Energy Report: Risks Are Evolving

A request from one trade group will unlikely make an immediate change to the Natural Gas Act (NGA), which is the framework for allowing U.S. LNG export licenses. The licenses are granted on a long-term basis to allow the LNG export plants to operate. Market pricing has not been a restriction for the production of LNG in the U.S., reflecting the government’s free-market principles. U.S. LNG producers, in their various export license applications, have cited ample production figures underpinning supply for their export volumes. The Henry Hub front-month futures price on the NYMEX has been trading at multi-year highs in recent weeks. The October '21 front-month price closed at $5.34/MMBtu on Thursday.

The rise of natural gas prices increases the cost of natural gas liquids (NGLs), which are the feedstocks for petrochemicals and consumer plastics. The U.S. predominantly uses ethane as a feedstock to produce ethylene. Propane dehydrogenation (PDH) units convert propane into propylene. The U.S. has about 70m tonnes/year of LNG nameplate export capacity, with U.S. producer Cheniere’s 4.5m tonne/year Train 6 at Sabine Pass in Cameron Parish, Louisiana, next to start online, as well as the early commissioning of Venture Global’s 10m tonne/year Calcasieu Pass in Lake Charles, Louisiana.

Average feedgas of about 10 billion cubic feet/day (bcf/day) across the existing six LNG plants make up about 10% of the US marketed gas production, according to the US Energy Information Administration (EIA)’s 2021 estimate.

Prices in Europe and Asia have soared to record-high levels, as the ICIS Dutch TTF benchmark and the ICIS East Asia Index (EAX) for spot LNG cargoes have settled above multi-year prices. The TTF October ’21 November settled at $21.71/MMBtu on Thursday and the November ’21 was assessed at $23.45/MMBtu for Friday.

Bloomberg News reported that U.K. food and drink makers could run out of carbon dioxide within two weeks in the wake of an energy crunch, with meat production particularly vulnerable, an industry group warned. Soaring energy prices have forced two European fertilizer makers to halt some output in recent days, threatening shortages of CO2 -- a byproduct of producing the nutrients. Chicken and pig plants rely on the gas to stun animals at slaughterhouses and beverage makers use it to give soda and beer its fizz. A lack of CO2 will cause “massive disruption” to food supplies within 14 days, the British Meat Processors Association said Friday. Meat companies may have to shutter production lines, leaving farms crammed with extra animals. Already this year, livestock plants have cut output due to worker shortages, while consumers have faced bare grocery store shelves amid a lack of truckers.

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