For the second consecutive quarter three of the top five natural gas marketers reported sales volume declines compared with the year-ago period, and 24 leading companies had total sales transactions of 127.06 Bcf/d in 3Q2011, an 8.54 Bcf/d (6%) decrease from the 135.60 Bcf/d they transacted in 3Q2010, according to NGI‘s 3Q2011 Top North American Gas Marketers Ranking.
BP plc remains at the top of NGI‘s marketers survey, despite a 10th consecutive quarterly decline compared to the corresponding year-ago period, reporting 22.00 Bcf/d in 3Q2011 sales, a 12% decline compared with 25.10 Bcf/d in 3Q2010. The last time BP reported a quarter-to-quarter increase was 1Q2009, when it reported 31.80 Bcf/d, a 17% increase compared with 1Q2008.
BP’s physical sales peaked at 32.50 Bcf/d in 4Q2008. BP remains entangled in the repercussions of the April 2010 Macondo well blowout in the deepwater Gulf of Mexico (see Daily GPI, Dec. 8). No. 3 Shell Energy North America (13.10 Bcf/d) and No. 4 Macquarie Energy (9.77 Bcf/d) also reported declines compared with 3Q2010.
No. 2 ConocoPhillips (15.30 Bcf/d, up from 15.20 Bcf/d in 3Q2010) and No. 5 EDF Trading NA (7.67 Bcf/d, up from 7.21 Bcf/d) were the only companies in the top five to report increases in 3Q2011. ConocoPhillips, which is readying a spinoff of its refinery operations to reemerge as the largest pure-play explorer in North America, is planning to spend $15.5 billion for its capital program in 2012 with about 90%, or $14 billion, to support exploration and production with 60% directed to North America projects (see Daily GPI, Dec. 6).
Also reporting significant increases in 3Q2011 were No. 6 JP Morgan, which reported 6.84 Bcf/d, a 1.70 Bcf/d (33%) increase compared with 5.14 Bcf/d in 3Q2010. JP Morgan also reported significant increases in NGI‘s 1Q2011 and 2Q2011 surveys (see Daily GPI, Sept. 9; June 9) — acquired RBS Sempra Commodities’ wholesale natural gas marketing and trading unit late last year (see Daily GPI, Dec. 2, 2010).
Total sales transactions among NGI‘s surveyed companies also declined in the second quarter over 2Q2010. The 24 leading companies had total sales transactions of 123.44 Bcf/d in 2Q2011, a 3.50 Bcf/d (3%) decrease from the 126.94 Bcf/d they transacted in 2Q2010, according to NGI‘s 2Q2011 Top North American Gas Marketers Ranking. It is notable that while the second and third quarter surveys show sales down over the previous year, the nation’s natural gas production is up. In its latest estimates, the Energy Information Administration said natural gas production should average 65.9 Bcf/d in 2011, which if realized would be 6.6% (4.1 Bcf/d) higher than in 2010 (see Daily GPI, Dec. 7).
Source: Quarterly financial reports with the Securities and Exchange Commission, or if necessary, statements signed by company officials and provided to NGI. Some previous-year data has been updated by the companies since it was originally reported.
Companies providing data directly to NGI include Bank of America Merrill Lynch, BP, Chevron, Citigroup, ConocoPhillips, EDF Trading NA, J. Aron & Co.; Gazprom, JP Morgan, Louis Dreyfus, Macquarie Energy, Shell Energy and Tenaska. *Macquarie Energy data reflects Macquarie Energy LLC’s transactions in the United States and Macquarie Energy Canada’s transactions in Canada. **The gas volume figures for Apache, Chesapeake, Devon, EnCana and ExxonMobil represent the amount of North American gas produced in the quarter. Those companies may be marketing more third-party gas for sale. ***J. Aron & Co. is the commodity trading subsidiary of Goldman Sachs.
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Surveyed sales volumes are always much higher than production since the survey includes sales by several companies of the same package of gas. The fact that sales volumes declined in the last two quarters over the same period last year while production increased could be ascribed to lower prices dampening trading and spawning fewer multiple trades. It also could be that more production went into storage to be sold later.
In the last year the natural gas industry has “overachieved on the supply side and underachieved on the demand side, and as a result we have gas prices trading well below norms,” according to Houston Energy Partners co-manager John Olson. “If we had the so-called traditional ratios between natural gas and crude we’d be trading closer to $9[/MMBtu] or so right now; instead we’re trading at $3.40 or so and a little higher in the Northeast.” Increasing production and pipeline capacity from the nation’s shale plays has resulting “in a lot of gas trying to find a home,” he said.
“Here we are going into the heating season with very tall storage, a very long supply of new pipeline capacity coming on everywhere and backed-up supply coming out of Canada. It’s going to be a very long winter unless we have a Siberian winter.”
But most forecasters are expecting temperatures to be more moderate this winter than in recent years. Weather Services International has said it expects this to be the mildest winter the United States has seen since 2006-2007, forecasting a 7.5% reduction in heating demand relative to last winter, which would still be a 4% increase relative to the 1981-2010 average (see Daily GPI, Nov. 22).
The National Oceanic and Atmospheric Administration (NOAA) has also said it expects temperatures through February to average below normal in California, Nevada, the Pacific Northwest and the northern Plains, with warmer-than-normal temperatures to be in place across much of the South, including the southern Ohio Valley and southern Mid-Atlantic areas (see Daily GPI, Nov. 18). And forecasters at AccuWeather.com have said that while the current La Nina event may prompt especially harsh temperatures and snowfall across the Midwest and Great Lakes region, the Northeast can expect winter 2011-2012 to be less extreme than last year (see Daily GPI, Oct. 6).
“Right now it’s profitless prosperity for producers when it comes to natural gas,” Olson said. “Most producers don’t break even on an all-in cost unless you have gas at anywhere from $5 to $7…you have the oil and natural gas liquids side subsidizing the natural gas side.”
A more vibrant economy and new gas-fired power generation would soak up some of the current surplus and buoy natural gas prices, but “the cyclical trends are not terribly promising right now for the next several years,” Olson said. “It takes time to work these surpluses down.”
Declining rig counts could help to put a lid on surpluses — there were 856 gas-oriented rigs operating at the beginning of December, an 11% decline from the same time last year, according to the Baker Hughes Rotary Rig Count — but liquefied natural gas (LNG) exports may not become a substantial part of the equation for some time. “LNG plants are years away, if they happen at all, especially with the financing that’s needed for a $4-5 billion plant project,” Olson said.
“When you add it all together I think we’re going to continue to see an upside-down marketplace where oil and NGLs will have to subsidize the losses taken on natural gas production.”
Highlights of NGI‘s 3Q2011 survey include a 9% increase for Sequent Energy Management (4.90 Bcf/d, compared with 4.50 Bcf/d in 3Q2010), a 117% increase for Citigroup (4.60 Bcf/d, compared with 2.12 Bcf/d in 3Q2010), a 6% increase for Encana Corp. (3.37 Bcf/d, compared with 3.18 Bcf/d in 3Q2010), an 18% increase for Southwestern Energy Co. (1.67 Bcf/d, compared with 1.41 Bcf/d in 3Q2010), a 38% increase for Apache Corp. (1.48 Bcf/d, compared with 1.07 Bcf/d in 3Q2010) and a 10% increase for Atmos Energy Corp. (1.03 Bcf/d, compared with 0.94 Bcf/d in 3Q2010).
The survey ranks marketers on sales transactions only. In a separate analysis of federal filings of gas sales, purchases and production earlier this year, NGI found that BP was the only one of the top five U.S. producers of natural gas that also showed up among the top five gas marketers in 2010 (see Daily GPI, July 14). BP led the marketers in combined sales and purchase volumes, followed by Shell, ConocoPhillips, Macquarie and JP Morgan, according to that in-depth NGI report based on 2010 Form 552 filings with the Federal Energy Regulatory Commission.
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