Hints of an economic turnaround weren’t enough to pull natural gas marketing out of the doldrums during the first three months of this year, according to NGI‘s 1Q2010 Top North American Gas Marketers Ranking, which found that the 22 reporting marketers that also participated in the 1Q2009 survey transacted 122.85 Bcf/d in 1Q2010, an increase of less than 1% compared with the 121.87 Bcf/d they reported in the year-ago period. Those same 22 marketers reported a less than 1% decrease in NGI‘s 4Q2009 survey compared with the year-ago period.
While still the top marketer in the survey, BP plc reported physical sales of 29.4 Bcf/d in 1Q2010, an 8% decline from 31.80 Bcf/d in the year ago period, following an 11% decline in the 4Q2009 survey. Shell Energy North America (US) LP remained in second place in the survey, reporting a 2.5 Bcf/d (17%) increase to 17.20 Bcf/d in 1Q2010 compared with 14.70 Bcf/d in 1Q2009. It was the third consecutive strong performance for Shell, which reported a 12% increase in NGI‘s 4Q2009 survey compared with 4Q2008 and a 9% increase in the 3Q2009 survey compared with 3Q2008 results.
ConocoPhillips reported 14.10 Bcf/d in 1Q2010, a 1% decline compared with 14.30 reported in 1Q2009. For the third consecutive quarter privately held Louis Dreyfus Highbridge Energy had one of the largest percentage increases in the survey, up 1.04 Bcf/d (17%) to 7.26 Bcf/d in 1Q2010 compared with 6.22 Bcf/d in 1Q2009. Louis Dreyfus reported a 19% increase in NGI‘s 4Q2009 survey and a 25% increase in the 3Q2009 survey compared to the corresponding year-ago periods.
The Energy Information Administration (EIA) has projected that marketed natural gas production will increase 1.2 Bcf/d (2.1%) in 2010 — 0.5 Bcf/d more than in its previous forecast — but said 2011 production will retreat almost 0.5 Bcf/d to 60.8 Bcf/d (see related story). President Obama’s moratorium on drilling or planned drilling in the Gulf of Mexico (GOM) in response to the explosion on the Deepwater Horizon rig and mammoth oil spill (see NGI, May 31) is expected to result in a GOM production decline of about 0.03 Bcf/d in September 2010 to 0.24 Bcf/d by December 2011, according to the EIA outlook.
“Gas is a market in search of demand,” according to Maryland-based energy consultant Ben Schlesinger. “It needs demand, and with more demand we can justify the kinds of development projects I think people envision when we think about large gas supplies, shale supplies and our conventionals in North America…When you look at the difference between oil and gas prices, it’s pretty telling. Oil is more than three times as much as natural gas on a per-Btu basis. It didn’t have to be that way.”
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 BP, Chevron, Citigroup, ConocoPhillips, EDF Trading NA, JP Morgan, Louis Dreyfus, Macquarie Energy, Merrill Lynch, RBS Sempra, Shell Energy and Tenaska. *Macquarie integrated Constellation Energy’s gas trading business into its operation at the beginning of April 2009. No combined data is available for 1Q2009. 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, ExxonMobil and XTO represent the amount of North American gas produced in the quarter. Those companies may be marketing more third-party gas for sale. *** Due to a resubmission of data, RBS Sempra’s total for 1Q2010 was increased to 9.50 Bcf/d on 6/24/2010 from the originally reported 6.40 Bcf/d, taking them from 8th place to 5th place in the quarterly rankings. The change increased the total for all companies from 144.59 Bcf/d to 147.69 Bcf/d.
Demand and prices aren’t likely to see a long-term increase until the economy gets back on its feet, but the conversion of some coal-fired power plants to gas generation could lead the way, Schlesinger told NGI. “Power plants in North America are needed to help create gas demand,” he said.
Despite Cheniere Energy Partners LP’s recent bid to add liquefaction services at the Sabine Pass liquefied natural gas (LNG) receiving terminal in Cameron Parish, LA, and suggestions by a number of industry analysts and executives that the U.S. Lower 48 could become an LNG exporter (see NGI, June 7), that scenario isn’t likely to open the kind of market the industry really needs, Schlesinger said.
“The places where we’d be exporting LNG also have to think about their gas industries. LNG would come into other markets with their own issues. Europe is in a real precarious position right now with respect to its gas supply. In a sense it’s a dual market that resembles in some ways the North American dual market of the 1980s in which there were spot gas transactions and trading centers, and long-term contracts as the mainstay market. We all saw how unstable that situation was in North America in the 1980s. Spot won and contracts lost. I don’t necessarily believe that is going to happen in Europe, but the influence of spot-traded gas in Europe is really being felt in the contract markets.”
One potential market yet to be fully tapped is transportation, Schlesinger said.
“We should have had 20 million natural gas vehicles [NGV] by now,” he said. The problem isn’t necessarily infrastructure — “we have 1,500 fill stations around the United States for only 100,000 vehicles,” Schlesinger said– but there are simply not enough NGVs being produced.
“We don’t have the vehicles because manufacturers didn’t want to make the vehicles because no one asked for them, and people didn’t ask for them because they didn’t see them in the showroom. It’s kind of a vicious circle that could have been broken by a good deal more leadership on the part of the manufacturers in particular…so we don’t have our 20 million natural gas vehicles now and we’re not going to have them for a while, and so that can’t be used to solve our demand problem, at least not for the foreseeable future.”
Other highlights of NGI‘s 1Q2010 Top North American Gas Marketers Ranking include a 1.80 Bcf/d (58%) increase for Sequent, which reported 4.90 Bcf/d, compared with 3.10 Bcf/d in 1Q2009. Sequent also reported the largest percentage increase in the previous NGI survey (see NGI, March 22). In December Sequent Energy Management LP closed a deal involving the purchase of substantially all of Integrys Energy Services Inc.’s wholesale natural gas marketing business (see NGI, Dec. 14, 2009).
Changes will be coming to the survey’s upper ranks later this year with RBS Sempra Commodities, a joint venture business of Sempra Energy and the Royal Bank of Scotland, scheduled to be dissolved by the end of August (see NGI, May 10). The once-lucrative business, which was ranked eighth in the 1Q2010 survey, lost $5 million in the first quarter, compared to $114 million in net profits in the first quarter of 2009, according to Sempra.
And Nexen, which reported 4.80 Bcf/d in 1Q2010, a 6% decline compared with 3.10 Bcf/d in 1Q2009, has agreed to sell its North American downstream natural gas marketing business to Goldman Sachs’ commodity trading subsidiary J. Aron & Co. (see NGI, May 17). J. Aron is expected to take over the operations of Nexen’s gas marketing business by the third quarter. Nexen Marketing would continue to market Nexen’s proprietary gas production in both Canada and the United States. The deal came on the heels of Nexen successfully unloading its European gas and power marketing business for C$15 million.
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