Yesterday I told you about our record low natural gas prices in the U.S. and how our resources will be soon available to rest of the world.
Of course, the rest of the world will have to wait another few years until we start ramping-up exports. Unfortunately for Egypt, U.S. liquefied natural gas still has until December 2015 before those shipments start hitting foreign shores.
Last month, newly elected Egyptian President Abdel Fattah Al Sisi agreed on a gas deal with Africa’s largest natural gas producer, Algeria.
According to the EIA, Algeria has the world’s third largest shale gas reserves at around 707 trillion cubic feet, but production has declined over the last few years due to delays on new developments.
There’s one slight problem developing, however. As you can see, production has been relatively flat, while Algeria’s consumption is slowly creeping higher.
Granted, the country can still export nearly 2 trillion cubic feet a year, but considering their increasing gas demand, it’s no surprise to hear that Algeria is putting a hefty premium on its shipments.
Looking a little closer at the details, you’ll see that Algeria agreed to supply Egypt with about five shipments, each containing 145,000 cubic meters of LNG by the end of this year.
Egyptian officials have said that Algeria is charging them $250 million for the shipments, which boils down to about $13 per million Btu. Compare that to the $11 per MMBtu that Algeria’s other customers are paying.
It’s too bad for the Egyptians that they couldn’t wait another year or so for U.S. LNG exports to hit full steam and lower prices around the globe.
It may seem like a long wait until the December 2015 rolls around, but it’s well worth the wait for the glut of shale gas that’s expected between now and 2040.
As you can see, the EIA is expecting U.S. Gas production to reach nearly 40 trillion cubic feet of natural gas. At that point, our supply will be used both domestically, as well as shipped abroad via LNG tankers, tapping into Asian, African, and European markets, where prices are almost triple when compared to the $3.85 per MMBtu sold at the Henry Hub.
One caveat, however, is that Egypt’s deal only lasts until the end of this year. So, it turns out that they may just have to bite the bullet and pay the extra cash for their LNG until they can find a better price elsewhere.
Although the price may not be much lower by then, it’s only a matter of time before the U.S. is able to tap into the global gas markets. And countries like India, China, Japan, and EU will all be waiting in line to buy U.S. natural gas.
Let’s hope 40 trillion cubic feet can help satisfy their needs, but only time will tell.
Until next time,