Chevron warns of medium-term LNG supply gap

http://oilpro.com/post/30895/chevron-warns-medium-term-lng-supply-gap?utm_source=DailyNewsletter&utm_medium=email&utm_campaign=newsletter&utm_term=2017-04-14&utm_content=Article_9_txt

"Countering the prevalent LNG market theme of a supply glut, Chevron’s vice chairman Michael Wirth has warned of a supply gap, which is likely to open up in the LNG industry if investor appetite for new projects does not pick up.

“In the short term, LNG supply is coming online faster than demand is growing, but with continued demand growth in the next decade the market will rebalance,” Wirth said, speaking at an April 4 gas industry conference in Japan.

“So while we expect ample supply in the next few years ... a supply gap could eventually confront us in the years to follow if we don’t eventually sanction new LNG projects,” he said, in comments cited by Reuters....."

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I foresee Chevron spinning-off it's interest in the LNG operations in Australia into a separate stock company. Chevron will retain control of the newly formed company while separating it from the remainder of its US and worldwide operations and the CVX common stock. If the future smiles on LNG, it will be a gain for Chevron, the operator, and its investors. If LNG operations are later determined non-strategic, it can be sold off.

So if new investment isn't made then we could see a drop in supply 10 years from now? Wow, what profound insight; guess this is why Wirth gets the big bucks.

Most Chrvron LNG is already contracted for sale. Wirth is talking about spot market for the remainder, which is evolving quickly and may be a great opportiny for all sellers, including CVX. Most assets sell product at a small discount until it is well known in the market. Once Gorgon is running reliably, there will be no differential based on reliability. Australia has a huge location advantage.

TJK buyers are not fools. Chevron cannot talk the market up to sell their unsold volumes at Wheatstone and Gorgon. Meanwhile proven LNG suppliers like Shell and Exxon are capitalizing on Chevron's incompetence. You need to be good to compete in the LNG marketplace, and Chevron is just not good enough. Chevron ha suffered long term reputation damage and only cure is to "buy" back into the market with lower priced LNG supply. Gorgon and Wheatstone revenue will be lower than expected. It must be discounted because it is not reliable

Natural gas is in abundant supply around the world. The rush to build LNG facilities WAS a good strategy at the time when natural gas was in the $4.2 MMBTU selling range. Chevron wanted to be the first and largest provider. But any good thing is always pursued by others as well. What we see today is a glut in supply, both natural gas and crude oil around the world. It's a shame that Chevron put many of its marbles in the LNG game and is now paying a steep price.

In other words, Exxon and Shell are having a hard time selling what they believe will be Chevron's missed production. That's OK, there are folks with proven ability planning to bring a few new facilities online and set up a desk at the market. LNG is still a worthwhile investment, just have to do it smart and deliver. The smaller entities who are able to move very efficiently from proposal to first cargo stand to make significant profits.

http://www.cnbc.com/2017/02/22/cheniere-energy-co-founder-dishes-out-two-ways-the-us-has-strong-advantages-in-natural-gas.html

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Chevron warns of medium-term LNG supply gap

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