Amid export boom, U.S. still imports natural gas from Russia

By Naureen S. Malik on 12/28/2018

NEW YORK (Bloomberg) -- The U.S. may be exporting natural gas at a record clip, but that hasn’t stopped it from accepting imports of the fuel, including a shipment of Russian gas likely headed for Massachusetts.

Pipeline constraints, depleted stockpiles and a 98-year-old law barring foreign ships from moving goods between U.S. ports is opening the way for liquefied natural gas to be shipped from overseas with prices expected to spike as the East Coast winter sets in.

In the next few days, tankers from France, carrying gas that originated in Russia, and Nigeria are set to deliver to East Coast terminals about 6 Bcf of the fuel, enough to power about 150,000 homes for a year. At one point Thursday, the ship carrying Nigerian gas to Cove Point in Maryland passed another tanker filled with U.S. gas that was headed abroad.

"It is ironic,’" said John Kilduff, a partner at Again Capital LLC in New York. But the "super cheap gas” produced in the nation’s shale fields “is trapped down west of the Mississippi unable to serve its own market," he said by phone. “The gas is where the people aren’t.”

As usual, it’s all about the money. The companies shipping the gas into Maryland -- BP Plc and Royal Dutch Shell Plc -- will likely have it stored until freezing East Coast temperatures push prices higher as local suppliers struggle to meet demand, according to Trevor Sikorski, head of natural gas, coal and carbon with the London-based industry consultant Energy Aspects Ltd. in a note to clients on Wednesday.

Meanwhile, the gas being exported out will likely fetch higher prices right now in Europe and Asia. Dominion Energy Inc., which owns the Cove Point terminal, didn’t respond to emailed and telephone requests seeking comment.

Other factors are at play as well. For instance, American providers can’t just ship LNG from shale fields in the south because the giant ships that transport the super-chilled fuel sail under foreign flags. Under the 1920 Jones Act, that means none can legally transport LNG to the Northeast from existing export terminals in Louisiana and Texas.

At the same time, even the vast pipeline network feeding the region can quickly develop bottlenecks at a time when stockpiles are sitting at their lowest levels for this time of year since 2002. While production is soaring, strong demand from more and more U.S. power plants using the fuel, along with new export terminals, soaks up much of that new supply.

“There’s still some logistics and pipelines that need to be built to match out to where the demand is,” Kilduff said.

While Boston Harbor sees regular LNG traffic from Trinidad, the imports at the Cove Point terminal in Maryland are “a less expected development,” Sikorski said in the Energy Aspects note. The Northeast’s appetite for LNG imports “is an outlier in a global market that has seen a very soft” fourth quarter for demand, he said.

Further north, a tanker named Exemplar has been loitering just outside Boston harbor after picking up a cargo from France’s Montoir-de-Bretagne terminal two weeks ago, according to ship tracking data.

That ship picked up a cargo of LNG from the Yamal LNG facility in Russia that had been brought to the French terminal by another tanker, according to Madeleine Overgaard, an LNG market analyst for Kpler.

The cargo was initially supposed to be delivered to Canada on Dec. 21, Overgaard wrote in an email, but is now headed to Exelon Corp’s Everett import terminal “and can discharge at the berth within 24-48 hr, depending on the local schedule.”

Exelon didn’t comment on the Russia cargo. Carol Churchill, a spokeswoman, said the company "seeks to ensure a reliable supply of electricity and LNG to New England."

If the Russia-originated gas is off-loaded, it would be the second such cargo known to be imported into the Everett terminal in 2018, with the last arriving in January.

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