Gas Market Update (April 23, 2013)

Natural gas futures fell sharply during morning trading on Monday as investors booked profits from a rally that took prices to a 21-month high in the previous session.

Prices came under pressure as weather forecasts suggested that the coming weeks will see warmer weather, which is expected to limit demand for the fuel.

On the New York Mercantile Exchange, natural gas futures for delivery in June traded at $4.30 per million British thermal units, down 2.5 percent on the day.

Last week, the US Energy Information Administration said that natural gas storage rose by 31 billion cubic feet (Bcf) compared to expectations for an increase of 34 Bcf. Inventories increased by 21 Bcf in the same week a year earlier, while the five-year average change for the week is a build of 39 Bcf.

Total US natural gas storage stood at 1.704 trillion cubic feet as of last week, 32 percent lower than last year at this time and 4.2 percent below the five-year average for this time of year.

A report released last week shows that Alberta would create jobs and take in $600 million in annual revenue if more oil and natural gas was processed in the province and not shipped to other jurisdictions.

The report, undertaken by a University of Calgary economist, was commissioned by a group of municipalities and energy companies known as Alberta’s Industrial Heartland Association. The association confirmed that it plans to lobby the government for new and expanded policies that will allow for more value-added processing of oil sands bitumen, natural gas liquids and raw natural gas.

Company news

Suncor Energy (TSX:SU) reached an agreement to sell the conventional portion of its natural gas business in Western Canada for $1 billion to a newly established partnership between Centrica (LSE:CNA) and Qatar Petroleum International. Estimated production from this business in 2013 is approximately 42,000 barrel of oil equivalent per day (90-percent gas).

The sale includes properties situated across multiple regions in Alberta, Northeast British Columbia and Southern Saskatchewan. Excluded are the majority of Suncor’s unconventional natural gas properties in the Montney region of British Columbia and the company’s Wilson Creek, Alberta unconventional oil assets. The sale is subject to regulatory approval and is expected to close during the third quarter.

Anadarko Petroleum (NYSE:APC) encountered around 190 net feet of natural gas pay at its Orca-1 discovery well offshore Mozambique in an area dubbed Offshore Area 1. The company’s vice president for exploration, Bob Daniels, said the company is designing a two-well appraisal program to determine the extent of the deep-water Orca find.

“Discovering another large, distinct and separate natural gas accumulation in the Offshore Area 1 continues our outstanding exploration success offshore Mozambique,” he said.

Mitsui (TSE:8031) entered into a memorandum of understanding (MoU) with Mexican state-owned oil company Petróleos Mexicanos under the witness of Enrique Pena Nieto, Mexico’s president. The MoU outlines a scope of cooperation and discussion among the parties relating to energy projects, including natural gas.

Mitsui has expanded its activities in the Mexican natural gas sector and is currently operating a liquefied natural gas receiving terminal project on the pacific coast at Manzanillo, six gas-fired power projects in various locations in Mexico and a natural gas distribution business in major cities such as Mexico City and Monterrey.

It expects demand for natural gas in Mexico to continue to increase due to support from the development of shale gas projects in the US and Mexico and as a result of the stable growth of the Mexican economy.

Related reading: 

Out of the Shadows: Mozambique’s Natural Gas Attracting Attention