US Natural Gas Price Drops to Three-year Low; LNG Projects Gain Approval

The US natural gas price dropped to its lowest level since April 2012 on Tuesday morning, falling below $2 per million British thermal units (mBtu). 
Specifically, the front-month NYMEX contract for November fell about 5.5 percent, extending a 9.8-percent drop seen on Monday. However, that price drop helped spark demand, and a price recovery was seen later in the day, according to Bloomberg.
“The market is staging a half-hearted recovery in reaction to the selloff,” Teri Viswanath, director of commodities strategy at BNP Paribas (EPA:BNP), told the publication. “While the near-term weather guidance is less than supportive, there appears to be some hope that the weather in November could turn around.”
This week’s low price comes on the back of high natural gas supply. US natural gas in storage stood at 3.8 trillion cubic feet as of October 16, and is expected to reach a record 3.956 trillion feet by the end of the week, as per data from the US Energy Information Administration.

Scotiabank’s Patricia Mohr told the Financial Post that high volumes of technical trading due to futures contracts rolling over from November to December on Wednesday also likely contributed to the drop. She added that the $2-per-MBtu level is close to the cost of production and said that there is “not a lot of room to go lower before you start to get shut-ins.”

LNG projects get green light

Two liquefied natural gas (LNG) projects received approval in BC early this week: TransCanada’s (TSX:TRP,NYSE:TRP) proposed natural gas export facility near Prince Rupert, and Woodfibre LNG’s proposed project southwest of Squamish.
TransCanada announced on Tuesday that the BC Oil and Gas Commission has extended a dozen permits to allow it to start work on the $5-billion, 900-kilometer Prince Rupert pipeline project. The company said that it has been cleared to start construction on compressors and meter stations, while work on the full pipeline is subject to federal approval.
Meanwhile, the smaller Woodfibre LNG project received provincial environmental approval, despite objections from local residents and municipalities. The environmental assessment certificate came along with 25 conditions designed to lessen the project’s impact on marine life, water quality and traffic within local waterways. It still requires federal environmental approval and permits from the BC Oil and Gas Commission.

LNG projects Down Under are also progressing, with a proposal for a new LNG precinct near James Price Point in Western Australia being slated for approval by the Environmental Protection Authority. Three delegates have recommended that the proposal be approved; it includes a 50-million-tonne LNG gas processing plant, two heavy industrial areas, port facilities, a 300-meter-wide shipping channel and a possible desalination plant.
 
Securities Disclosure: I, Kristen Moran, hold no direct investment interest in any company mentioned in this article.
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