market sentiment, page-23

SF,

Indeed I am seeing the US as effectively a lost market to global LNG. This certainly provides Europe with the surplus Atlantic LNG which they really needed to loosen the stranglehold the Russians have over them. So at what price will the Russian be prepared to defend market share at? how much below oil parity?

If they cede surplus Atlantic LNG to Europe as a done deal, then really they have to look at what the Qataris are going to do with there's, send it East or West. I really think the Russians are going to say let's defend price rather than volume.

So what I am then really saying is that firstly the US may as well be on another planet, it is neither going to import, nor export much gas for the foreeable future. Secondly that LNG output is pretty inelastic. Thirdly that Russia is the main swing supplier, and that it's thoughts and strategies are what really matter on the supply side.

Russia is the big supply side unknown, but we know that there new supply is not cheap, with huge capex spent to get gas huge distances through often semi-hostile terrain with everyone along the way wanting a cut.

The other big unknown atm is aspects of the coal vs gas economics in coastal regions of China and India in particular.

I am therefore really thinking our delemma is the price we will get, not the volume we will sell, and that in the medium term this will be a Russian question, in the longer term a coal question.

I believe shale gas is largely short term damage done, one market ceded, but a red herring as far as further impact.

A possible future wild card to watch might be much increased use of natural gas in the Asian transport sector. CNG already big in countries like Pakistan, but LNG could become a game changer, with at least one auto company developing an engine for direct injection of the LNG as liquid(which is much more efficient).

I am betting the 2012 IEA gas outlook will be vastly different from the 2009, just as the 2009 was to the 2007 or 2008. As far as AOE is concerned I believe the economics can allow it to, and that it will be willing to, cede say an extra 10% on oil parity to get contracts signed. Much harder for the likes of Shell, BG, WPL, Petronas, Qatargas etc to drop the oil parity with their existing vested interests. The new entrant with robust economics can though.

Just my amateur ramblings, but I really think GAS GLUT is a truism distorted to mistruth. OPEC has surplus capacity, do we have an oil glut?

EL