The Best Natural Gas Plays Now

0
The Best Natural Gas Plays Now
Pexels / Pixabay

Further to the second and last items above, it’s easy to forget that natural gas is actually a pretty good play right now — at least in certain parts of the world.

As the chart below shows, North American natgas prices have been uninspiring recently. With rates at the Henry Hub slipping back to near $3/mcf — trading at $3.16 as I write.

 

ValueWalk’s December 2021 Hedge Fund Newsletter: Hedge Funds Avoid Distressed China Debt

InvestWelcome to our latest issue of issue of ValueWalk’s hedge fund update. Below subscribers can find an excerpt in text and the full issue in PDF format. Please send us your feedback! Featuring hedge funds avoiding distressed china debt, growth in crypto fund launches, and the adapting venture capital industry. Q3 2021 hedge fund letters, Read More

Screen Shot 2017 04 21 at 5.46.01 AM e1492778815886

North American natural gas prices have been subdued over the past year (source: Energy Information Administration)

That gives little to get excited about for traders. A far cry from the end of 2014, when a surge to over $5/mcf suddenly (and briefly) brought the natgas market back to life.

But natural gas markets are very different elsewhere in the world — as news this week from Australia and Argentina shows.

Unlike oil, natgas prices show big regional variations. A consequence of the difficulty and cost associated with transporting natgas around the world.

I’ve written before about Argentina being one of the world’s best gas markets right now. With prices currently pegged by the government at $7.50/MMBtu — more than double prevailing U.S. prices.

That’s a great rate, and a big part of the reason majors like Exxon and Chevron are spending billions on Argentina’s shales.

But the natgas story is actually even better in other parts of the globe.

The thing is, Argentina’s high gas prices won’t last forever. With the $7.50/MMBtu rate slated to last until the end of 2018 — after which prices will be eased downward to $6 by 2021. Argentinean officials will then move to free-market pricing in 2022.

Those rates are likely enough to support Argentina’s unconventional development efforts. But they’re far from the best going globally — as evidenced by the recent price spikes in Australia.

Spot pricing for Aussie markets is tougher to find than in the U.S. But some recent figures from local producers show how rates here are some of the most attractive in the world right now.

Origin Energy, for example, earned A$1.946 billion from the sale of 228.2 petajoules of natgas for the year ended June 30, 2016. That equates to A$8.53 per gigajoule — or US$6.75 per MMBtu.

Recent concern from Australia’s politicians shows prices may be spiking even higher of late. Which should help spur drilling — with Aussie unconventional plays being a contender for the “next big thing” in shale.

In fact, the Asia-Pacific region as a whole is looking good for natgas producers right now. With recent reports suggesting that Indonesian domestic prices are averaging $9/MMBtu. I’ve looked at projects in the country recently where local pipelines are selling gas at over $10/MMBtu.

Prices in other Southeast Asian markets have subsided a bit. With Thailand’s PTTEP reporting a natgas sales price of $5.60/MMBtu in 2016, down from $7.20/MMBtu in 2015. But as a whole, this part of the world is still a great place to pump gas.

Where else? I had a call this week with Colombia producer Canacol Energy — who are getting a very decent average price of $5.60/MMBtu for production in northern South America.

Eastern Europe is also a market to watch. With Romania recently liberalizing natgas prices — which could lead to more-attractive pricing here, and in nearby countries like Hungary.

Gas may be down in North America, but it’s far from out globally. Watch for ongoing pricing developments, especially in currently-volatile markets like Australia — these could create some great opportunities for local producers.

Here’s to going where the money is,

Updated on

Dave Forest writes Pierce Points Free Daily E-Letter, an advisory on mining and energy read every day by BP, Rio Tinto, JPMorgan, BNP Paribas, Repsol, GDF Suez, GE, Platts, Warburg Pincus, and the UN. Sign up for free at www.piercepoints.com. Mr. Forest has funded and managed over $80 million in global exploration and development in natural resources, and continues to design and develop projects globally. He is a professional geologist.
Previous article Foot Locker Long Idea
Next article Introducing ‘Operator 4.0,’ a tech-augmented human worker

No posts to display