Roscoe 74, -to ad to your commentsU.S. set to export first LNG on Canada's behalf from Cheniere's Sabine Pass If this article from Seeking Alpha is correct, and I don’t see why it wouldn’t, Sabine Pass LNG must be scouring the outlier hubs looking for cheap NG, either in actual spot prices or on the futures strips of those hubs, and presumably at prices so favorable that it can pay the shipping to transport that gas to Louisiana. Given the prices we’ve seen at AECO from time to time or from Hubs in the Marcellus (it used to be the Dominion) prices in both regions can easily fall below one cent and is common occurrence. Now remember, there are always discrepancies between the hubs with the Henry
usually offering the highest and most stable prices.
However the differing bids and asks amongst the hubs absolutely electrifies the system and supplies the vigor to really make it work in the 1st place. Pure speculation on my part but I suspect Cherniere employs algorithms to monitor the hubs 24/7 to find such anomalies and then pounce on them where there is a momentary melt down, such as occurred at AECO last year during the Fort McMurray fires. At that time, NG destined for the oil sands had to be diverted to storage. This particular load of Montney gas being shipped from Cherniere could be directly attributable to that crisis. The outlier hubs are the most vulnerable to fluctuating prices. What it does show however is that Cherniere will definitely have an effect of bonding the prices closer together between the hubs at least where shipping charges permit. This is a big win for both Cherniere and the outlier hubs.
The naysayers might be inclined to scoff, -saying that it’s just the equivalent to peeing in the ocean and thinking that it will raise the water level. But there are 3 trains up and running an a 4
th in July/August and scouring for the best price by Cherniere in this fashion would be relentless. The result for Hubs is that
the worst off prices are then made at least to be the best possible. Not an inconsiderable improvement. Why hell, it’s almost Rawlsian. I’ll see if anyone picks up on that.
Now there is another side to this that I haven’t mentioned, the possible disadvantages. Sometimes with a new innovation the market reacts by shifting into a new mode with possibly a whole new set of inequalities. Wouldn’t it be nice to hear from someone at Platts or Bentek to comment on this new twist in the NG trading? There must be someone out there that can add to this discussion.