EQUITY RESEARCH
April 4, 2024 Industry Update
Natural Gas Guide: White House May
Consider Lifting Pause On LNG Approvals
AECO-Dawn Basis Pulling Volumes Eastward
A Few Things We Are Watching
Flows out of West Gate remained subdued following recovery in
takeaway capacity: Last week, Western Canadian field receipts stayed
relatively flat at 17.9 Bcf/d, while demand increased by 0.1 Bcf/d to 8.8 Bcf/d.
Flows out of West Gate failed to regain recent highs following maintenance
on the system while flows out of East Gate have increased by ~1.0 Bcf/d.
Widening of AECO-Dawn differentials could be a contributor to the increase.
Western Canadian storage stayed relatively flat at 348 Bcf, which is 147 Bcf
above five-year average. NYMEX closed Wednesday at US$1.65/MMBtu (up
US$0.22 W/W). AECO basis widened to US$0.33/MMBtu below NYMEX (-
US$0.19/MMBtu last week) and Station 2 basis widened to US$0.74/MMBtu
below NYMEX (-US$0.46/MMBtu last week).
White House may consider lifting LNG export pause: According to Platts,
U.S. dry gas production hovered around 102 Bcf/d yesterday, which is 0.7
Bcf/d lower than last week. Weather forecasts for the next three months
continue to show above-average temperatures which should be supportive
for power burn and could support natural gas demand. According to Reuters,
the Biden administration is considering lifting the pause on LNG approvals in
an attempt to shore up Republican support for a Ukraine aid package. Lifting
the pause could pave the way for additional LNG projects in the U.S. U.S.
gas in storage decreased by 37 Bcf last week, versus consensus
expectations for a 42 Bcf draw. At 2,259 Bcf, stocks were 422 Bcf above the
same period in 2023 and 633 Bcf above the five-year average.
Saudi Arabia continues to expand its footprint in the gas market:
According to Bloomberg, Saudi Aramco has awarded contractors more than
US$7.7B to expand the Fadhili gas plant’s processing capacity from 2.5
Bcf/d to 4.0 Bcf/d at an implied capital efficiency of ~US$5MM/MMcf. Aramco
has identified natural gas and global LNG markets as one of its key growth
drivers over the coming years. The company expects domestic gas demand
growth to be driven by power generation, water desalination, petrochemical
production, and other industrial consumption. In September 2023, Aramco
entered global LNG markets by acquiring a minority equity interest of
US$500MM in MidOcean Energy. Aramco’s total raw gas processing
capacity was 19.1 Bcf/d as at December 31, 2023. European inventories
decreased by 32 Bcf to reach 2,271 Bcf, narrowing the surplus over the five-
year average by 24 Bcf to 685 Bcf. NBP closed Wednesday at
US$7.86/MMBtu (down US$0.47/MMBtu W/W), while Netherlands TTF
closed at US$8.11/MMBtu (down US$0.69/MMBtu W/W). JKM closed at
US$9.50/MMBtu (up US$0.10/MMBtu W/W).