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LNG: The Long, Strategic Play For Europe

Tyler Durden's picture




 

Submitted by James Stafford of OilPrice.com

LNG: The Long, Strategic Play for Europe: Interview with Robert Bensh

Liquefied natural gas (LNG) to Europe isn’t a get-rich-quick scenario for the impatient investor: It’s a long, strategic play for the sophisticated investor who can handle no small amount of politics and geopolitics along the way. When it comes to Europe, Russia’s strategy to divide and conquer has worked so far, but Gazprom is a fragile giant that will eventually feel the pressure of LNG.

Robert Bensh is an LNG and energy security expert who has over 13 years of experience with leading oil and gas companies in Ukraine. He has been involved in various roles in finance, capital markets, mergers and acquisitions and government for the past 25 years. Mr. Bensh is the Managing Director and partner with Pelicourt LLC, a private equity firm focused on energy and natural resources in Ukraine.

In an exclusive interview with Oilprice.com, Bensh tells us:  

•    Why the smart LNG play is a long-term one
•    How LNG fits into the European energy picture
•    Why LNG will eventually pressure Russia in Europe
•    Why Gazprom is but a fragile giant
•    How Russia combines gas and political influence in Eastern Europe
•    How the European Union is easy to divide and conquer
•    Why the Ukraine crisis has brought attention to the South Stream pipeline
•    Why Bulgaria is the new front line
•    How Lithuania succeeded in negotiating down Gazprom
•    What Moscow’s Crimea annexation really achieved
•    Why it’s game over for Gazprom prices when Turkey steps in

James Stafford: Where does LNG fit into the overall European energy picture?

Robert Bensh: A better question might be, “When does LNG fit into the European energy picture?” When the price is right, it fits into the picture across the European Union, with new import terminals under construction, plenty of transmission lines to deliver it to land-locked countries and the prospect of deliveries from rising energy hub Turkey. And while it may not be a reality at this very moment, it is the prospect of cheaper LNG and the pace of LNG infrastructure development that has Gazprom worried about maintaining its monopoly.

James Stafford: So from an investor’s perspective, what do we need to know here?

Robert Bensh: Listen, the LNG economics are marginal. LNG is about long-term, steady supply. It’s a low-margin, long-term supply of gas to Europe. This is not a play for impatient investors who are looking to get rich quickly. This is a play for investors with longer-term vision, patience and strategic capabilities on a regional level. Those are the people who are going to make money off of this and, along the way, help reshape the balance in Europe away from Russia.

James Stafford: Who are the buyers in this scenario?

Robert Bensh: The countries that primarily take LNG are the Eastern European countries that are paying the highest gas prices and feeling the most significant strategic energy crunch from Russia. They can purchase large amounts of LNG on five 10-year contracts.

James Stafford: And what will Gazprom’s response to more LNG for Europe be? What are its options?

Robert Bensh: Gazprom will either see its supply reduced, or it will be forced to reduce prices to limit economic impact. But once we can start getting LNG through the Turkish-controlled Bosphorus Strait, it is game over for Gazprom in terms of pricing. You’ll still have LNG coming into Europe simply because demand will always exceed supply with long-term contracts in place. That’s when you’ll start to see significant amounts of Canadian and American LNG entering the European and Asian markets, which will affect gas prices in Europe.

James Stafford: Has Russia’s, or Gazprom’s, energy strategy in Europe really been as sinisterly brilliant as is often suggested?

Robert Bensh: In many ways, yes; but it has its limitations. Financially, Russian gas monopoly Gazprom is a fragile giant.

Russia’s European energy policy is to approach different EU states on an individual basis in order to discriminate with price and get the maximum price possible from each. Beyond that, Russia also attempts to lock in supply by consolidating control over strategic energy infrastructure throughout Europe, as well as Eurasia.

In 2002, for example, Russia attempted to buy major energy infrastructure holdings in the Baltic states of Lithuania and Latvia. When both countries refused to cede control, Moscow sharply cut oil deliveries to both states. The final piece of Moscow’s strategy is to maintain control of energy corridors, thus denying Europe any alternative energy routes.

Russia gets away with this because its divide-and-conquer energy strategy is made easy by the fact that the European Union is anything but unified.   

James Stafford: How does Gazprom’s controversial South Stream pipeline play into the crisis in Ukraine?

Robert Bensh: The South Stream pipeline is now coming into much clearer focus against the backdrop of the Ukraine crisis. This pipeline, which would run from the Black Sea to Austria and bypass Ukraine, is both a frightening and exciting proposition for Central and Eastern Europe. The specter of this pipeline makes the fractures in Europe highly visible.

The annexation of Crimea was significant on numerous fronts. The Ukraine crisis provided Russia with the opportunity to achieve important the economic and geopolitical goals of promoting alternative energy supplies that bypass Ukraine. And the results have been quick: Already, some EU countries have indicated that they are willing to drop their objections to the South Stream pipeline in order to increase the percentage of gas shipped directly from Russia.

James Stafford: What about Bulgaria’s recent back-and-forth over South Stream? What can we read into this?

Robert Bensh: For the South Stream pipeline, which is largely a macrocosm of the Ukraine crisis, the front line is Bulgaria, where Russian influence is now at its strongest, and where there is already talk of the country becoming the next Ukraine. The wider EU is trying to block the South Stream project, while Central and Eastern Europe are very torn. Bulgaria is where this pipeline will enter the EU, and accusations persist that Gazprom has had a hand in framing Bulgarian legislation that would circumvent EU competition directives. All of Europe wants this pipeline, but Brussels doesn’t want it to be majority-Russian owned — they want to enable other suppliers to bring gas through it.

The Bulgarian story is getting very interesting. Last week, the Bulgarian government said it was suspending working on South Stream, under pressure from the EU over the project and U.S. sanctions against Russian firms working on the project. Bulgaria is caught in a very bad place here—between Russia and the EU. On the one hand it is suspending work—for now, as it consults with the EU. On the other hand, it is making sure everyone knows it still intends to go ahead with South Stream.  

James Stafford: How much of a threat to Russia is the European Commission’s pending investigation into Gazprom’s monopolistic activities?

Robert Bensh: Europe has argued that Gazprom manipulates prices for political gain and the European Commission is set to release the results of a two-year investigation this month, which is expected to demonstrate substantial evidence that Gazprom is breaking European laws. After that report is released, the EC could take action relatively quickly with up to10 billion euros in fines, which Gazprom cannot afford. Again, the Bulgaria question will figure prominently in his debate.

James Stafford: How does Russia take advantage of the divisions within the EU?

Robert Bensh: The problem within the EU is that Western European countries have more supply opportunities, while Central and Eastern Europe are stuck with Russia. There is no common policy among the EU countries, so there can be no unified front to take on Russia in the energy sphere. Russia takes full advantage of this bifurcation. While talking of interdependence and dialogue, Russia has insisted on providing demand guarantees for the producers and sharing responsibilities and risks among energy supplier’s consumers and transit states. Russia’s actions have not backed up its visions for a new global energy security due to the state policy of not budging from monopolizing gas production or oil and gas pipeline transportation. Europeans are wholly energy dependent on Russia.   

Russia conducts geo-economic warfare on Europe. Russia’s vast oil and gas resources and strategic geographic positioning has translated into increased influence in global energy markets and political clout in its relations with the numerous states that remain more or less dependent on Russian energy. Lawsuits and rulings from the European Commission will prove to be well intended, yet ultimately failed efforts to control Russia’s policy aims driven by control of energy supply and transportation. Here is where efforts to reduce dependence by one client state will have a concomitant benefit for other client state consumers. The European Union lacks a coherent, unified energy strategy and policy towards Russia. Russia thus wisely triangulates client states and the EU to achieve their policy goals either through cheaper supply or infrastructural development.   

James Stafford: Will other countries in the region follow the example of Lithuania and Poland—both of which are aggressively pursuing alternatives to Russian piped gas?

Robert Bensh: Some, yes, out of necessity. The wisest ones, of course, will develop what they can internally of their own resources in an effort to reduce or possibly even remove the need for Russian oil and gas.

James Stafford: Where in Europe is there the potential to actually develop domestic resources to reduce Russian dependence?

Robert Bensh: Ukraine has the potential to do so. Poland, potentially, as well. Other countries, the Baltics in particular, will have a much harder time reducing dependence through internal resource development. For this reason, the development of LNG and additional transportation routes to the region are vital strategically to reduce the dependence on Russian energy.

James Stafford: How should we perceive Lithuania’s recent success in negotiating down gas prices with Gazprom?

Robert Bensh: The country has very earnestly pursued LNG and is close to signing a supply deal with Norway’s Statoil. This, in turn, has forced Russia into price concessions for fear of losing market share. But for now, it’s a luxury that the poorer members of the EU in Central and Eastern Europe cannot afford, economically or politically.  

Unfortunately, most countries will not play ball. Either they have enough of an internally generated resource base to help reduce dependence on Russian energy, or they have multi-integrated economic ties to Russia. Or both.  

The crisis in Ukraine has taught us a devastating lesson: The failure to reduce dependence on Russia, in combination with a multi-integrated economic union with Russia, exposes a client state to geo-economic warfare. In Ukraine, this situation eventually led to President Viktor Yanukovych refusing to sign an Association Agreement with the European Union, which in ignited the Maidan protests that led to the president’s overthrow and Russia’s annexation of Crimea.   

James Stafford: Where will politics and geopolitics head this off? What is Russia’s weak point, it’s Achilles’ heel?

Robert Bensh: Russia has done a good job of tactically focusing on each client state, recognizing their weaknesses and exacerbating them to suit their needs. The only countries that can head this off are those with independent economies and diversified energy supplies. Russia can only provide oil and gas supplies and energy infrastructure development. It cannot provide expertise in oil and gas drilling or service, which really comes from the United States.

And Gazprom’s Achilles’ heel—that which makes it a fragile giant—is the prospect of losing the European market to LNG. And it eventually will, at least in part, though it won’t be tomorrow.

James Stafford: What does the LNG pricing look like right now?

Robert Bensh: LNG is always about $1 less than Gazprom. The U.S. wants to sell their LNG, period. Asian prices are higher, anywhere from $3-$4 higher. But long, steady supply will always get sold. Unless Gazprom comes down in its prices, to make LNG uneconomic, there will always be an LNG marketplace in Europe. There will always be enough supply to meet demand in Europe. All Gazprom has to do is drop its prices down $1 and LNG will be uneconomic. But you have some countries in Europe who are willing to pay a premium to reduce their dependence on Russian gas. LNG supply and the development of internal resources is a strategic decision being made by each country.  

There won’t really be U.S. LNG hitting Europe until 2017-2018. There isn’t enough LNG coming from the U.S. to supply both Asia and Europe. Until there are more export terminals built in the U.S., there will always be significantly more demand than supply, from a U.S. standpoint. For now, U.S. LNG does not impact Europe—we’re not transporting enough in the next five years.  

James Stafford: Last month, amid the crisis in Ukraine, Russia and China inked what is viewed as a highly significant gas deal. What are the implications of this deal for Europe?

Robert Bensh: Let's put this into perspective a bit: This Russia-China deal might not be squeezing out potential supply to Europe, but making up for the likely disappearance of the market for gas from Ukraine. A decade ago, Ukraine was buying 52 billion cubic meters of gas annually from Russia, and last year, this was down to 28bcm. The take-or-pay agreement signed in 2009 was for 42 bcm, which is more than the annual supply as per the China deal. It is not unreasonable to think of Ukraine being totally self-sufficient in gas over the next decade as rational energy pricing reduces very inefficient consumption, while Ukraine has lot of opportunities to hike production -- assuming it remains unified.

This is part one of a three-part series of interviews examining the prospects for Black Sea LNG.

 

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Sun, 06/22/2014 - 20:11 | 4884088 MeMadMax
MeMadMax's picture

Dude,

LNG from the US to europe is a JOKE.

 

Just like this dude that's trying to play us for fools....

Sun, 06/22/2014 - 20:22 | 4884111 kaiserhoff
kaiserhoff's picture

I'm usually in favor of any form of energy, including burning urban fat phucks, but these things are floating bombs and terrorist magnets.

Use the gas here, export oil and coal.  We'll all live longer.

Sun, 06/22/2014 - 20:24 | 4884119 CrazyCooter
CrazyCooter's picture

The process of liquifying natural gas consumes approximately 30% of the energy for a given volume. That is to say, if you had 1 unit of methane, at industrial scale you could consume the methane for energy and use that energy to liquify the 1 unit (i.e. cool the gas to -260 degrees F  or -161 degrees C) and have approx .7 units left.

Can you say "premium".

Regards,

Cooter

Sun, 06/22/2014 - 20:29 | 4884128 knukles
knukles's picture

Talking about Your Zen for the Day and natural gas...

 

They say that cucumbers make you burp.
I must not be shoving mine up far enough.

 

Sun, 06/22/2014 - 20:46 | 4884171 Stackers
Stackers's picture

The real deal killer with LNG is the cost in energy to liquefy it all. First it takes energy to get it out of the ground, then more energy to clean it and transport it to the LNG plant which uses a LOT of energy to cool the gas down to cryogenic temps. All that for a fuel with half the stored energy per volume of mass as diesel fuel.

Sun, 06/22/2014 - 20:59 | 4884208 kowalli
kowalli's picture

They need to tell any BS to public to cut off Gazproms pipeline.

Sun, 06/22/2014 - 21:13 | 4884235 pods
pods's picture

I skimmed the article and saw not one mention of Unicorns or Skittles.

pods

Sun, 06/22/2014 - 21:59 | 4884326 Manthong
Manthong's picture

Oh, gee..

I don’t want to even think of what one of those LNG things would like if detonated.

Sun, 06/22/2014 - 23:17 | 4884527 Latina Lover
Latina Lover's picture

This Benish is a state department paid shill, a professional liar masquerading as a second rate analyst. LNG will always be more expensive than Russian Gas, making Europe even less competitive. 

Mon, 06/23/2014 - 05:12 | 4884827 BorisTheBlade
BorisTheBlade's picture

Ain't surprised for a second there. Natgas Pipelines are the most efficient on a cubic meter basis, same with oil. No wonder Rockefeller built pipelines when he envisioned his Standard Oil Empire. Genuises in DC think they will outprice Russian gas through LNG shipped from the unstable Middle East or by tankers through Atlantic. Taking on Gazprom with that logic is a teriffic idea except simple physics of the process run contrary to that intention. Someone will have to subsidize the entire venture and it won't be Gazprom or US: it will be Europe, which will pay for American need to contain Russia in the energy markets.

Sun, 06/22/2014 - 21:18 | 4884248 SuperRay
SuperRay's picture

I hope this guy paid Tyler a lot of money to post this propaganda...

Sun, 06/22/2014 - 21:36 | 4884278 Ignatius
Ignatius's picture

"Copyright ©2009-2014 ZeroHedge.com/ABC Media, LTD; All Rights Reserved."

His name was Tyler Durden.

Propaganda.  Because it works.

Sun, 06/22/2014 - 21:44 | 4884290 strannick
strannick's picture

In Ukraine, this situation eventually led to Agreement with the European Union, which in ignited the Maidan protests that led to the president’s overthrow and Russia’s annexation of Crimea.   

-Ahh, so Maidan was a popular uprising. While all along I took Vicky Nuland at her word that it was a 5 billion buck CIA financed coup. I thought I was reading TIME Magazine

Sun, 06/22/2014 - 21:53 | 4884302 The_Prisoner
The_Prisoner's picture

Those must have been some killer cookies.

Hey, i'm trademarking the name: Vicky Nuland's Crazy CookiesTM people will set their cities on fire for them.

The packaging will show the picture of the Maidan Children making molotov cocktails to set people on fire in Odessa: http://ukraine-human-rights.org/odessa-ukraine-right-sector-and-maidan-activists-murder-at-least-43-persons/crghw-qkqpw/

 

Sun, 06/22/2014 - 21:19 | 4884250 greatbeard
greatbeard's picture

>> is the cost in energy to

Ethanol proved that energy costs in production doesn't matter. 

Sun, 06/22/2014 - 21:58 | 4884324 gatorengineer
gatorengineer's picture

You think the government is going to subsidize LNG exports?  Ethanol is around because its corporate wellfare for big agriculture nothing more.

Sun, 06/22/2014 - 22:31 | 4884395 bonin006
bonin006's picture

Ethanol proved that energy costs in production doesn't matter to politicians buying votes with other people's money.

Sun, 06/22/2014 - 23:29 | 4884550 Canadian Dirtlump
Canadian Dirtlump's picture

We will see how strong the nat gas lobby is compared with the corn mafia.

Sun, 06/22/2014 - 23:27 | 4884548 Canadian Dirtlump
Canadian Dirtlump's picture

First off if this was a priority for the US or Canada the development of the infrastructure would have been in process. Which it hasnt been.

 

They should have been pushing nat gas as a surface fuel but have not. Now I can tell you as an exec at a pipeline company in alberta that the only gas wells being drilled here are wet gas so they can pay for them with distillates. I personally know several owners of junior gas plays with shut in production due to prices. With conventional and unconventional gas fields we have an almost incomprehensively stratospheric supply. 10 years ago every pipeline we did was gas now we do virtually none.

 

As normal we have a tone deaf political class and self serving financial sector who have teamed up to fail in a spectacularly paralyzing way such that the answer is years away.

Sun, 06/22/2014 - 21:48 | 4884295 CrashisOptimistic
CrashisOptimistic's picture

oilprice.com returns to its worthlessness roots.

 

In general, guys who have been blah blah blah for twenty five years or blah blah blah for 17 years are working with an embedded mindset of abundance.

Oil's 107.30 on the Asian futures this moment.  That's all about abundance, I guess.

These guys cannot wrap their minds around the question . . . if Russia sends gas to China, and Everyone Else is sending gas to China, and US gas can't possibly get across the Atlantic (assuming there's a surplus, US nat gas storage for this time of year is at all time lows this moment) where the FUCK are these European countries going to get gas?

Chinese consumption is insatiable.  India is following close behind.

Sun, 06/22/2014 - 21:50 | 4884303 Skateboarder
Skateboarder's picture

Appreciate the post. Note that ZH 'doesn't read' Michael Synder's Economic Collapse Blog but posts liberally from there anyway. Uhuh.

Sun, 06/22/2014 - 23:43 | 4884562 Canadian Dirtlump
Canadian Dirtlump's picture

Price solves all problems. With a coherent political policy, a proper market price and infrastructure North America has a staggering amount of nat gas ( conventional unconventional, low pressure high pressure).

 

Dont forget dear friend. We flare as much gas into the air as we sell.

 

Edit. Eg. In saskatchewan most gas is simply flared to the air. That changes this year and you will see a bunch of gas being gathered for market which before was burned to the hapless oblivion. This is like alberta. Years ago gas was largely flared but now you get a 30 day flare permit then need to tie it into a gathering system. Again. We burn into the air in north america as much gas as we sell. It could and should be a game changer. Do that math.

 

As i said before i have seen the bids for massive gas plants and gathering systems in areas where before the gas was just lit into the air. If it becomes a political priority we will, steady state without trying, have a gas revolution the likes of which heretofore would have bèen localized to a koch brothers mental masturbation session.

Mon, 06/23/2014 - 01:12 | 4884690 ebear
ebear's picture

Just as Russian gas will go to China, so too will Canadian gas via the west coast.  Better deal for Canada than selling it to the US.

One thing that doesn't get much attention in this debate is that sooner or later, the US will have to import LNG.  So, maybe having the export facilities in place isn't such a bad idea, as they can quickly be converted to import.  Is that the real story here?  Building import facilities under the guise of exporting NG that isn't really there?

Mon, 06/23/2014 - 01:22 | 4884706 Bro of the Sorr...
Bro of the Sorrowful Figure's picture

Listen, the LNG economics are terrible...It’s a low-margin, high risk, short-term supply of gas to Europe. This is not a play for smart investors who are looking to not get fucked quickly. This is a play for investors who like getting fucked with longer-term vision, patience and strategic capabilities on a regional level. People like me are the people who are going to make money off of this by fucking people like you, and, along the way, people like me will help the banksters reshape the balance in Europe away from Russia.

Mon, 06/23/2014 - 05:40 | 4884842 pitz
pitz's picture

You simply do not know what you are talking about, there is minimal, almost no flaring of natural gas in Saskatchewan, and hasn't been for decades.  When flaring happens, its actually a fairly big news item.

Mon, 06/23/2014 - 10:53 | 4885513 Canadian Dirtlump
Canadian Dirtlump's picture

http://www.theglobeandmail.com/report-on-business/rob-magazine/the-glari...

 

Right. Where does the gas go then? There are no gas gathering systems there ( estevan inter alia ), virtually every well is tied into a shitty 400bbl tank with fiberglass line. Where are the gas plants if they capture the gas? Nowhere that's where.

 

there is new laws coming into effect soon like I have said before, http://www.nr.gov.nl.ca/nr/cfvrf/forum/gasflaring.htm. NOt coincidentally there are a couple of large gas projects on the horizon.

 

So you don't know what the fuck you're talking about, Dwayne.

Sun, 06/22/2014 - 20:45 | 4884172 NoDebt
NoDebt's picture

Cooter, you silly goose!  That's what wind and solar are for- liquefying natural gas!

Sun, 06/22/2014 - 21:32 | 4884271 disabledvet
disabledvet's picture

This is being done in the Netherlands...and no "this is no joke." (or i should say "the joke is one you" hahahahaha.)

The Netherlands also has one of the largest gas fields in the world. So simply put "the problem is not the cut off in gas but the cut off in capital" something this article simple ignores.

Wind power absolutely has the ability to be the true game changer...but the price collapse your talking about would be truly epic. With Alstom now in the hands of General Electric can there be any doubt that the future really is in the turbine business?

And of course that means a lot of copper.

Coal is still the best per btu per amount of btu to get out of the ground (depending on type and grade of course.) The number of ships currently "bottled up" in Australia to get all those resources out is truly astounding. At some point even Australia might want to start making some money and maybe strike the ore instead of depleting it.

In the meantime the importance of natural gas has been as a feedstock in the chemical business...and not with the "liquification regime." The USA is light years ahead of anyone else in its development and deployment of the most extensive petro-chemical complex in the world.

You can "default" to electricity...but that's very expensive...and "the gas" itself has "impurities" which may be of great value.

http://businessjournaldaily.com/drilling-down/one-gas-processing-plant-c...

Sun, 06/22/2014 - 22:51 | 4884451 Flakmeister
Flakmeister's picture

CC, it is a little better than that, liquification is about 13% another 5% blow off in transit...

Mon, 06/23/2014 - 00:41 | 4884652 sushi
sushi's picture

And some of that transit blow off is captured and used to provide ship board services which reduces other energy inputs.

Mon, 06/23/2014 - 01:00 | 4884678 agent default
agent default's picture

%5 blow off in transit?  Isn't methane a greenhouse gas?  Now where are all those environmentalists going ape about this.

Mon, 06/23/2014 - 02:44 | 4884772 Flakmeister
Flakmeister's picture

You haven't been watching closely...

Sun, 06/22/2014 - 23:18 | 4884531 BlindMonkey
BlindMonkey's picture

I had hear that there was about a 50+% price premium for LNG. Gazprom could still price their pipeline delivered supply lower on an actual (not subsidized) basis than any LNG supply. I can see diversifying to lower supply risk but price is price and the lowest gets the deal in a "free market".

Mon, 06/23/2014 - 07:53 | 4884953 Crazy Or Not
Crazy Or Not's picture

Canada is heading to broke - well according to its cost of homes to incomes ratios.
No concerns there on digging up/laying waste to artic to fund yard sale /children/ everything sale to claw back.
And Canada's Southern neighbor pulls the levers anyhow.

Remember this....

https://www.youtube.com/watch?v=Gy3RUDl_YnU

Iraq was a side show....
Gas prices

Sun, 06/22/2014 - 20:39 | 4884158 Escrava Isaura
Escrava Isaura's picture

Don’t waste your time, or your comment, here. This whole article is a joke.

Sun, 06/22/2014 - 20:49 | 4884177 NoDebt
NoDebt's picture

I'm not laughing.  It's their plan and it will be paid for by government subsidies.  The money side always works out with enough government subsidies.

Sun, 06/22/2014 - 21:04 | 4884226 Escrava Isaura
Escrava Isaura's picture

Instead, check the link below…. It’s brilliant.

http://patzek-lifeitself.blogspot.com/2014/06/the-future-of-engineering-education.html

 

Sun, 06/22/2014 - 22:03 | 4884334 gatorengineer
gatorengineer's picture

Its not at all brilliant, its actually dead wrong, in light of recent changes.  With Obama socializing college education 20 years at 10%  or 10 years at 10% if you work for the giverment, the number of professional students will explode.  Since paying for it doesnt matter anymore, bragging rights to draw students in will be all thats left....  University of Southern Podunck can now charge 40k a year.... same as berkley

Sun, 06/22/2014 - 21:58 | 4884323 sangell
sangell's picture

Pipelines seem to be far more vulnerable than LNG tankers

Sun, 06/22/2014 - 20:22 | 4884116 knukles
knukles's picture

Has anybody any real fucking idea about how long it will even take to get environmental permitting passed for any one terminal let alone meaningful capacity?
Jesus H folks....

Why don't we try for a pipeline?  Or a tunnel.  Yeah, a tunnel.  Or tell the fuckers to go solar.  Yeah, go fucking renewable and solar like Obie & Cie want us to do. 

Having a Lewis Black moment

Sun, 06/22/2014 - 21:17 | 4884243 CrazyCooter
CrazyCooter's picture

The answer is "forever" ... just look at north slope gas in Alaska ... they have been trying to get a damn pipeline built for decades! And it is for all intents and purposes in the middle of f-ing nowhere.

There is no way in hell this has any traction at all ...

On that note, the shell floating LNG plant is genius for this exact reason. It bypasses all the BS and when they tap out the resource they just relocate to a new one. THAT is the future of LNG.

Regards,

Cooter

Sun, 06/22/2014 - 22:01 | 4884330 sangell
sangell's picture

Cove Point and Sabine Pass have gotten their licenses. As long as US gas prices stay under $7 or so I don't see any pressure to stop LNG exports.

Sun, 06/22/2014 - 22:49 | 4884448 bonin006
bonin006's picture

But Russia would have sold gas to Ukraine for $3.85 if they would have stopped whining and paid up. With the 30% energy loss from compression, LNG would need to sell for more than 50% above the non-LNG price. $7 x 1.5 = $10.50. Ukraine can't afford $3.85. Maybe if I had a PhD in economice from Princeton I could understand how $10 LNG will save them.

Mon, 06/23/2014 - 02:19 | 4884752 sangell
sangell's picture

Maybe if you knew the price of gas in Europe is now $11 and the US price is $4.50 you would be a rich man instead of an idiot.

Sun, 06/22/2014 - 22:31 | 4884383 HardlyZero
HardlyZero's picture

Gen III and Gen III+ nuclear plants probably are in the long-term running vs. LNG.

Just have to make sure the plant backup cooling systems are 100% reliable under any/all conditions including 50 meter Tsunami for 1 day, plenty of redundancy, and local battery emergency backup.

(7 of 11 shut down correctly at Fukushima...and it was really the diesel backup generators that got washed out to sea).

 

If modern (and even Gen IV) nuclear energy picks up then LNG might have more competition in Europe.

That is probably the correct comparison.

Sun, 06/22/2014 - 21:57 | 4884321 Taint Boil
Taint Boil's picture

 

 

Riiiight, stopped reading when I got to OilPrice.com

The Absurdity of US Natural Gas Exports
Sun, 06/22/2014 - 22:00 | 4884327 ebear
ebear's picture

Not a joke if you owned Cheniere (NYSE-LNG) these last 3 years.

TK LNG Partners (NYSE-TGP) not looking too shabby either.

Mon, 06/23/2014 - 05:36 | 4884838 pitz
pitz's picture

I concur, who on Earth is going to invest in something so stupid when there's oceans of Russian natural gas supply sitting in the region, available if only Russia actually gets paid.  If the Ukrainians and other eastern Europeans can't pay Russia for what they use, they sure as heck aren't going to be able to pay North American suppliers the dramatic premium that LNG costs to put into tankers and ship overseas. 

The whole idea of LNG to supplant Russian natural gas is idiocy at its finest.  European energy consumers simply need to pay their gas bills, and all will be well.  If they can't, well, that speaks to over-consumption relative to the capacity of their economy to produce.

Mon, 06/23/2014 - 07:02 | 4884899 Crazy Or Not
Crazy Or Not's picture

LNG is a space filler.
We know Qatar is sponsoring revolution in Syria for Qatar pipeline to Europe via Levant.
A stable Syria will also export its own and from elsewhere.

Europe is a market and the players are chasing it.

Gazprom /Putin have moved East for these reasons - and will tap into a 1.7billion consumer market....yeah they must be pissed! (sarc) Their boss continue the rearguard action of their withdrawl. Income is income wherever it comes from so take it while you can....?

God why do we have to pull the stops out to illustrate the bigger picture - naively I used to think ZH was for that. Eventually I realised it was to gather the database of where to target the Reapers.

Oh well time to move to Location Zulu.

 

Mon, 06/23/2014 - 12:50 | 4885968 masterinchancery
masterinchancery's picture

Yes, LNG is expensive and requires careful handling. LNG can't compete with pipeline gas.

Sun, 06/22/2014 - 20:16 | 4884099 The_Prisoner
The_Prisoner's picture

This reads like something from The Diplomat

Sun, 06/22/2014 - 20:39 | 4884157 peter4805
peter4805's picture

"This reads like something from The Diplomat"

Na, more like something from the Onion.

Sun, 06/22/2014 - 21:23 | 4884258 CrazyCooter
CrazyCooter's picture

Sometimes OP has decent material, but sometimes they have this dribble which I assume is intended to bilk retail level investors who never bought a copy of Oil 101 by Downey.

They had one article a while back that cited the proportion of oil production that comes from giant class and super giant class fields (almost all of them are old). I want to say it was 60% or something on par with that ... all from aging fields that are not being replaced (oil discovery peaked in the 60s I think).

EDIT:

The world’s 507 giant oil fields comprise a little over one percent of all oil fields, but produce 60 percent of current world supply (2005). (A giant field is defined as having more than 500 million barrels of ultimately recoverable resources of conventional crude. Heavy oil deposits are not included in the study.)

http://oilprice.com/Energy/Crude-Oil/Ageing-Giant-Oil-Fields-still-Domin...

Regards,

Cooter

Sun, 06/22/2014 - 21:50 | 4884304 CrashisOptimistic
CrashisOptimistic's picture

oilprice.com is the prototype for all worthlessness, followed aggressively by The Diplomat.

Sun, 06/22/2014 - 20:19 | 4884104 TheFourthStooge-ing
TheFourthStooge-ing's picture

Robert Bensh is talking out his ass:

But once we can start getting LNG through the Turkish-controlled Bosphorus Strait, it is game over for Gazprom in terms of pricing. You’ll still have LNG coming into Europe simply because demand will always exceed supply with long-term contracts in place. That’s when you’ll start to see significant amounts of Canadian and American LNG entering the European and Asian markets, which will affect gas prices in Europe.

He, along with the credulous James Stafford, conveniently forget that the US is a net importer of natural gas. The US imports it from Canada. Canada also uses a shitload of NG in their Alberta tar sands operations.

Do the math, Mr. Bensh, and see how many ships of LNG from the US/Canada will have to cross the Atlantic per year to impact supplies in Europe.

Sun, 06/22/2014 - 20:26 | 4884122 knukles
knukles's picture

USLNG thorough the Bosporus.
Hows about teleporting the shit there?
Who is this guy?
Who are these people?
Where am I?
Help!
I'm lost in never never land!
Mommy told me to never do acid, that the flashbacks were a bitch.....

Sun, 06/22/2014 - 21:00 | 4884209 MontgomeryScott
MontgomeryScott's picture

i canna' change the laws of physics, laddie.

I GOT to have 15 minutes!

I was waiting for KLINK to post a cut from 'Hogan's heroes', where Major Hochstetter asks, 'WHO IS THIS MAN, KLINK?'. When Werner Klemperer does the imitation of Obama ('UM, UM, UM'), Hochstetter declares, 'KLINK! You are an IDIOT!'.

EXIT LIGHT,

ENTER NIGHT!

TAKE MY HAND... WE'RE OFF TO NEVER-NEVERLAND!

70 million views, by the way, since gookletube decided to 're-allow'.

http://www.youtube.com/watch?v=1QP-SIW6iKY

The gookletube people reset the counter to ZERO back in 2008, when I was reflecting this video. It WAS at about 39 million at THAT time.

Momma told me (YES, she TOLD ME), I'd meet girls lke you.

She ALSO told me, "Stay away, you never know what you'll catch".

http://www.youtube.com/watch?v=CgN_8cxBCWw

(CHEAP TRICK AT BUDUKAN)

Who is this guy?
Who are these people?

These are MOST EXCELLENT questions.

 

 

 

Sun, 06/22/2014 - 20:37 | 4884147 El Vaquero
El Vaquero's picture

And let's see how pissed off Americans get when exporting nat gas raises the domestic price, which also raises the price of electricity and fertalizer.  The only way that the US could make this work is to import a lot more nat gas and act as a middle man, skimming profits.  And even then, it would likely not work.  

Sun, 06/22/2014 - 20:50 | 4884182 Seer
Seer's picture

"The US imports it from Canada."

It's a regional/hub thing, distribution by/from the closest refinery: oil tends to work this way too; one of the "good" things about a global market (I suppose).

"Canada also uses a shitload of NG in their Alberta tar sands operations."

And the irony...  If we really want to talk about increasing energy imports to the US then this is it.

"Do the math, Mr. Bensh, and see how many ships of LNG from the US/Canada will have to cross the Atlantic per year to impact supplies in Europe."

And, Mr. Bensh, FOR HOW LONG?  AND AT WHAT RATE OF GROWTH?  Oh yeah, and when Europpe has been propped up way-beyond its shelf-life, when that LNG fix is no longer possible (because of nationalism/regionalism tending to retain more for domestic use), THEN WHAT?

Mr. Bensh, you differ little from a drug dealer.  STFU!

Sun, 06/22/2014 - 22:16 | 4884362 sangell
sangell's picture

LNG shipments seem to supply Japan and South Korea. Together those two nations are population/GDP equivalents of Germany, France and the Benelux.

Mon, 06/23/2014 - 01:52 | 4884732 FinalCollapse
FinalCollapse's picture

The cost of compression+transport+regassification is from $120 to $240 per thousand cubic meters with midpoint at $180/kcm. It is Asia that is on the high end of the pricing and Europe on the low end. The NG sells in Europe for around $350/kcm. There is plenty of room to make profit in the range of 25%-33% by selling LNG from USA, Australia etc. to Europe.

Yes - all pipelines in Soviet Union/RuSSia are extremely vulnerable to terrorist attacks. I would not be surprised if they start blowing up all over Siberia. You fight with sword, you die from sword...

 

The author talks about LNG being transported via pipes  in Turkey. WTF? I almost fell from my chair laughing...

Sun, 06/22/2014 - 20:22 | 4884112 taraxias
taraxias's picture

Tylers PLEASE, no more OilPrice 

Sun, 06/22/2014 - 20:38 | 4884150 El Vaquero
El Vaquero's picture

It's good to read some of the bullshit fed to the ignorant masses sometimes.  

Sun, 06/22/2014 - 20:52 | 4884188 Seer
Seer's picture

No!  There's TOO much out there as it is!  They just keep pulling out the same plot lines, changing the names to make it look new...

But... yeah, it's good to see the stories they're telling so that should anyone ask then one is primed for a sound debunking... (I'm getting too old and too impatient with this shit any more.)

Sun, 06/22/2014 - 20:22 | 4884114 zelator
zelator's picture

I call bullshit on this article.  We are not only facing an energy supply crisis, but also a financial one all at the same time.  The cost of building and maintaining the infrastructure for LNG delivery will be expensive.  The world economy, especially in Europe, simply cannot afford it.

"This is a play for investors with longer-term vision, patience and strategic capabilities on a regional level."

Do such investors even exist?

Sun, 06/22/2014 - 20:54 | 4884191 Seer
Seer's picture

"The world economy, especially in Europe, simply cannot afford it."

DUH! <slaps head>  I forgot about the abilithy for folks to actually PAY for it!  Hm... wasn't this what got them in trouble in the first fucking place?

Sun, 06/22/2014 - 21:27 | 4884267 Baldrick
Baldrick's picture

every day new viewers arrive at zh and they are not informed. you all teach them thru your comments.

Sun, 06/22/2014 - 21:54 | 4884315 CrashisOptimistic
CrashisOptimistic's picture

It's astonishing how fast people figure out the value is in the comment threads.

Mon, 06/23/2014 - 20:27 | 4887660 MeelionDollerBogus
MeelionDollerBogus's picture

We'll line the hulls of the tankers with Failtonium-clad bitcoin armor. Since bitcoinz R ultr@ k00L this will readjust the laws of physics in near proximity to what will otherwise become a lot of hot air.
We should immediately consult Reggie LaForge to hire him on as Chief Engineer for the ship.

Sun, 06/22/2014 - 20:22 | 4884115 aardwolf
aardwolf's picture

LNG FROM US TO EUROPE IS A FUCKING JOKE US PROPAGANDA. DO NOT POLUTE THESE BOARDS WITH THIS RUBBISH. HOW MANY THOUSAND VESSEL JOURNEYS WOULD BE REQUIRED PER YEAR BEFORE YOU EVEN TAKE INTO THE ACCOUNT THE 25% ENERGY LOSS OF LIQUFIDATION...I CAN'T BE BOTHERED TO EVEN POINT OUT THE NONSENSE. THE MAN WHO WROTE THIS TRIPE IS A LIAR AND A SHILL AND THOSE THAT BELIEVE IT ARE MENTALLY DEFICIENT.

 

GERMANY AND EUROPE WILL EVENTUALLY SIDE WITH PUTIN BECAUSE THEY ARE NOT STUPID LIKE THE AUTHOR OF THIS GARBAGE.

 

OCEANIA HAS ALWAYS BEEN AT WAR WITH EURASIA.

Sun, 06/22/2014 - 20:38 | 4884151 Schaublin
Schaublin's picture

Your post is quite correct but I recommend unlatching the caps key to avoid appearing tinfoil hatterish.

Sun, 06/22/2014 - 20:42 | 4884166 peter4805
peter4805's picture

Red for all caps

Sun, 06/22/2014 - 21:21 | 4884255 Seer
Seer's picture

[bleat nauseous uppercase stream] | sed 's/.*/\L&/'

Sun, 06/22/2014 - 21:25 | 4884264 MontgomeryScott
MontgomeryScott's picture

See the comment above (or below) for reccomendations on how to post over at ZeroHedge. 'Capslock' is a bitch, but must be dealt with on YOUR end.

YES, Oceania has ALWAYS been at war with Eastasia.

CORRECTION.

NO; Oceania has ALWAYS BEEN at WAR with EURASIA.

We can build ships, see, that will carry liquified natural gas, see. About 100 a month for the next three years! Those pesky Nazis/Ruskies/Muslims and their 'sub-marines' cannot stop us!

"THE MAN WHO WROTE THIS TRIPE IS A LIAR AND A SHILL AND THOSE THAT BELIEVE IT ARE MENTALLY DEFICIENT."

WOW!

Don't hold back, now. Tell us how you REALLY feel! Just because this ass-clown minion is spewing NWO corporatist bullshit, and he gets it in the ass every night from his Masters and Corporate Handlers is NO reason for you to be SHY regarding your opinion. I WARN YOU, though, that your opinions might be construed as 'domestic terrorism' or 'homophobia'.

Sun, 06/22/2014 - 22:24 | 4884378 ebear
ebear's picture

 

Couple of points:

1. Ocean shipping is the lowest cost means of transporting bulk cargo.   Back in the 70's when I worked for (major oil co.) most of Canada's east coast oil supply came from Aruba and Venezuela by ship because it was cheaper than sending Alberta oil that far by pipeline.  I doubt those logistics have changed very much.

2. Energy losses due to liquifaction, while higher, are comparable to losses in long distance electrical transmission.  When you compare the cost of increasing transmission capacity (assuming you have supply)  to the cost of building new ships, the relative advantage of shipping starts to kick in, especially for coastal regions.

The more I look at this sector, the more I see an investment opportunity that could be a long term buy.  As the man said, it won't happen overnight, but big bets have already been made, and to me, the trend appears firmly in place.

Ground floor opportunities don't come along that often, so I wouldn't be so quick to dismiss this out of hand.   A final point: right now, distance to market is a key factor, but what happens when the arctic and even antarctic open up to nat gas development?  not only will shipping be essential (including large production platforms) but liquifaction will be starting from much lower temperatures which will help the bottom line.

Mon, 06/23/2014 - 20:17 | 4887633 MeelionDollerBogus
MeelionDollerBogus's picture

NO.
Ocean transport is the MOST EXPENSIVE way to transport NATURAL GAS.
It is not BULK CARGO and BULK CARGO doesn't constantly get vaporized on the way to the destination but LNG does.
"Energy losses due to liquifaction, while higher, are comparable to losses in long distance electrical transmission"
WHICH IS ALSO why we'll never ship power overseas either.
Fail x2 for you.
#3 : you can not increase capacity. You can LOSE MORE while shipping more but you always lose the same % per total unit delivered for the same distance. The ONLY solution around this is NO SHIPPING, MORE PIPELINES.
The % hit is on EVERY unit of LNG which means you ALWAYS LOSE. There's no way around it but to make the distance shorter or change the laws of physics and you can do neither.
"but what happens when the arctic and even antarctic open up to nat gas development?"
WAR.
This will be an epic war with Inuit turning to terrorists & Russians ready to try to take Canadian assets and Americans stationed with Canadians to stop it.
If it gets super ugly it could in fact be a spark for a nuclear war.
It's NEVER HAPPENING. No arctic gas will be drilled or shipped.
Ever.

You're smoking pure concentrated black-tar hopium.

Mon, 06/23/2014 - 20:11 | 4887610 MeelionDollerBogus
MeelionDollerBogus's picture

#1 true
#2 IS THIS THE OUTPUT OF A PROGRAM YOU WROTE IN COBOL ON A PDP11 ?

Sun, 06/22/2014 - 20:34 | 4884137 kowalli
kowalli's picture

To build lng infrastructure in Europe and USA - they need min 5 years. To build lng tankers - they need more time than 5 years and they still can only provide about 30% of the Russian volume.
THis article is total BS

Sun, 06/22/2014 - 22:37 | 4884414 ebear
ebear's picture

"To build lng tankers - they need more time than 5 years"

Three years actually, and business is booming:

TOT-NYSE

Long long ago, in the before time, I seem to remember ZH as investment oriented.  What happened?   A shit-load of money has been made in this sector over the past 4 or 5 years and yet all people here seem to do is trash the idea, apparently without doing their own independent research.

So.... what's up with that?

Mon, 06/23/2014 - 20:10 | 4887603 MeelionDollerBogus
MeelionDollerBogus's picture

You spout blind assertion and call it research.

-1 for you.

How much MONEY is BORROWED and not put to infrastructure, long-term business maintenance, and then it will DUMP AND CRASH?

That's the key question.

Your ignorance is astounding.

Sun, 06/22/2014 - 20:36 | 4884141 Reaper
Reaper's picture

Talk about a floating bomb in US coastal cities, or European ones. Who's going to build all the ships? Ships are economical because large weights are carried without much increase in fuel consumption. LNG is a light weight cargo. Who's going to explain to US gas consumers about what a doubling of demand does to gas prices in the US? Are we going double NG fracking in the US? Is this article produced by the CIA or State Department as a phoney enticement to Europeans to fight for NATO in the Ukraine?

Sun, 06/22/2014 - 20:39 | 4884154 kowalli
kowalli's picture

They are going double facking in the US =)

Sun, 06/22/2014 - 21:45 | 4884294 MontgomeryScott
MontgomeryScott's picture

FRACKING.  FRACKING, DAMNIT!

It's like FRIGGING or FUCKING, but on a more 'Homogeneous Globalist' scale.

HYDRAULIC FRACTURING. Injecting the earth's mantle with chemicals and water in order to extract leftover oil and gas deposits; despite the obvious pollution of the groundwater that is the freshwater supply of literally BILLIONS of people, all in the name of 'corporate profit'.

FRACKING. It's what's for dinner.

I FRACK my wife every night, because if I don't, she gets irratable, and I get irratable as well.

I've never 'double-fracked' (had two women at the same time and hydraulically fractured them both).

"They are going double facking in the US =)".

Let me know how this works out.


Sun, 06/22/2014 - 21:59 | 4884325 CrashisOptimistic
CrashisOptimistic's picture

"Injecting the earth's mantle with chemicals and water in order to extract leftover oil and gas deposits;"

 

Sorry Scotty, the earth's mantle underlies its crust.  The crust on continents is about 28 miles thick.

Fracking takes place only 2 miles down from the surface.  The fracking is nowhere near the mantle.

But don't sweat it.  You're doing a helluva job with those engines.

Sun, 06/22/2014 - 20:53 | 4884189 NidStyles
NidStyles's picture

Think about building ships powered by natural gas to transport goods and you might be closer to realistic. If anything this article is recommending you to ride the trend up... Says nothing about how long the ride really is. 

Sun, 06/22/2014 - 21:38 | 4884282 Seer
Seer's picture

"Says nothing about how long the ride really is."

EXACTLY!

And anyone who actually cares about facts ought to be asking about the TIME component: how much can be supplied for HOW LONG and at WHAT RATE OF CONSUMPTION?  Seems like pretty common business sense, unless, that is, one is merely pimping something to make a quick buck (unlike the article's claim to the contrary- in the entire scheme of things it's going to be QUICK).

Sun, 06/22/2014 - 23:02 | 4884485 ebear
ebear's picture

"LNG is a light weight cargo."

One gal. of liquified natural gas weighs 3.5 lbs.

One gal. of light sweet crude, about 7 lbs.

A typical LNG tanker carries the same weight as a similar sized crude tanker.  That's what the above deck bulge is all about.

However, the proper comparision is BTU's, not weight.

I gal. of LNG has 64% the BTU's of a gal of gasoline.

http://www.afdc.energy.gov/fuels/fuel_comparison_chart.pdf

So, in BTU terms, an LNG voyage delivers 64% of the energy of a refined gasoline voyage.  Now compare the cost per BTU to the end customer and you'll see why we don't burn gasoline or diesel to make electricity.  

Incidentally, LNG terminals are either located offshore, or in unpopulated areas.  Same as oil tankers, basically.

 

Come on people.  You have the internet.  Research this stuff!

Mon, 06/23/2014 - 02:33 | 4884768 sangell
sangell's picture

You left out price per BTU, come on stupid. Isn't that the most important number?

Mon, 06/23/2014 - 05:38 | 4884840 Wild Theories
Wild Theories's picture

But we are not here to research stuff and learn what's new, we are here to bitch and moan to our chosen flavors. :)

Mon, 06/23/2014 - 20:06 | 4887584 MeelionDollerBogus
MeelionDollerBogus's picture

There are PLENTY of turbine-driven plants burning diesel as well as coal or NG.

Sun, 06/22/2014 - 20:40 | 4884160 i8emallup
i8emallup's picture

Cheniere will send LNG in 2015. Others in La. and Tx. soon thereafter.  There will be 2-4 ports off the east coast in 2016, as long as they dont try to run pipes over estuaries rich in endangered species.  For example, forget Sandy hook, and run out of Keyport or Staten Island.  

Quit being so focussed on who cant do what in 5 minutes.  Russia's cheap gas is a lever that will last about 15 minutes, and they are milking it for all its worth, as usual.

 

Sun, 06/22/2014 - 22:06 | 4884333 CrashisOptimistic
CrashisOptimistic's picture

So you think this imaginary US gas, burning a bunch of it to freeze down, paying for shipment across an ocean, and losing 1% per day to warmth enroute is going to ignore cheap gas from Russia that flows from a pipe at room temperature and delivers at about 40% of the price?

US gas will be preferred, why?

Mon, 06/23/2014 - 01:19 | 4884702 ebear
ebear's picture

"US gas will be preferred, why?"

Maybe it won't.  Maybe those ports are really being built to IMPORT LNG when Canada starts exporting theirs to China and Japan?  Gas can run in either direction once the infrastucture's in place.  Maybe it's just easier to call it an export initiative than admit that you'll desperately need these facilities for imports in just a few years?

Gotta look at all the angles, right?

Mon, 06/23/2014 - 20:03 | 4887574 MeelionDollerBogus
MeelionDollerBogus's picture

LOL.
There is zero chance we're exporting LNG to Asia from Canada. No way we can get it to port affordably with all the demand we have for it for winter power consumption. Never.

Sun, 06/22/2014 - 20:42 | 4884164 Last of the Mid...
Last of the Middle Class's picture

you use 25% of the gas compressing it. Count in the huge investment in ships and ports to handle it and the economics of shipping gas to Europe are very very shady. I've seen no figures on what Europe would have to pay to make it feasable but i bet it is plenty high. Like someone else said ship the oil and coal use the gas here. It's plentiful and would solve a lot of our domestic supply issues. 

Sun, 06/22/2014 - 21:04 | 4884223 Schaublin
Schaublin's picture

Its worse than that as I understand it. About 25 percent of the gas is allowed to evaporate in order to cool the remaining gas to a temperature where it will liquify at atmospheric pressure. Then, depending on the length of time in transit, an amount of gas is constantly evaporating in order to keep the liquified gas temperature down - the tanks are not pressurised but are insulated to slow the losses. Try parking one of those tankers off shore for a few weeks and... poof its gone!

Sun, 06/22/2014 - 20:57 | 4884200 news printer
news printer's picture

Gazprom strategy: swapping dollar bonds for gas pipelines
Read more: http://voiceofrussia.com/2014_06_22/Gazprom-strategy-swapping-dollar-bonds-for-gas-pipelines-7413/

Sun, 06/22/2014 - 20:57 | 4884202 NoWayJose
NoWayJose's picture

How can the US government push to export LNG to Europe while at the same time attacking coal power plants (which will need to switch to natty gas), and also attack both fracking (land supplies) and offshore drilling?

Sun, 06/22/2014 - 21:03 | 4884221 kowalli
kowalli's picture

They can push by telling total and absolute bs like they always do. Why are you so surprised?)

Sun, 06/22/2014 - 21:51 | 4884307 Seer
Seer's picture

"They" is  "US."  The folks that have POWER are doing the lobbying.  It's NOT "BS;" to suggest it is is to NOT understand the dynamics of the energy situation.  If TPTB can get the govt to reduce taxes and regulatory oversight then you better believe that LNG tankers will be coming around.

When we're playing a failed game it should be of no surprise that all undertakings will result in failure.  It's always easy to sit back and point out failures and claim that something would be more successful when that something does not get exposed to the full force of our realities; bu make no mistake about it, doesn't matter how good something looks that if it's looking to promote the game of perpetual growth on a finite planet it WILL fail too.

We're at the circus.  Don't complain about the clowns...

Sun, 06/22/2014 - 21:01 | 4884214 vincenze
vincenze's picture

Gazprom can give $1 million to pirates. They will attack an LNG tanker as it's such an easy target. The problem is solved.

 

Sun, 06/22/2014 - 21:55 | 4884317 Seer
Seer's picture

Well, I'm sure that that's how western PTB would look to paint it.  Gaxprom and Russia really not need do a fucking thing- why risk it when China, who actually has exchangable wealth, can actually PAY for your energy?  That is, why would Gazprom/Russia PAY so that it could deal with broke customers?  The logic just ain't there... (unless it's another US "babies in incubators being killed" storyline [or any of the tons of other ficticious stories jammed down our throats])

Sun, 06/22/2014 - 21:06 | 4884215 kurt
kurt's picture

No, no, you have it all wrong!

In the new futuristic, future world of international intrigue, LNG will be transported by submarine tankers at a depth sufficient to reduce the thickness of the containment vessel. The deeper you go the more the oceanic abyss reinforces the Gasubmarine. They travel from the source to the terminal, a great deep pipe with a female connector. The male connector is on the sub itself. There, like a mother feeding its young, the lifegiving LNG raises up, up to the distribution terminal. As the future advances, more of the work is done at depth, reducing the need for mechanical compression, there, under the sea, robotic and man'd crews work diligently in a world devoid of day or night. The rag tag crew meets up every night at the watering hole where they share ribald stories of life, love, and fightin'. It's not a life for the panty waisted or to the weak subject to vapors. No, it takes people of substance. If you're interested, put an annonymous add in the local want ads and I will find you, oh yes, I will find you. Use these words in the add: "wanted job pumpin' gas on the down low where the adventuresome roll."

Sun, 06/22/2014 - 21:15 | 4884237 Rootin' for Putin
Rootin&#039; for Putin's picture

+1 just for the imagination involved.  Good job.

Sun, 06/22/2014 - 21:56 | 4884319 Seer
Seer's picture

Yeah, I thought so too!  Of course, the problem of payment...

Mon, 06/23/2014 - 19:57 | 4887547 MeelionDollerBogus
MeelionDollerBogus's picture

Any chance the 1st submarine will be christened the Serenity because I see a first-season cancellation in its very near future.

Sun, 06/22/2014 - 21:06 | 4884216 IReallyDontCare
IReallyDontCare's picture

Robert Bensh is an energy and energy security expert with over 13 years of experience leading oil and gas companies in Ukraine. He has been involved in various roles in finance, capital markets, mergers and acquisitions and government for the past 25 years. Mr. Bensh is the Managing Director and partner with Pelicourt LLC, a private equity firm focused on energy and natural resources in Ukraine. Mr. Bensh has served as a strategic advisor to Ukrainian former energy minister and vice-prime minister Yuri Boyko on energy, western capital markets and political systems.

Another creep on the payrole.

http://www.nextoilrush.com/international-oil-powerbroker-joins-cod/

Scroll down to see this wonderful umbiased scumbag.

 

 

Sun, 06/22/2014 - 21:06 | 4884227 Downtoolong
Downtoolong's picture

I bet Robert Bensh has the perfect long term LNG investment opportunity for us that will net him a cool short term fortune too.

Phuck, it never ends.

 

Sun, 06/22/2014 - 21:09 | 4884232 Rootin' for Putin
Rootin&#039; for Putin's picture

Did this post come from the National Enquirer?

Sun, 06/22/2014 - 21:27 | 4884265 Winston Churchill
Winston Churchill's picture

Only because the Onion rejected it.

Sun, 06/22/2014 - 21:39 | 4884286 Jack Burton
Jack Burton's picture

As so many posters have said, this LNG play from American fracking fields to Europe via LNG tanker is a hoax. Seriously? Sure, the USA would love to sell LNG to Europe at sky high prices, because that is what ti would take to deliver it. This American scheme works only if Russian gas is shut down. A war in Ukraine could do that. Guess who invested 15 billion dollars into starting a war in Ukraine? Guess who is trying to stop South Stream across the Black Sea. Guess who fought North Stream but ran out of options to stop it. The USA!

Seriously. American desire to make Europe dependent on US LNG is a desperate move to keep Europe under control. Stopping Russian gas at it's much cheaper delivery price is a must. Thus America is using everything it has to force the Ukraine war to explode.

LNG is not ecnomically viable, as many have pointed out. But as a tool of American empire and control of Europe, it is a plan the US wants to push through. It is going to be a sick failure. Like everything the smart asses in Washington have done the last 12 years.

Sun, 06/22/2014 - 22:01 | 4884329 Seer
Seer's picture

"This American scheme works only if Russian gas is shut down."

No, it ONLY works if folks in Europe can afford it.  And given the delviery costs LNG tankers can NEVER come close in efficiency as a pipeline.

The writing is on the wall for Europe.  Who knows how this works out long-term, whether being first to admit that trying to maintain unsustainbable practices is a bad idea won't allow them to get on a "corrected" course sooner than others or whether they just end up wallowing in the muck longer (as others slowly join in).

Mon, 06/23/2014 - 19:52 | 4887484 MeelionDollerBogus
MeelionDollerBogus's picture

Silly.
I can't believe I completely missed this.
Cut off all NG supplies OTHER than LNG ports incoming from Murrika - using an ice-wall.
Can someone get TEPCO on the line?

Then for fun we can bring in a bunch of cosplay nerds dressed as zombies holding signs at the wall saying "PRO-WALL is the same as ANTI-WHITEWALKERS. stop whitewalker genocide!"

Sun, 06/22/2014 - 23:29 | 4884551 ebear
ebear's picture

"LNG is not ecnomically viable, as many have pointed out."

Say what?   LNG has been moving by sea since 1959.  There are currently about 200 LNG tankers in service.  Many nations import it, especially in Asia.

If the question is, can the USA become a viable LNG supplier to European markets, then yeah, I suppose they can.   Will they displace the Russians?  Probably not, but meantime there's money to be made selling seabourn LNG regardless of who buys it.

If I had to guess, I'd say 10-15 years from now Europe will be getting most of its NG from the high Arctic, not from Russia.

This guy is spot on about the Russia/China deal.  They see the future (they are Arctic players too) and are trying to diversify.

Look, nearly all the financial articles on the net are puff pieces, including ZH, but don't let that blind you to what's actually going on.  Do your own research.  I was an LNG sceptic too, but I looked into it and changed my mind.  Now I see opportunity.

This is still an investment site, no?  

I can talk about these things?

Mon, 06/23/2014 - 19:44 | 4887478 MeelionDollerBogus
MeelionDollerBogus's picture

NO, not from each and every port it COULD.
Those ports have to be built & the compression has to be performed RIGHT THERE, or you'll need to keep pipelining that gas (even more expensive) to existing sites & ports.
Idiot.

Sun, 06/22/2014 - 21:46 | 4884296 ObamaDepression
ObamaDepression's picture

The US selling LNG abroad is completely stupid.

Why should we sell away our competitive advantage?

Cheap energy would make us once again globally competitive in manufacturing and stimulate every aspect of our economy.

Haven't we always made fun of stupid ME oil countries who sold crude oil without first adding value by refining it or making plastic products?

Sun, 06/22/2014 - 22:09 | 4884340 Seer
Seer's picture

"Cheap energy would make us once again globally competitive in manufacturing and stimulate every aspect of our economy."

THE ISN'T ANY MORE 'CHEAP' ENERGY!  That's why the world is in the state that it's in (and which it would always come to given that we've been on a steady draw-down of FINITE resources!

You're asking to nationalize so that we can be competitive in "free markets?"  WTF?

"Haven't we always made fun of stupid ME oil countries who sold crude oil without first adding value by refining it or making plastic products?"

Not sure who "we" is, but I'm pretty sure that US strategy has ALWAYS been one of limiting this so that it maintains controll/upper hand.

Funny, though, that the ME oil is pretty much about OPEC, and that OPEC's structure/charter is pretty much patterned off of the Texas Railroad Commission.  If ever something was ironic it has to be this...  Yeah, those talking about "free markets" might as well be talking about unicorns...

BUT, I'd have to agree that the direction, though I don't promote any "solutions," is that a nation's resources will increasingly come under the sanctions of the given nation- internal consunmption will ultimately trump exports; and if you're a nationn that is highly dependent upon such resources then better study up on the term "peak exports," as these will hit sooner than "peak production."

Sun, 06/22/2014 - 22:10 | 4884343 sangell
sangell's picture

We are flaring NG in North Dakota because there is no way to sell it. The Marcellus shale needs higher prices to exploit. You can't make money fracking dry gas wells at $4. Europe is paying $11. Even with converting to LNG and shipping there is money to be made shipping US gas to Europe. Even more to Asia.

Sun, 06/22/2014 - 22:55 | 4884460 Seer
Seer's picture

An hit-men make money off of killing people.  So?

Because something is possible that don't mean that it SHOULD be done.

The NG fracking is one huge bubble.

If it weren't for the fact that I don't promote stuff I almost wish I could tell folks to just "drill baby drill" so we can once and for all jsut burn through all this shit and be done for it.  Sad part is that it'll drag on just long enough to exceed people's memories, people will forget that they've been given a LONG line of shit- another wave of exploiters will rack 'em up and sell yet another disasterous scheme on the dimwitted masses...

Sun, 06/22/2014 - 22:31 | 4884397 VangelV
VangelV's picture

Why should we sell away our competitive advantage?

It isn't 'our' oil or 'our' gas.  It belongs to the shareholders and they have the right to get the best price for it.  

Cheap energy would make us once again globally competitive in manufacturing and stimulate every aspect of our economy.

But shale is not cheap.  In fact it is so expensive to produce that I can't find any primary producers of shale gas that have self funding shale operations.  They have been dependent on cheap loans to stay in business and keep drilling but that time is about over.  With the Bakken ready to roll over in the next few months without having generated positive cash flow for the producers I think that it will be hard to keep the illusion of cheap and pletniful energy believeable even to the most naive.  
Sun, 06/22/2014 - 22:59 | 4884478 Seer
Seer's picture

And the added "plus" is that everyone else gets to absorb the externalized costs.  As you note, this shit is running on "free money," which, as we know, is really no more than a big gouge out of all us peasants.  And when the hotshots pack iup and leave that community to fester in the wastes?  Folks who believe in something ought to have to LIVE right where their operations are, until their dying days (and if they should suffer medical issues as a result of their ventures then they ought not receive any until they've parted with wealth equal to their prescribed treatments FOR EVERY PERSON in that community who has likewise been shown to have been afflicted by same said operations).

Mon, 06/23/2014 - 19:38 | 4887455 MeelionDollerBogus
MeelionDollerBogus's picture

whuuUUUUUT?
Too much glass not enough broken windows.
Didn't you lern nuthin from Krugmanomics 101?

Sun, 06/22/2014 - 21:52 | 4884309 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

No shit on Bulgaria for anyone following routes Bulgaria is the next buffer and major transit route for South Stream and Nabucco.

https://en.wikipedia.org/wiki/File:Major_russian_gas_pipelines_to_europe...

https://en.wikipedia.org/wiki/File:Nabucco_Gas_Pipeline-en.svg

Though if the Russians have any brains they will put a split in the Black Sea and route a second line in Romania.

It is no coincidence that the banks in Bulgaria are having problems right as the South Stream comes online. The EU will used scorched earth tactics and Greece the banking system in Bulgaria if it comes down to it then they can play hardball with Bulgaria concerning South Stream unless Bulgaria leaves the EU. Notice how Greece is the next stop on the southern split for the South Stream.

Sun, 06/22/2014 - 22:12 | 4884352 Seer
Seer's picture

Pepe Escpbar's coinage of "Pipelinestan" (I think he was responsible for coining it) tells it all.  Tensions in energy-producing and or energy-transiting countries.

Are people not yet getting it that ALL WARS ARE ABOUT RESOURCES?

Mon, 06/23/2014 - 00:59 | 4884677 ebear
ebear's picture

"Are people not yet getting it that ALL WARS ARE ABOUT RESOURCES?"

I think most people get it, they just don't see a viable alternative.

What would you suggest that doesn't involve rolling us back to the horse and buggy era?


Mon, 06/23/2014 - 19:34 | 4887442 MeelionDollerBogus
MeelionDollerBogus's picture

I suggest rolling back is smart and the alternative is death.
Period.

Sun, 06/22/2014 - 22:19 | 4884353 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

The only major competition Gazprom is going to have for LNG right now and the next 5 or so years in the Eurozone is from Qatar and possibly Norway. The major market US LNG exports is going to be competitive against Gazprom is in the Asian markets especially if that storage terminal in Indonesia comes to fruition.

Norway more than anyone else is potentially Gazprom and Russia's biggest threat to dominance in the gas markets in the Eurozone right now. Remember they are not in the EU or Eurozone and are the second largest gas supplier for Europe after Russia.

There is always the possibility Norway and Russia could partner and create their own gas version of OPEC leaving the GECF outright sticking it to Qatar.

https://en.wikipedia.org/wiki/Gas_Exporting_Countries_Forum

All the membership countries are the major gas exporters to Europe right now with the exception of Norway who is only an observer and not a member.

 

Sun, 06/22/2014 - 22:27 | 4884387 VangelV
VangelV's picture

The major market US LNG exports is going to be competitive against Gazprom is in the Asian markets especially if that storage terminal in Indonesia comes to fruition.

Sorry my friend but there is no profit to be made in American shale gas, which is why most of the players are trying to migrate to liquids.  While there are some great wells that are very profitable they are only found in small core areas that have been pretty much tapped out.  To build and run an LNG terminal you need long term contracts that will guarantee supply within a given price range.  Most of the shale producers will no longer have operational wells by the time the LNG terminals are half way through their life cycle so where is the rest of the gas going to come from?

Sun, 06/22/2014 - 23:06 | 4884495 Seer
Seer's picture

"To build and run an LNG terminal you need long term contracts that will guarantee supply within a given price range.  Most of the shale producers will no longer have operational wells by the time the LNG terminals are half way through their life cycle so where is the rest of the gas going to come from?"

Not to mention the fact that it's highly unlikely that the demand volumes (based on actual ability to pay) is going to hold up to what it is now.  Pretty sticky situation, declining long-term sales PLUS [highly probable] increases in long-term production costs: and, actually, dropping volumes will result in higher operational costs as "economies of scale in reverse" exert that pressure.

I'm pretty sure that TPTB on Easter Island were encouraging their people to work harder and faster to construct those statues (and that near the end they were blaming the people's failure to do so with their demise ["failing to please the gods!"]).

Mon, 06/23/2014 - 00:05 | 4884611 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Canada, South America local underwater drilling operations run by Indonesia, etc. It is a storage hub in spoke hub type network sort of like the way international airports and airlines work.

Mon, 06/23/2014 - 19:27 | 4887419 MeelionDollerBogus
MeelionDollerBogus's picture

Solution is obvious. Export the US politicians to Europe. Every time they speak, collect the gas & put it in the pipe.

Sun, 06/22/2014 - 22:14 | 4884357 Nexus789
Nexus789's picture

Stupid article - the only ones seeing conflict are the degenerates in Washington that are trying to create a split between Europe and Russia. What would Russia care about LNG as they are 'pivoting' to China which will become the biggest gas market in the world. Now they are talking about building a pipeline to India.

Sun, 06/22/2014 - 22:16 | 4884360 Kirk2NCC1701
Kirk2NCC1701's picture

This is a desperation biz model, promoted on Hopium.

I've mentioned a number of times in the past 12 months that it's all about extending the Petrodollar game and its GRC status. Before the rest of the world ditches it in favor of direct currency swaps.

The US and it's oil & gas industries need to protect the USD, along with its MIC, and must try to outline and outpace the opposition, which is trying to do the same.

US and French pipelines from Africa (via Italy and Spain) are WIP, but are vulnerable to direct attacks and -- more importantly -- to revolutions and war. Russia and China will want to play accordingly.

Sun, 06/22/2014 - 22:20 | 4884370 SweetDoug
SweetDoug's picture

'

'

'

LNG… The Hindenburg of 2015!

 

Just wait until some pissed off Jihadi gets a handheld grenade or missile launcher in some port like Boston, and light's 'er up!

 

Badi-badi-badi-badi-badi badi… That's all, folks!

 

•?•
V-V

Sun, 06/22/2014 - 23:08 | 4884503 Seer
Seer's picture

"Just wait until some pissed off Jihadi gets a handheld grenade or missile launcher in some port like Boston, and light's 'er up!"

Just like with 9/11!

Mon, 06/23/2014 - 19:05 | 4887347 MeelionDollerBogus
MeelionDollerBogus's picture

Or someone just has a smoke on board.

Sun, 06/22/2014 - 22:23 | 4884376 VangelV
VangelV's picture

The idea that shale gas will become profitable now that most of the core areas in the shale formations are past their prime does not seem very realistic.  The problem with shale is its cost.  Once you add up all of the costs and depreciate the costs over the life of a well you find that there is nothing left over to provide a decent return.  None of the primary shale producers are economic or have any projects that are self financing.  The entire shale illusion has been created by access to cheap loans and narratives told by analysts and consultants looking to make their firms a lot of money.  The trouble is that when we look at the 10-Ks we find nothing to suggest that shale is viable outside of the core areas.  

 

Note that proving me wrong is very easy.  All you would have to do dear reader is show us primary shale producers that are generating positive cash flows and not dependent on debt on new debt, asset sales, or equity dilution to close their funding gaps.  One other thing.  How is it that the ND Bakken data can show the number of wells nearly double in two years while the average production rate falls from 140 to 126 bpd.  Note that the ND data is for oil production and that is doing much better than gas.  

Sun, 06/22/2014 - 22:31 | 4884394 oncefired
oncefired's picture

Pipe Dreams! Read many places that our fracking reserves are no where near what is claimed, why was there shortages here last winter?

Sun, 06/22/2014 - 23:21 | 4884537 Seer
Seer's picture

"Read many places that our fracking reserves are no where near what is claimed"

We won't know for sure until it's all past us.  OPEC ended up "discovering" a TON more reserves back in the 1980s.  Coincided with the move to base exports off of stated reserves.  If you were looking to extract more wealth while the game was hot it seems like ramping up one's claims that cannot be supported/traced would be a hot thing to do too.  And figure that it might not be easy to explain away the lie in the future- people are likely to believe that there really are the reserves and that the POWER is sitting on it for themselves (part might be true, but on the whole, not).  Anyone imagine that any of the existing powers in oil-producing countries would stay in power if they claimed that all the oil really wasn't there, or that it was in rapid decline?

"why was there shortages here last winter?"

One season doesn't provide us with enough data points.  Even in a well-run enviornment such as in the US things can go wrong.  Operational errors and or administrative errors (demand forecasts wrong) happen.  This is not to say that it couldn't have been intentional; no, I would never claim that it couldn't be, especially after this history lesson that was Enron.  I just caution that some things are human errors, and that such is likely more prevalent than outright fraudulent action (wihich, again, as Enron demonstrated, can create a HUGE stink that's hard to not notice).

Sun, 06/22/2014 - 23:12 | 4884508 BouncingCat
BouncingCat's picture

All someone has to do is start torpedoing those LNG boats.

Sun, 06/22/2014 - 23:24 | 4884540 Seer
Seer's picture

Bad systems FAIL.  It'll fail on its own accord.

Sun, 06/22/2014 - 23:32 | 4884560 lasvegaspersona
lasvegaspersona's picture

Patient, sofisticated, long tern investors do not exist.

Natural gas is a gift. Pressurizing it and shipping it is a waste. When the dollar collapses we will need energy to compete when some industry returns to the USA. LNG is a political joke. It could be done but by the time the plans are made and the infrastructure started it will be obvious it was a bad idea.

That may not stop some activity but bad science usually doesn't last...corn ethanol...redo...

Sun, 06/22/2014 - 23:44 | 4884581 flacorps
flacorps's picture

They can do the same damage as a nuke. And at least one will.

Sun, 06/22/2014 - 23:39 | 4884573 Seer
Seer's picture

To remind folks that AFFORDABILITY has EVERYTING to do with success or failure, speaking on this subject is Gail Tverberg (http://ourfiniteworld.com/2014/06/10/iea-investment-report-what-is-right...):

The point that the IEA does not seem to understand is that diminishing returns affects buyers’ ability to pay higher prices for products. The IEA assumes that buyers will be able to pay higher prices (than the general rise in inflation) for energy products, without it adversely affecting the economy. This clearly isn’t true because salaries do not rise to match the higher cost of energy products. Buyers will cut back on discretionary goods, when energy prices rise. This leads to layoffs in discretionary sectors and quite possibly recession. It also leads to higher default risk.

And as I have been cautioning, this all leads to the situation that I refer to as "economies of scale in reverse," whereupon the positives brought about by leveraged prodcution/volume are wiped out in a similarly non-linear way as the affordability across large populations drops to the point at which there is sales volume loss.  It then becomes a nasty unwind...  And for this short-lived resource there just isn't enough time to suck it up and hold out for a possible up-turn: the costs will be far to high to try and keep the lights on.

Mon, 06/23/2014 - 02:14 | 4884748 Jano
Jano's picture

Mr. Bensh, you as CEO, can you tell me, what is less: 14USD for LNG from US, or 6USD for the same energy content, delivered from Central Asia via pipe line?

I, as EU citizen, I opt for the Central Asian delivery.

Mon, 06/23/2014 - 04:26 | 4884806 Reptil
Mon, 06/23/2014 - 04:54 | 4884814 smacker
smacker's picture

Strangely, Mr Stafford managed that long interview article without one single mention of Qatar gas and of the West's plan to replace Assad in Syria so the LNG can be flowed thru his country to Europe.

Mon, 06/23/2014 - 07:36 | 4884929 Red Raspberry
Red Raspberry's picture

It's about expoting from the USA.

Mon, 06/23/2014 - 07:48 | 4884948 JohninMK
JohninMK's picture

Nor the potential of the discoveries in Albania, or the Turkey/Greece/Italy pipeline about to be getting under construction.

Whatever the sheeple might be being led to believe TPTB both sides of the Atlantic are well aware that Europe's long term, post Dollar as reserve currency, future lies with Russia. Not with a bankrupt dying Empire 1000's of miles away.

Everything the US now does on the world stage must be seen in that light, trying desperately to put it off for as long as possible by any means. We all know how dangerous that can be, whilst the poor Ukrainians are finding it out now for real.

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