Natural gas prices have collapsed since the beginning of the current fiscal year, even as stock levels remain below average, mainly due to oversupply.
Oil expert Medhat Youssef told Daily News Egypt that gas prices continue to decline in international markets, partly due to geopolitical tensions, but mostly due to natural gas quantities outpacing global demand.
He pointed out that gas prices began to decline when the United States increased its production of shale gas significantly in recent years. This also contributed to a lessening of dependence on natural gas as oil prices declined during this period.
Youssef said that shale gas exploration companies are suffering from financial pressures due to high investment costs, although production of gas rose by about 15% during May.
Additionally, LNG exporting countries have seen their revenues fall sharply due to lower gas prices, nearing the actual production cost of LNG, which includes production, liquefaction, and shipping.
He added that the markets are experiencing seasonal fluctuations, where demand peaks in the winter and then turn to lower levels in the summer. Consumption falls sharply with the start of the spring and autumn months. The LNG prices are also affected by the race between Russia and the United States over increasing gas exports.
If natural gas prices continue to decline in world markets, coal-importing countries will transition to natural gas for industry and power plants due to natural gas’s economic feasibility and its position as a cleaner alternative
Meanwhile, the number of active natural gas rigs in the United States recently dropped to 144, the lowest level since January 2017, compared to 173 in June, after being affected by the glut of supply and the decline in natural gas prices to $2.31 per million BTU.
Natural gas inventories in the United States rose to about 2.39trn cubic feet of gas (scf) in the last week of June, from 89bn scf, due to weak demand and oversupply.
A former chief executive officer at one of the US largest producers of shale gas, said in a previous statement that the situation has become a “total disaster” and is causing continuous losses.
Head of gas market research at Rested Energy also said that Russia and the United States are natural rivals with the fact that they are among the world’s biggest gas producers, but in what appears to be a race to the bottom, not only in the lucrative Asian market but also in Europe.
He added that Russia and the United States sent increased quantities of gas to Europe despite the decline in the price of gas, and that some US exporters do not cover operating costs. However, US exports to Europe in the first half of 2019 increased by 6.9bn scf.
In a related context, a source in the petroleum sector said that Egypt will not be affected by the glut of supply of natural gas in world markets after it reduced its production of gas locally by about one billion cubic feet per day, waiting for the market to stabilise. Egypt moved to export shipments of liquefied gas through liquefaction plants.
He pointed out that Egypt has an infrastructure of a national gas network that allows it to receive and distribute about 9bn scf/day and transport it to all parts of the republic, in addition to Idku and Damietta liquefaction plants of 1.88bn scf/day.
He pointed out that Egypt’s total gas production is currently about 6bn scf/day, which meets the needs of the local market.
It is noteworthy that member countries of the Gas Exporting Countries Forum, accounted for 42% of the total gas production globally, and also owns 70% of the gas resources in the world, and controls 38% of gas trans-pipeline operations and 85% of trade in liquefied natural gas.