03.08.2009

Closing down of LNG facilities due to downward pressure on prices which would mean that it would not be economic to continue to run the facility. Although LNG prices have fallen from a high of $24 mmbtu in the summer of 2008 to a low of $4 mmbtu in the winter of 2009, shut-in of LNG liquefaction capacity is unlikely. It is estimated that U.S. prices would have to fall to around $2.50 per mmbtu before margins were thin enough — around 70 cents per mmbtu — to force any shut-ins from suppliers to that market. However, the cost of producing LNG in some plants, including those in top producer Qatar, is considered quite low because the fuel is produced alongside other higher-profit liquids. The LNG business is very capital intensive and the operating costs are quite low relative to the sales price of LNG. A plant could operate at a loss to ensure condensate can continue to be produced. Large new LNG trains are likely to continue producing, given the technical complications of shutting down a whole train and the need to pay for the investment. Smaller trains with no pressing payments might consider shutting down, but this is unlikely to tighten the market. There has not been a shut-in of an LNG production plant since the early 1980s when the U.S. stopped imports from Algeria over a price dispute, forcing the North African state to cut production

Gina Cohen
Natural Gas Expert
Phone:
972-54-4203480
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