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Monday, March 9, 2015

Hulk's HOG

Wow, so Wall Street “Energy” hustlers are telling potential buyers of LNG that an “Alaska LNG” will never happen? Yes, at a non-public by invite only convention in Japan that brings together buyers and sellers for long term LNG “futures” contracts, some buyers were holding out for lower prices, based on a very peculiar fact. About a year ago, even before oil started to cause Alaska's Governor Parnell to panic and chant out loud “My hide is falling”, well when EXXON's PNG LNG plant started producing the price of LNG crashed 7%. As this plant came on-line and commenced to flood the LNG market with even more product, it was now at a critical junction – it is called over-supply and in a “supply and demand” world, it means lower prices for the consumers and less profits for the pirates. Look, LNG “exports” go over the high seas, and J.P. “Henry” Morgan likes that “Pizzo”! And that critical junction is defined by the after-profits “Expected” and with such a drop, it was now at the borderline of Good/No Good. So no excitement from the investors, the middle-earth that makes a living by manipulating prices for their own well-being. How many hands in the pot? Now that EXXON plant in Papua New Guinea is 1/3rd the size proposed for the Alaskan LNG Project. So do the math, it would mean another drastic slide in LNG pricing – bringing a plant of that size on-line would be like a “flash flood” in the desert. So no wonder the buyers were holding out, and come to the defense of the sellers just serenade the doubtful with “comfort” NOT to worry about that Alaska LNG getting in the way of negotiating contracts. In fact the Alaska LNG project has gained the interest of a nickname, “Hulk's HOG”! So with the price of oil slicing into the profit margins for any and all energy - as it is all tied to a fixed budget based on the price of oil - there are guarantees being gambled upon that there will not be an Alaskan LNG project, not in the near future. And considering that these seller/buyer contracts are 10 to 15-years in the making with guarantees that there will exist some semblance of price stabilization plus easy re-negotiating for extending a contract into the future – there ain't going to be an Alaska LNG project. Nobody is interested in Alaska's “Stranded Gas” being considered for an LNG “Export” project - a humongous sized project that would allow the price of LNG to collapse some more! And due the fact that “Alaska's” gas is somewhat contaminated – with a measly methane content of 76% and “out-of-spec” for pipeline quality gas, it is a more costly commodity as that “drawback” must be accommodated and accounted for – as every BTU counts for boiling water! And when EXXON decided to move forward with the PNG, it utilized an economic forecasting model, the ORANI CGE, for “Computable General Equilibrium”. Today, a similar model run with “Alaska and Asian export data” does not paint a very good picture for the Alaskan project. In fact, those that think it will come to be should read EXXON's PNG LNG Economic Study of 2009. So, we still get the impression that the Juneauites feel there is enough wiggle room in that over-crowed “Out-House” for Alaska's crappy gas! Maybe on the books, money spent for this and for that, but forget about a construction job. So what, as we have been waiting how many years by now for that project – like 39-years! But we owe it to Ted Stevens to commence today building an “in-state” only gas pipeline that cares not a rat's ass about any “export” potential, as his dream was a dream for our children. Ted's dream was to make damn sure we built a pipeline for “US”, so, let's order the pipe and get to ditching. Bottom-line, by bringing an idea of an “export” into the equation, it is once again stalling the benefits of “natural gas” to, well we own that gas so what's the problem?

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