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Boston Bound: LNG on the Way to New England

Located about 10 miles off the shore of New England in the brisk, choppy waters of Massachusetts Bay are two deep water ports capable of sending regassed LNG ashore.  GDF Suez’s Neptune Deepwater Port and Excelerate’s Northeast Gateway (NEG) spend most of their time idle, however, the market is sending out some positive signals that they could be put to work this winter.

For some context, let’s look at what happened about a year ago. Pricing signals last year were strong enough to incentivize Excelerate to send their self-titled Excelerate floating storage regasification unit (FSRU) to moor just off of Boston for about two months delivering gas intermittently throughout the winter. The graphic below shows NEG LNG send out along with Boston temperatures.  Prior to winter 2014/2015 NEG had not seen any volume since the winter 2009-2010.

Now let’s bring into the picture the pricing that incentivized these deliveries for the past two years along with how forwards are looking today. Since the tankers have to be contracted some time in advance, November forwards should provide us with both the pricing signals and the requisite amount of time to hedge and, with Europe being the competing market in the Atlantic Basin, we’ll look at the spread between the UK’s National Balancing Point (NBP) and Algonquin Citygate.

Not only are AGT forwards trading at a premium to NBP this winter, as shown in the graphic above, but AGT is also trading at about a $0.17 premium over Asia’s JKM, making it the highest forwards price in the world for LNG this January and February as shown below.

So, with no new pipeline projects set to come online in New England until late next year (Algonquin Incremental Market (AIM)) and existing pipes expected to be at capacity again this winter, it looks like the market is sending a pretty strong signal out for a tanker to dock in Massachusetts Bay this winter.

That signal could very well be answered by Exclerate’s 3.1 Bcf Express FSRU tanker, which according to ship tracking data is currently sitting in the Caribbean just off of Trinidad and Tobago. However, the question remains: why stop with only one ship when these forwards can be locked in now? Perhaps Massachusetts Bay will be a little bit more crowded than usual this winter.

To track supply/demand dynamics in the northeast, infrastructure build-out timing, and basis implications, request a free sample of our Northeast Gas Quarterly report.

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Mr. Matthew Hoza is the Head of European Energy Markets at FactSet. In this position, he spearheads the expansion of FactSet’s data and analytical offerings in the European natural gas and power sectors. Prior to his current role he managed the U.S. Power Markets and U.S. Natural Gas teams, focusing on developing and marketing comprehensive data sets and analyses for each commodity. He earned an MS in Finance from the William E. Simon Graduate School of Business at the University of Rochester and a BS in physics from Florida State University.

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