Cheniere Energy (LNG) Pops on Indonesia Deal as NatGas Futures Trade Higher

Michael Teague  |

Cheniere Energy ($LNG), one of the US’s larger midstream oil and gas companies, saw its share price jump on Thursday after the $9.2 billion company announced that it had penned a deal with Indonesia’s national oil & gas company, PT Pertamina.

The deal, set to begin in 2018, will see Pertamina purchasing some 800,000 metric tons of natural gas per year from an export hub that Cheniere is planning to build in Corpus Christi, Texas, a project that is still awaiting approval from the US Federal Energy Regulatory Commission.

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The news arrives on a day that saw natural gas futures for January delivery trading over 4 percent higher at $4.12 per BTU on the New York Mercantile Exchange. The price action for natural gas futures was itself the result of the weekly inventory report from US Energy Information Administration that indicated that US supplies of gas had dropped by 162 billion cubic feet for the week ending Nov. 29, a reduction that was about 20 billion cubic feet more than had been expected by analysts.

The drastic increase in shale oil and gas production in the US over the past few years, as well as the possibility that Iran may sooner than later be selling its vast reserves of oil and gas on the global market have led many to worry about oversupply in the coming years, and, of course, the lower prices that result from oversupply.

For the time being, however, more immediate circumstances are offering support for natural gas futures, such as pipeline problems at the recently opened Kashgan oil field in Kazakhstan’s portion of the Caspian Sea, thought to be one of the largest offshore discoveries of oil and gas in the world in recent years.

Indonesia’s natural gas needs are also likely to play a price-supporting role in the future. The country’s consumption of natgas is expected to grow some 4 percent to over 7 billion cubic feet per day by 2025. Cheniere, for its part, stands to benefit greatly from the situation. Shares were up 7.5 percent to nearly $48 dollars heading toward Thursday’s closing bell.

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