New England ‘imports European prices’ amid looming gas supply crisis

A European-style winter energy shortage looms over New England in the north-east of the United States, even as American natural gas producers are exporting record quantities and a wave of fuel is flowing across the Atlantic.

The region’s utility chiefs have appealed to Washington for emergency help to forestall a crisis while cracking down on a centuries-old law that has cut New England off from some of America’s rich shale mines and made it more dependent on expensive imports.

A ship loaded with liquefied natural gas will land in Massachusetts on Friday — but federal law barring foreign ships from going between US ports means the gas will come from Trinidad, not US export facilities along the Gulf of Mexico , the record amounts of fuel shipped abroad.

“One would think that charity begins at home . . . that American fuel would go to American ports,” Joe Nolan, chief executive officer of Eversource Energy, one of New England’s largest utilities, said in an interview. “We will have to compete like everyone else – in the global market.”

The New England regional grid operator has said it will be able to get by under normal weather conditions this winter, but warned that a prolonged period of particularly cold temperatures could force it to ration power, possibly through blackouts.

Prices for gas due for delivery in Boston this winter have risen to nearly $30 per million British thermal units on the Intercontinental Exchange, comparable to current prices in Europe, where utilities are scrambling to find international supplies to replace Russian energy.

Line chart of $/Mn BTU Equivalent showing that energy prices have spiked in the Northeast US this year

Elsewhere in the US, gas is trading at about a quarter of that level for the same months. Spot prices have even fallen below zero in west Texas for the past few weeks as production climbed to new highs.

Plans to pipe more gas to New England from huge shale deposits in the nearby Appalachian Mountains have been scrapped in recent years, while the Jones Act of 1920 prevents foreign ships — such as LNG tankers — from shipping super-cooled Gulf gas to customers in the Northeast deliver.

As Gulf terminals export record amounts of gas, Elizabeth Warren, the Democratic Senator from Massachusetts, said earlier this year pushed Joe Biden’s administration to curb LNG exports “to keep prices down for American consumers.”

The vessel, arriving from Trinidad at the Everett LNG terminal near Boston, will be the eleventh to dock in the region this year, up from nine last year, according to Kpler, a tanker tracker. The price is likely to be close to European levels, analysts said. The terminal’s owner, Constellation Energy, said the US Coast Guard has banned it from releasing information about cargo arriving at the terminal.

Despite the imports, utilities responsible for power transmission in the region, including Avangrid and National Grid, have warned of New England’s “weak reliability position” as temperatures drop.

“On the precipice of the 2022-2023 winter period, New England faces retail energy supply prices about double what they were last winter and, perhaps more worryingly, a dangerous fuel security situation if the region experiences prolonged cold weather or a unplanned weather should suffer fuel disruption,” they wrote in a filing with the Federal Energy Regulatory Commission last week.

The region has spearheaded efforts to decarbonize the US energy supply and build new renewable power generation capacity, and a burgeoning offshore wind industry is beginning to take hold.

But those developments will take time, and analysts say nuclear shutdowns, the blockage of new power transmission lines from Canada and gas pipelines from western Pennsylvania’s shale gas fields, and overly rosy assumptions about cheap foreign supplies have left New England exposed.

“You sleep in the bed you make,” says Jen Snyder, senior consultant at energy consultancy Validere. “There were decisions along the way that were a little optimistic about oil and LNG prices and how quickly . . . Wind and solar energy could have a larger and more consistent share of the electricity market.”

“We import LNG – but we also import European prices,” Snyder added.

The bleak outlook for natural gas supplies is reflected in the market for liquid fuels known as distillates, including diesel and heating oil, the fuel used in many New England homes.

The Energy Information Administration warned Thursday that homes using heating oil — about a third of homes in the Northeast versus 4 percent nationally — would pay 45 percent more for their fuel this winter than last due to a tight market. Stockpiles of the fuel in the Northeast have fallen by nearly half over the past year.

A valuation by the nonprofit North American Electric Reliability Corporation this week that without “significant effort” to replenish oil and LNG stocks, there are concerns “whether there will be enough energy available to meet electricity needs during an extended cold spell.” . .

A spokesman for the Department of Energy said the government is working with companies to increase stockpiles and will “continue to monitor the situation closely, working with government and industrial partners and standing ready to assist as necessary”.

Eversource Energy’s Nolan recently wrote to Biden calling for an emergency federal response to forestall a crisis, including releasing supplies from a federal fuel stockpile and a waiver of the Jones Act, and saying the Northeast’s reliance on foreign supplies could decrease also worsen a global supply crisis.

“In addition, given the war in Ukraine, the increasing dependence on natural gas from foreign sources poses a particular national security threat at this time,” he said.

Video: American LNG Exports Rise With European Demand | FT power source

https://www.ft.com/content/f9374ff4-3bfd-4b5e-8542-58c3db81514b New England ‘imports European prices’ amid looming gas supply crisis

Adam Bradshaw

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