Cheniere dominating Europe market

Dutch gas prices hit 10-year lows this week, reflecting high European inventories swelled by liquefied natural gas (LNG) imports, testing levels at which companies that committed to buy American LNG will start making serious losses. Prices for month-ahead Dutch gas have dropped by 66 percent since it peaked last September at under 30 Euros per megawatt hour (MWh). Dutch gas for July delivery slumped to 8.95 Euros per MWh on June 28, the lowest since last August. European pipeline gas prices also tend to rise with the onset of winter. The price falls are in part to an influx of American LNG supplies. But customers of Cheniere Energy, which dominates U.S. production, have been feeling the pain from their long-term commitments for months due to a fixed pricing formula. Cheniere sells its LNG at 115 percent of gas futures plus a liquefaction fee of between $3 and $3.50 per million British thermal units (mmBtu). Cheniere LNG’s costs now are around $5.61 per mmBtu with the liquefaction fee, compared to $3.19 per mmBtu paid for natural and re-gasified gas at the Dutch hub, a benchmark for European prices. Yet American LNG is still being sold to Europe, which received between 30 and 50 percent of all U.S. supplies between January and May, according to Refinitiv Eikon shipping data. Royal Dutch Shell is the largest Cheniere off-taker with a commitment of 5.5 million tons per year (mtpa) and paying $723M per year in liquefaction fees, according to Cheniere's filings. With Cheniere's flexible destination clauses, buyers take the LNG and sell onwards to others or deliver it themselves to countries around the world. It’s helped the European market that U.S. Henry Hub prices are also weak, slumping to a three-year low of $2.159 per mmBtu due to inclement weather and record-breaking shale production boosting inventories. (Source: Marine Link 06/28/19) Cheniere Energy owns and operates the Sabine Pass (Texas) LNG receiving terminal and the Creole Trail Pipeline - a 94-mile flow from Ellis Station, La., to Sabine Pass - through a general partner ownership interest in and management agreements with Cheniere Energy Partners. The Creole Trail Pipeline is interconnected with the Natural Gas Pipeline of America, Transcontinental Gas Pipeline Corp., Tennessee Gas Pipeline, Florida Gas Transmission, Bridgeline Holdings, Texas Eastern Gas Transmission, and Trunkline Gas.