Global LNG, China Demand Shifts Signal Mixed Signals for Bakken
Long-term LNG supply deals contrast with faltering Chinese demand, influencing the global oil and gas balance that sets Bakken prices.
Two major long-term liquefied natural gas (LNG) supply agreements were announced Wednesday, according to Rigzone, creating a potential floor for global gas markets that can influence associated gas economics in the Bakken. Cheniere Energy secured a 22-year contract to supply LNG to Brazil's state-owned Petrobras, Rigzone reported. Separately, Sempra announced a 20-year agreement to supply approximately 0.8 million metric tons per annum of LNG to the same Brazilian company.
These deals signal sustained international demand for natural gas, which can support global gas prices. For Bakken producers, whose wells often produce significant volumes of associated natural gas alongside crude oil, stronger global gas fundamentals can improve the economics of gas capture and reduce flaring pressures in North Dakota.
However, the oil market outlook faced a headwind as a nascent recovery in Chinese oil demand has begun to falter, Rigzone reported in a separate story. China is a key global oil consumer, and softening demand there can weigh on international crude benchmarks like Brent and WTI, which directly set the price for Bakken crude.
In another development affecting global gas supply, Chevron's local partners in Israel's Leviathan gas field canceled a potential $6.7 billion domestic supply deal, according to Rigzone. The scrapped contract would have supplied gas from the Mediterranean project to two planned Israeli power plants. This decision could keep more Leviathan gas available for the global LNG market, potentially adding to supply and moderating price gains from the new Brazilian contracts.
For Bakken operators, the day's news presents a mixed picture: supportive long-term gas demand against immediate concerns over oil demand growth. The net effect on wellhead economics will depend on which force dominates the volatile global market. Royalty owners and drillers watch these international signals closely, as they ultimately dictate cash flow and drilling activity levels in the Williston Basin.
Source
Rigzone (Cheniere Notches 22-Year LNG Contract to Supply Petrobras; China Oil Comeback Loses Steam; Leviathan's Israeli Owners Cancel $6.7B Domestic Supply Deal)
