New England 'imports European prices' in looming gas supply crisis

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

A European-style winter energy crisis is looming over New England in the northeastern United States, even as US producers of natural gas export record volumes and a wave of fuels crosses the Atlantic.

Utility bosses in the region have called for emergency help from Washington in anticipation of a crisis, while lashing out at a century-old law that cut off New England from some of the prolific shale production American 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 vessels from sailing between US ports means the gas will come from Trinidad, not US export plants along the Gulf of Mexico shipping record amounts of fuel overseas.

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

The New England regional network operator said it would be able to cope with normal weather this winter, but warned that a prolonged period of particularly cold temperatures could force it to ration food. electricity supply, potentially through blackouts.

Gas prices for delivery to Boston this winter have soared 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 energy prices in the Northeast US have skyrocketed this year

Gas elsewhere in the United States for the same months is trading at about a quarter of that level. Spot prices have even dipped below zero in West Texas in recent weeks as production hit new highs.

Plans to bring more gas to New England from huge shale deposits in nearby Appalachia have been shelved in recent years, while the 1920 Jones Act prevents foreign vessels – such as LNG carriers – from deliver frozen gas to the Gulf to customers in the northeast.

As Gulf terminals export record volumes of gas, Elizabeth Warren, the Democratic senator from Massachusetts, urged the Joe Biden administration this year to curb LNG exports “to keep prices low for American consumers.” .

The ship arriving from Trinidad at the Everett LNG terminal near Boston will be the 11th to land in the region this year, up from nine last year, according to Kpler, a tanker tracker. The price should be close to European levels, analysts said. The terminal’s owner, Constellation Energy, said the US Coast Guard prohibits it from publicly disclosing information about cargo arriving at the terminal.

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

“On the precipice of the 2022-2023 winter period, New England is facing retail energy supply prices that are about double what they were last winter and, possibly more. worrisome, to a dangerous energy security situation should the region experience prolonged cold weather or an unforeseen fuel supply disruption,” they wrote in a submission to the Federal Energy Regulatory Commission last week. .

The region has been at the forefront of efforts to decarbonize the United States’ energy supply and create new renewable energy generation capacity, and a nascent offshore wind industry is beginning to take hold.

But those developments will take time, and analysts say the withdrawal of nuclear capacity, the blocking of Canada’s new power lines and gas pipelines from western Pennsylvania’s shale gas fields, as well as Overly optimistic assumptions about cheap foreign supplies, left New England exposed.

“You sleep in the bed that you make,” said Jen Snyder, senior adviser at energy consultancy Validere. “There were decisions along the way that were a little bullish on oil and LNG prices and how fast. . . wind and solar could serve 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 supply is reflected in the market for liquid fuels called distillates, including diesel and fuel oil used as fuel in many New England households.

The Energy Information Administration warned Thursday that households using fuel oil — about a third of homes in the Northeast, compared to 4% nationally — will pay 45% more for their fuel this winter than last year. due to a tight market. Fuel stocks in the northeast have fallen by nearly half over the past year.

An assessment this week by the non-profit North American Electric Reliability Corporation found that without “significant effort” to replenish oil and LNG inventories, there were concerns “whether there will be enough energy available to meet electricity demand during an extended cold period”. spell”.

A Department of Energy spokesperson said the administration is engaging with companies on ways to increase inventory and “will continue to closely monitor the situation, work with state partners and of the industry, and stands ready to provide support as needed”.

Eversource Energy’s Nolan recently wrote to Biden asking for an emergency federal response to anticipate a crisis, including the release of supplies from a federal stockpile of fuel and a waiver of the Jones Act, saying the northern reliance -is with respect to foreign supplies could get worse. a global supply crisis too.

“Furthermore, the growing reliance on foreign-sourced natural gas poses a particular threat to national security at this time, given the war in Ukraine,” he said.

Video: US LNG exports increase with European demand | FT power source

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