In this ‘Tale of Two Cities’ you’ll get $2/MMBtu in New York (Henry Hub) and around $20/MMBtu in Singapore (Asian spot). The divorce between the Atlantic Basin and Pacific Basin couldn’t be any starker – the question is whether these spreads will incrementally narrow under inexorable laws of economics, or whether politics will throw a spanner in the works.
‘Convergence’ makes most sense for the US of course – Chesapeake’s foibles merely mask a structural problem for American gas players; they are selling their gas for a pittance in the US when they could be making an absolute killing overseas, roughly to the tune of $1bn spreads a day in Asia.
Whatever the economic merits of keeping ‘US gas for US consumers’ improving balance of payments, fast tracking coal to gas for emissions, as far as gas players are concerned, it’s still a damp squib. Great, they’ll get $5/MMBtu rather than $2/MMBtu with some unfortunate mothballing / defaults in between. Not exactly the giddy heights of Asian LNG.