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Arbitrage in Liquified Natural Gas

 Essay about Arbitrage in Liquified Gas

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Arbitrage in

LIQUIFIED Gas

December 2012

Take a look at the long-term chart of commodity future trading and gas. В The historical oil-to-gas price percentages have ranged from 6: you to 15: 1 before the economic crisis. В Since one barrel of oil provides the energy comparable of the your five. 825 mil BTU of natural gas, a great implied BTU arbitrage retained this relationship in check. Spot natural gas exchanged as lowВ 1. 905 before in the weekВ implying an energy equal price of the barrel of crude oil of $11. twelve. В Place crude shut down at $105. 23 on a single day. (Business Insider, 04, 2012)

There was a time when natural gas was treated as an unwanted side product of crude oil production and simply flared off. Now it is a common replacement for crude oil and an important source of energy for many nations. Gas comprises 22% of globally energy require (Morgan Stanley Research, 03, 2011). Natgas consumption is forecast to double by simply 2030. Is it doesn't fastest growing energy source in the world and the most flexible of primary fossil fuels. Its uses include electricity generation, residence heating/cooking, fertilizer and is likewise convertible to diesel gas for automobiles. It is also without color, odorless and burns solution than other fossil fuels. Unlike petrol and coal, natural gas are not able to simply be packed on a deliver or train for transport from its supply to the client. Historically, gas required costly pipelines that have been uneconomic more than large distances. The other option was using complicated conversion devices to amazing the gas into liquid form or perhaps modify the chemical formula to allow change to other products. Technology advances and declining costs have finally allowed gas to overcome these kinds of economic problems. Introduction

In america energy self-reliance has been a popular topic because the oil retencion implemented by OPEC in 1973. At the moment, the bar awakened an awareness that America is dependent about oil imports. The danger to the midsection class life-style of aircraft travel, muscle mass cars and air trained homes worried the country into an energy coverage to expand production and adopt preservation strategies. With this context the oil market experienced a domestic rate of growth. The boom to produce was reinforced since West Arizona Intermediate raw skyrocketed among 1970 and 1980 coming from under $4 per barrel or clip to $50. Naturally, widened drilling developed an environment pertaining to enterprising corporations to build fortunes. Money was flowing to get raw materials, land, engineering, tube, drill parts, drilling dirt and tough necks whom could hit the shell out zones deep in the ground. A frenzy for dark-colored gold constructed industries that hadn't been around before. Quickly forward to early 1980s once diplomacy between your US Reagan Administration and Saudi Arabia led to a rapid increase in Saudi production to drive throughout the price. By 1985 the cost per clip or barrel (pb) was down to $12. This accomplished the desired result of starving the previous Soviet Union of gasoline dollars and also killed the industry in the us that acquired flourished over the last decade. The producers at the margins power down and wells were connected and abandoned. Enter the 1990's and America was went for a moderate recession. Right at the end of Come july 1st, 1990 oil was trading at $21 pb. In August 2, 1990 Suddam Hussein's Iraqi Army occupied Kuwait and annexed it as the 19th Iraqi province. Simply by Aug six oil had climbed to $28 pb and by October the price had risen up to $46 pb. Again, America was told of their reliance on imported olive oil. In response, the crumbled sector of older entered a time of expansion that has continuing to this day. The expansion has been challenged by rates that go up and fall during economic cycles, yet improved technology have defeat thinning margins when prices drop. Specifically, advances in seismology, directional drilling, extensible tubes and " fracking” or fracturing rock formations with ruthless water to produce hydrocarbons have got enabled...

Offered: 1 . " A Huge Energy Arbitrage Prospect Has Appeared. " В Business Insider. D. p., summer Apr. 2012. Web. 22 Nov. 2012. http://articles.businessinsider.com/2012-04-06/markets/31297989_1_crude-natural-gas-clean-energy-fuels

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3. " Cheniere Energy, Inc. " Cheniere Energy, Inc. D. p., d. d. Internet. 22 November. 2012. http://www.cheniere.com/default.shtml

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5. " Latest News. " Arcticgas. gov. And. p., in. d. Net. 22 Nov. 2012. http://www.arcticgas.gov/

6. " Natural Gas Arrays Finish 2012 Storage at Record Levels. " Most recent News. N. p., in. d. Internet. 22 Nov. 2012. http://www.cattlenetwork.com/cattle-news/latest/Natural-gas-inventories-finish-2012-storage-at-record-levels--177940761.html?view=all

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10. Hubbard, David R., Stuart Baker, and Evan Callosidad. " Morgan Stanley Blue Paper. " В Morgan Stanley Research. Morgan Stanley & Co. International, 14 Mar. 2011. World wide web. 22 November. 2012.

11. " Liquified Natural Gas: Understanding the Basic Details. " Dept. of Energy Usa, Aug. june 2006. Web. Nov. 2012.

12. " DownstreamToday. com -- News and Information intended for the Downstream Oil and Gas Industry. " DownstreamToday. com - News and Information to get the Downstream Oil and Gas Sector. N. p., n. g. Web. 22 Nov. 2012. http://www.downstreamtoday.com/news/article.aspx?

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14. " Qatargas -- Home. " В Qatargas - Home. N. p., n. d. Net. 22 November. 2012. http://www.qatargas.com/English/Pages/default.aspx

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of sixteen. " Eventually - One Word. " В 2B1stconsulting. In. p., and. d. World wide web. 23 November. 2012. http://www.2b1stconsulting.com/liquefaction/

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