According to Zhitong Finance APP, Tianfeng has released a Research Report stating that the Permian Basin is the second largest Shale Gas block in the USA, with associated gas production reaching 23.3 Bcf/d. However, according to Statistics, the current pipeline capacity capable of transporting Permian natural gas is only 7.54 Bcf/d, which means a significant amount of natural gas may still be trapped within Permian. The gas prices in the Permian region of the USA are at a premium compared to HH prices. Plans to increase the transportation capacity of Permian natural gas are underway, and as the trapped gas from Permian is gradually released, the price at Waha is expected to rise; simultaneously, due to the increase in supply, HH prices may potentially decline, narrowing the price gap between the two.

As of December 6, 2024, the average annual price of HH is $2.32/MMBTU, while the price at Waha (Permian region gas price) is only -$0.37/MMBTU.

Delay in the commissioning of LNG terminals: Future demand is expected to be hampered.

According to the EIA, among the 10 LNG projects expected to be commissioned in the future, 6 have experienced some level of delay. Both Golden Pass and RIO Grande are delayed by more than one year. This delay in the commissioning of LNG terminals is expected to somewhat improve the supply-demand balance.

Supply and demand situation of natural gas in the USA.

According to calculations, USA natural gas will be in a de-stocking scenario by 2025. In 2026, due to the delays in the commissioning of LNG terminals and the expansion of Permian pipelines, natural gas may begin to enter a stockpiling state. Given that USA natural gas has remained in a stockpiling state during 2023-2024, as of December 5, 2024, the EIA's weekly gas report indicates that USA natural gas inventories are at a five-year historical high. The de-stocking in 2025 will not have a significant impact on gas prices, with HH likely to maintain a long-term historical average of $2 to $3/MMBTU.

Investment Suggestions

Satellite Chemical (002648.SZ): Satellite Chemical is different from traditional petrochemicals, as the company's raw material is ethane (linked to HH prices). By the end of 2024, the average annual profits of the naphtha route, ethane cracking, and coal-derived ethylene are expected to be -210 yuan/ton, 2749 yuan/ton, and 1024 yuan/ton respectively.

ENN Natural Gas (600803.SH): The company's Henry Hub Natural Gas business includes direct sales, retail, and wholesale. The direct sales business primarily involves purchasing international natural gas resources. According to the company's Earnings Conference material for Q1 2024, it has signed long-term agreements totaling 10.16 million tons with Total, Chevron, Chenier, etc., securing relatively inexpensive natural gas resources.

Risk Warning

1) The decline in crude oil prices leads to risks of reduced by-product gas production; 2) The construction of LNG terminals is faster than expected; 3) The continued reduction in Shale Gas production results in supply falling below expectations.