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monthly U.S. natural gas trade

Source: U.S. Energy Information Administration, Natural Gas Monthly

U.S. net natural gas exports in February 2019 totaled 4.6 billion cubic feet per day (Bcf/d), marking 13 consecutive months in which U.S. natural gas exports exceeded imports. The United States exports natural gas by pipeline to both Canada and Mexico and increasingly exports liquefied natural gas (LNG) to several other countries.

Although U.S. LNG exports have grown in recent years, most U.S. natural gas exports are sent by pipeline to neighboring Canada and Mexico. Natural gas exports to Canada tend to be seasonal, increasing in the winter months because of Canada’s use of natural gas as a heating fuel in its more populous eastern provinces. In contrast, U.S. natural gas exports to Mexico are steadier, reflecting Mexico’s use of natural gas for over half of its power generation and for industrial purposes.

U.S. exports by pipeline to Canada have risen since November 2018, when the second phase of the Rover pipelineand the NEXUS pipeline entered service. These two projects bring natural gas from the Marcellus and Utica plays in the Appalachian Basin to the Dawn Hub in Ontario, Canada, near the St. Clair border crossing northeast of Detroit, Michigan. U.S. natural gas exports to Canada were 3.3 Bcf/d in February 2019, the highest on record. Overall, exports of natural gas by pipeline to Canada averaged 2.3 Bcf/d in 2018.

U.S. natural gas trade by pipeline by point of entry or exit

Source: U.S. Energy Information Administration, Natural Gas Monthly
Note: Rio Grande / Roma point of exit includes Rio Grande, Roma, McAllen, Rio Bravo, Alamo, Hidalgo, and Penitas.

U.S. pipeline exports of natural gas to Mexico in 2018 averaged 5.2 Bcf/d, up from 4.2 Bcf/d in 2017. Much of the recent growth is attributed to increased U.S. exports out of the Permian Basin in western Texas as new pipelines were installed and as natural gas-fired power plant projects in Mexico entered service. Several existing pipeline expansions in southern Texas were completed during the past 12 months as well, increasing cross-border capacity.

U.S. LNG exports averaged 3.0 Bcf/d in 2018 and recently hit a high of 4.1 Bcf/d in January 2019. The volume of U.S. LNG exports rose steadily during 2018 as three new liquefaction units, called trains, entered service:

  • March: A single train at the Cove Point terminal in Maryland
  • November: Train 5 at the Sabine Pass terminal near the Louisiana-Texas border
  • December: Train 1 at the Corpus Christi terminal in southern Texas

These three trains have a combined capacity of 1.9 Bcf/d, bringing total U.S. LNG export nameplate capacity to 4.3 Bcf/d as of the end of 2018. LNG export volumes are expected to continue to rise in 2019 as an additional 4.0 Bcf/d of liquefaction capacity is brought online by the end of the year.

EIA’s Short-Term Energy Outlook (STEO) forecasts that U.S. net natural gas exports will average 4.7 Bcf/d in 2019 and 7.5 Bcf/d in 2020, with most of the growth attributable to increases in LNG exports. However, pipeline exports of natural gas are also increasing. In three months of 2018 (September through November), the United States exported more natural gas than it imported by pipeline, in part because of the October 9, 2018 explosion on the Westcoast pipeline in British Columbia that led Canada to restrict natural gas imports into Sumas, Washington. According to STEO forecasts, the United States will become a net exporter of natural gas by pipeline on an annual basis in 2019.

monthly U.S. natural gas trade

Source: U.S. Energy Information Administration, Short-Term Energy Outlook, April 2019

natural gas pipelines STEO exports imports LNG
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Royal Dutch Shell Poised To Become Just Shell

On 10 December 2021, if all goes to plan Royal Dutch Shell will become just Shell. The energy supermajor will move its headquarters from The Hague in The Netherlands to London, UK. At least three-quarters of the company’s shareholders must vote in favour of the change at the upcoming general meeting, which has been sold by Shell as a means of simplifying its corporate structure and better return value to shareholders, as well as be ‘better positioned to seize opportunities and play a leading role in the energy transition’. In doing so, it will no longer meet Dutch conditions for ‘royal’ designation, dropping a moniker that has defined the company through decades of evolution since 1907.

But why this and why now?

There is a complex web of reasons why, some internal and some external but the ultimate reason boils down to improving growth sustainability. Royal Dutch Shell was born through the merger of Shell Transport and Trading Company (based in the UK) and Royal Dutch (based in The Netherlands) in 1907, with both companies engaging in exploration activities ranging from seashells to crude oil. Unified across international borders, Royal Dutch Shell emerged as Europe’s answer to John D Rockefeller’s Standard Oil empire, as the race to exploit oil (and later natural gas) reserves spilled out over the world. Along the way, Royal Dutch Shell chalked up a number of achievements including establishing the iconic Brent field in the North Sea to striking the first commercial oil in Nigeria. Unlike Standard Oil which was dissolved into 34 smaller companies in 1911, Royal Dutch Shell remained intact, operating as two entities until 2005, when they were finally combined in a dual-nationality structure: incorporated in the UK, but residing in the Netherlands. This managed to satisfy the national claims both countries make on the supermajor, second only to ExxonMobil in revenue and profits but proved to be costly to maintain. In 2020, fellow Anglo-Dutch conglomerate Unilever also ditched its dual structure, opting to be based fully out of the City of London. In that sense, Shell is following the direction of the wind, as forces in its (soon to be former) home country turn sour.

There is a specific grievance that Royal Dutch Shell has with the Dutch government, the 15% dividend tax collected for Dutch-domiciled companies. It is the reason why Unilever abandoned Rotterdam and is now the reason why Shell is abandoning The Hague. And this point is particularly existentialist for Shell, since its share prices has been battered in recent years following the industry downturn since 2015, the global pandemic and being in the crosshairs of climate change activists as an emblem of why the world’s average temperatures are going haywire. The latter has already caused the largest Dutch state pension fund ABP to stop investing in fossil fuels, thereby divesting itself of Royal Dutch Shell. This was largely a symbolic move, but as religious figures will know, symbols themselves carry much power. To combat this, Shell has done two things. First, it has positioned itself to be at the forefront of energy transition, announcing ambitious emissions reductions plans in line with its European counterparts to become carbon neutral by 2050. Second, it is looking to bump up its dividend payouts after slashing them through the depths of the Covid-19 pandemic and accelerating share buybacks to remain the bluest of blue-chip stocks. But then, earlier this year, a Dutch court ruled that Shell’s emissions targets were ‘not ambitious enough’, ordering a stricter aim within a tighter timeframe. And the 15% dividend tax remains – even though Prime Minister Mark Rutte’s coalition government has been attempting to scrap it, with (it is presumed) some lobbying from Royal Dutch Shell and Unilever.

As simplistic it is to think that Shell is leaving for London believes the citizens of the Netherlands has turned its back on the company, the ultimate reason was the dividend tax. Reportedly, CEO Ben van Buerden called up Mark Rutte on Sunday informing him of the planned move. Rutte’s reaction, it is said was of dismay. And he embarked on a last-ditch effort to persuade Royal Dutch Shell to change its mind, by immediately lobbying his government’s coalition partners to back an abolition of the dividend tax. The reaction was perhaps not what he expected, with left-wing and green parties calling Shell’s threat ‘blackmail’. With democracy drawing a line, Shell decided to walk; or at least present an exit plan endorsed by its Board to be voted by shareholders. Many in the Netherlands see Shell’s exit and the loss of the moniker Royal Dutch – as a blow to national pride, especially since the country has been basking in the glow of expanded reputation as a result of post-Brexit migration of financial activities to Amsterdam from London. The UK, on the other hand, sees Shell’s decision and Unilever’s – as an endorsement of the country’s post-Brexit potential.

The move, if passed and in its initial stages, will be mainly structural, transferring the tax residence of Shell to London. Just ten top executives including van Buerden and CFO Jessica Uhl will be making the move to London. Three major arms – Projects and Technology, Global Upstream and Integrated Gas and Renewable Energies – will remain in The Hague. As will Shell’s massive physical reach on Dutch soil: the huge integrated refinery in Pernis, the biofuels hub in Rotterdam, the country’s first offshore wind farm and the mammoth Porthos carbon capture project that will funnel emissions from Rotterdam to be stored in empty North Sea gas fields. And Shell’s troubles with activists will still continue. British climate change activists are as, if not more aggressive as their Dutch counterpart, this being the country where Extinction Rebellion was born. Perhaps more of a threat is activist investor Third Point, which recently acquired a chunk of Shell shares and has been advocating splitting the company into two – a legacy business for fossil fuels and a futures-focused business for renewables.

So Shell’s business remains, even though its address has changed. In the grand scheme of things, never mind the small matter of Dutch national pride – Royal Dutch Shell’s roadmap to remain an investment icon and a major driver of energy transition will continue in its current form. This is a quibble about money or rather, tax – that will have little to no impact on Shell’s operations or on its ambitions. Royal Dutch Shell is poised to become just Shell. Different name and a different house, but the same contents. Unless, of course, Queen Elizabeth II decides to provide royal assent, in which case, Shell might one day become Royal British Shell.

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