Monday, February 6, 2017

A Perfect Storm for Natural Gas Prices. Nick Escu Guest Post

Recreated Rembrandt: Christ in the Storm
Art by Ankur Patar: Original was stolen

The  Three Storms 

The movie  The Perfect Storm was about two monstrous storms which come together, out in the ocean, and destroy a very solid fishing vessel.

Today, three storms have come together as a Perfect Storm for nuclear energy.

The Westinghouse Storm.

Toshiba’s $4 billion dollar purchase of Westinghouse, in 2006, was hit with
  • the March, 2011 tsumani in Japan.  
  • the  2012/2013 Toshiba accounting problems, and 
  • the merger of Westinghouse with CB&I, while building 4 new AP1000s in the US and 4 new AP1000s in China.  
This perfect storm is forcing Toshiba to possibly auction off Westinghouse.

The Areva Storm

AREVA's headaches as the step child of EDF were initially looked at as a “Begging Session.” Areva wanted to keep operating under French direction. However, French leadership wants to reduce nuclear power by 50%. This is very strange since almost 80% of all France’s power comes from nuclear energy.

But unquestionably, AREVA Nuclear Fuel is now being used by more and more operating companies.  So the stepchild is doing better than expected.

The Henry Hub Storm

Finally, the Henry Hub natural gas price in February, 2016, went from $1.71/MMBTU to $3.44/MMBTU yesterday. That is just over 100% increase in 11 months. But why? Because the Cheniere Liquid Natural Gas plant came on line and exported the first LNG ship overseas. But Cheniere is only the first of the 17 Approved LNG Permits. The others will be coming online this year, next year, and thru 2020.

The world prices at $20/MMBTU clearly show the profits to be made. So what does this have to do with nuclear energy? When nat gas reaches $4.75/MMBTU, nuclear power becomes standalone profitable. AND when nat gas reaches $6.10/MMBTU, even coal power becomes profitable.

My two previous posts on the subject were:
Nuclear vs Gas Economics, a Three Year Projection
Nuclear vs Gas Economics Part 2

After the Storm?

So here we are. With the ability to buy or merge Westinghouse and AREVA, at rock bottom merger prices, while the world hasn’t woken up yet to the natural gas prices climbing to new heights.

But the opposite is also possible.

Westinghouse could be broken up into saleable divisions. Same for AREVA, and then only GE would have their ESBWR or their ABWR to sell throughout the world.

For American nuclear exports, many 123 Agreements are in place, but the  Ex-Im Bank also needs to be funded for foreign sales to increase.

This year will decide the fate of many companies, as well as determining whether existing US plants have a lifeline.

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Nick Escu is the pen name of a person with long experience in the power industry.  He is a frequent guest blogger at this blog.

1 comment:

Alex Cannara said...

This may be of no concern, as China, India, Russia... work to dominate world nuclear power...
China's upper hand (thx JimK)...
http://www.foxnews.com/opinion/2017/02/03/chinas-secret-trump-card-could-beijing-deprive-our-military-critical-defense-components.html
China, China,chjina (thx MikeC)...
https://www.bloomberg.com/news/articles/2017-01-31/china-s-nuclear-power-fleet-seen-overtaking-u-s-within-decade