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Opinion

By CS LNG, Oct 1 2018 07:40AM

1. SHELL’S $31 BILLION LNG CANADA PROJECT MOVES AHEAD WITH CHINA APPROVAL

Royal Dutch Shell Plc’s Chinese partner in a liquefied natural gas venture in western Canada approved its share of the investment, pushing the C$40 billion ($31 billion) development one step closer to a final approval. The board of PetroChina Co., the nation’s largest oil and gas company, approved its $3.46 billion share of the LNG Canada project, the company said in a filing to the Hong Kong stock exchange Friday. The Beijing-based company holds 15 percent of the development. All the partners, including Malaysia’s Petroliam Nasional Bhd, Japan’s Mitsubishi Corp. and Korea Gas Corp., need to make similar moves for the venture to approve a final investment decision. Shell didn’t immediately respond to requests for comment. "PetroChina’s board approving their portion of funding for the project is a clear sign that the project is sprinting toward FID now," Bloomberg NEF analyst Fauziah Marzuki said by email. LNG Canada would be Canada’s largest-ever infrastructure project. With the capacity to eventually export as much as 26mtpa, primarily to Asia, it would also be the biggest new LNG terminal to be sanctioned in years. The decision may be the start of a wave of investments for major gas export projects after a supply glut and a price collapse forced the three-year hiatus. Booming demand growth means that 11 projects, including LNG Canada, are likely to receive final investment decisions by the end of 2019, according to BNEF. Shell and its partners are set to announce an FID on the project as soon as next week, Bloomberg News reported Wednesday. Preparations for an October 5 announcement followed by an LNG Canada event at a local golf club the next day are underway in Kitimat, British Columbia, the site of the proposed project, said people with direct knowledge of the activities, who asked not to be identified. [Source: Bloomberg 28/09/2018]


CS LNG comment: If this FID goes ahead it will be THE killer blow to US Gulf ambitions of capturing Asian market. If we look at the shareholders we can see where the market is and how the discount works: equity always wins!

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2. ARGENTINA AIMS TO START CONSTRUCTION OF FIRST LNG EXPORT TERMINAL IN 2019

Argentina's government wants construction of the country's first LNG liquefaction terminal to start in the second half of 2019, making it possible to export an increasing surplus of production from the giant Vaca Muerta shale play, an official said Thursday. "We are confident that the decision to push the button on this project will come after the next presidential election in October 2019," Daniel Dreizzen, the country's secretary of energy planning, said at a Moody's finance seminar in Buenos Aires. He said companies have brought forward proposals for building the terminal, which will be evaluated. Earlier this month, the country's biggest gas transporter, Transportadora de Gas del Sur (TGS), and Texas-based Excelerate Energy, which operates two floating LNG import terminals in Argentina, agreed to study the possibility of a liquefaction project in Buenos Aires province. They said they would present the proposal to the government by the end of this year for evaluation. But if no company is ready to advance by next year, Dreizzen said the government will hold an auction to find a builder and operator of the project. The terminal will have six trains for exporting supplies and should start operations by 2023, with the capacity to ship an initial 40 million cu m/d from Vaca Muerta, Dreizzen told S&P Global Platts on the sidelines of the event. The likely spot for the terminal will be in Bahia Blanca, a deep-water port in southern Buenos Aires province, where it will be fed with gas from Vaca Muerta in the southwestern Neuquen Basin, he added. The gas for export will be delivered over a dedicated pipeline under a contract that guarantees it can't be redirected to meet domestic demand, providing more confidence about the supply stability for the project's investors, Dreizzen said. [Source: Platts 28/09/2018]


CS LNG comment: Has this guy spent too much time in Columbia with over exposure to local ‘talcum powder’? They can’t even pay for the import cargoes on time let alone afford to invest in liquefaction: or is he thinking if they produce LNG they won’t have to import the product!

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3. QATAR'S LNG PLANS GET EVEN BIGGER AS U.S. TRADE WAR OPENS NEW OPPORTUNITY

Qatar Petroleum is primed to boost its natural gas output by adding a fourth liquefied natural gas (LNG) production line to raise capacity from the North Field, as it aims to steal another march on its competitors, particularly emerging U.S. exporters. U.S. LNG is one of Qatar’s major competitors for new supply development. But U.S. President Donald Trump is engaged in a tariff war with China, the world’s largest growth market for LNG. “Qatar could see this as an opportunity. It has recently signed a contract doubling the volumes that it will sell to PetroChina and is likely to be looking at further opportunities to supply the Chinese market,” said Giles Farrer, an expert in global gas and LNG supply at consultancy Wood Mackenzie. The world’s top supplier of the super-cooled gas said on 26 September that output from the field, which is shared with Iran, will rise from 77 million to 110 million tonnes of LNG per year. Qatar is well-placed to compete with any other LNG supplier because it has very low LNG production costs due to the co-production of valuable natural gas liquids from the North Field. “Based on the good results obtained through recent additional appraisal and testing, we have decided to add a fourth LNG mega train,” said Qatar Petroleum’s chief executive, Saad Sherida al-Kaabi, in a statement. Last year, Qatar announced it was planning to develop additional gas from the North Field and build three new LNG mega-trains. Qatar could probably add an additional train without significant additions to capital investment, said Farrer. Wood Mackenzie estimates capital expenditure for the three mega-trains previously announced was around $24 billion, covering both the upstream and liquefaction parts of the project. With worldwide activity in the oil and gas industry still low, now is a good time in the cost cycle to invest in a new project, added Farrer. “There are likely to be economies of scale from developing a bigger project, particularly in light of the promising appraisal results at the North Field…these economies of scale will make what is already the most competitive new LNG project worldwide even cheaper.” “Since Qatar announced its initial plan, the market environment has improved. Forecasts of future oil prices are higher, and forecasts of future LNG demand have grown stronger, particularly in Europe and China. Having already taken the decision to compete for LNG market share, Qatar is doubling down, making sure that it will be fully able to benefit from LNG market upside,” he added.

[Source: Forbes 26/09/2018]


CS LNG comment: Now this is a real story and one that supports our belief that US Gulf exports are not economically viable for Asian trade. Qatar will use US exports to hit Europe leaving Qatar exports to reach Asia.

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By CS LNG, Sep 11 2018 11:51AM

1. TOTAL SELLS EQUITY IN HAZIRA TERMINAL, SIGNS LNG AGREEMENT WITH SHELL

Total has signed a binding Letter of Intent (LOI) with Shell for the sale of its 26 per cent minority equity stake in Hazira LNG regasification terminal in India. The transaction remains subject to the approval of regulatory authorities. In a statement sent to Vanguard, Total stated, “In parallel, Total has signed an agreement to sell 0.5 million tons of liquefied natural gas (LNG) per year to Shell over 5 years, on a delivery basis to supply the markets of India and neighboring countries. “The deliveries will be sourced from Total’s global LNG portfolio and are expected to begin in 2019. “This deal enables Total to capture value through an asset disposal, while the LNG sales contract allows us to maintain the balance of our LNG portfolio,” said Philippe Sauquet, President Gas, Renewables and Power. “We remain committed to supply the Indian subcontinent, which is a key market experiencing strong growth in LNG demand.” [Source: Vanguard 28/08/2018]


CS LNG comment: Does this mean that Total is wary of Indian taxation or has no confidence in the country. And as for selling to Shell given Shell’s vast portfolio must mean that Shell is getting a good deal! Or could it be that Total is thinking that Yemen LNG could restart one day, which would make their Indian deliveries very profitable.

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2. WOODMAC WARNS LNG SHIPOWNERS OF OVER-ORDER RISK

This year has seen the number of orders for LNG vessels jump to 33, more than the past two years combined with higher spot/short-term charter rates prompting action from shipowners. In addition to the rates, newbuilding prices are remaining low, and the LNG trade is picking up, with Asia absorbing new volumes easier than expected, natural resources consultancy WoodMackenzie notes. A new wave of FIDs on new supply projects is expected to create even more demand for shipping. But owners need to be careful they don’t over order. There is still a huge number of ships ordered in the 2011-2014 LNG newbuilding boom to be delivered to the fleet and there is a long history of new ships arriving before new supply, WoodMac said. New projects coming on stream up to 2020, and the expected production rise by over 150 mmtpa is beneficial to LNG shipping as the majority of new volumes is coming from the US Gulf. Due to its position, moving 1 mmtpa of LNG from the US Gulf to Japan requires 1.9 ships compared to 0.7 ships to move the same volume from an Australian project, the consultancy said. China has so far absorbed the new volumes with its imports rising 50 percent during the course of the current year, following a 46 percent rise in 2017. However, China is moving towards seasonal demand pattern as new import facilities open up in the country’s north and more chilled gas will be needed during the winter months. WoodMackenzie adds that new final investment decisions will be made between this year and 2021, bringing some 114 mmtpa of new LNG to the market from 2023 onwards. Most of the pre-FID projects are unlikely to be available to ship before 2025. Between the current wave of new LNG supply and the anticipated pre-FID wave, there will be a period of low LNG supply growth. Ships being ordered now will deliver just in time for the start of the period of low supply growth, WoodMac said. However, looking at the newbuilding prices, that are considered lower than ever, shipowners are tempted to order sooner, especially as the LNG ship construction prices are expected to follow the shipping industry’s trend of growing costs. Vessel design and technology advances have seen the typical new order LNG ship become larger and more efficient, making ships ordered even three or four years ago outdated. So far this year 36 new vessels have been added to the fleet and three have been scrapped. A further 22 are scheduled for delivery before the end of the year – if these vessels are delivered on time and no further vessels are removed from the fleet, capacity will grow by 13 percent in 2018. The 37 vessels currently scheduled for delivery in 2019 will grow the fleet another 7.6 percent. “LNG trade is growing strongly but our forecast of an 8.2 percent expansion in 2018 lags behind fleet capacity growth. More long-haul imports from the USA to Asia should see tonne-mile demand grow at a faster rate, leaving a delicate balance between supply and demand for LNG ships. But forecast trade growth of 13.7 percent in 2019 should tip the balance in favour of ship owners,” WoodMac’s analysis shows. However, looking at the wider picture, the consultancy warns that continuation of the current ordering activity could result in too much shipping capacity too soon, especially with the size of under-used and laid-up older shipping capacity that could be more fully employed. [Source: WoodMackenzie 21/08/2018]


CS LNG comment: For once we tend to agree with WoodMac (or did they steal one of earlier comments) and it is clear they don’t hold shares in one of the big London brokerage houses who seem to have been encouraging owners to order ships. However, WoodMac have failed to mention that a lot of those projects coming on stream already have their ships ordered: to exasperate the market further there are 16 ships due out this year for US projects which are delayed (namely Cameron and Freeport).

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3. DYNAGAS LNG PARTNERS ANNOUNCES EARLY DELIVERY OF YENISEI RIVER AND EXTENSION OF YAMAL LNG LONG TERM CHARTER

Dynagas LNG Partners LP (the “Partnership”) (NYSE: “DLNG”), an owner and operator of LNG carriers, on August 27 announced that it has entered into an agreement with Yamal Trade Pte. Ltd. for the early commencement of the long-term charter contract for employment of the ice class liquefied natural gas (LNG) carrier Yenisei River in the Yamal LNG Project. Pursuant to this agreement, the Yenisei River will commence operating 180 days earlier and as a result, the firm charter period has been extended from 15 years to 15 years plus 180 days. The Yenisei River was delivered early to Yamal LNG on August 14, 2018, immediately upon completion of its mandatory statutory class five-year special survey and dry-docking in Singapore. Tony Lauritzen, Chief Executive Officer of the Partnership commented: “We are very pleased with the extension of the firm charter period of the Yenisei River and its early delivery to Yamal LNG. We have been focused on securing long term employment and filling short and medium-term availability gaps in our fleet. “Now that Yenisei River has commenced employment with Yamal LNG early and the Lena River has been contracted for employment by a major energy company, following its redelivery from Gazprom and prior to commencing its long term charter with Yamal LNG, our first potential vessel available for employment will be the Arctic Aurora in 2021. Thereafter, our next vessel available for employment is the Clean Energy in 2026. “We believe the Yamal LNG Project is running ahead of schedule and we are pleased we could accommodate Yamal LNG’s shipping needs with the early delivery of the Yenisei River. In addition, one of our Sponsor’s vessels (which we do not own and do not generate any revenues from) was also delivered to Yamal LNG six months earlier than its earliest contracted delivery date.” [Source: Port News 28/08/2018]


CS LNG comment: Good news for Dynagas which should see their stock value rise as they have no exposure to the spot market and settle for steady returns and full occupancy for their vessels. It also demonstrates why speculative owners should opt for the best possible specification and not the cheapest offered by the yards as it often pays off. Dynagas ordered Ice Class 1A and is just what Yamal needs!

By CS LNG, Aug 23 2018 09:29AM

1. GASLOG LTD. ANNOUNCES TWO NEW LONG-TERM CHARTERS WITH CHENIERE AND PLACES NEWBUILDING ORDERS AT SAMSUNG HI

GasLog Ltd. is pleased to announce the signing of two new charter party agreements, each for a firm period of seven years, with a wholly owned subsidiary of Cheniere Energy, Inc. To fulfil the Charters, two 174,000 cubic meter LNG carriers (HN 2300 and HN 2301) with low pressure two stroke (“LP-2S”) propulsion have been ordered from Samsung Heavy Industries in South Korea, with expected delivery in late 2020. The rate of hire for the Charters is broadly in line with mid-cycle rates and delivers returns in line with GasLog’s financial strategy. In addition to the Charters, GasLog has agreed with Cheniere an option for the charter of one or two additional newbuild vessels. GasLog Partners LP has the right to acquire the vessels delivered into the Charters pursuant to the omnibus agreement between GasLog and GasLog Partners. As a result, GasLog Partners’ potential dropdown pipeline will increase to 11 LNG carriers with charter length of five years or longer. Paul Wogan, Chief Executive Officer of GasLog, stated, “I am delighted to announce a significant expansion of our relationship with Cheniere, a high-quality counterparty and a leader in developing the US LNG export industry. Cheniere’s decision to partner with GasLog is a vote of confidence in our ability to deliver a differentiated service to our customers, founded upon our core principles of operational excellence and an uncompromising approach to safety. We continue to expand our fleet with highly competitive vessels backed by long term contracts, while simultaneously diversifying our customer base. We anticipate further incremental shipping capacity will be needed to supply forecast LNG demand growth, and remain confident in our ability to increase our market share at attractive returns.”

[Source: Oil&Gas 360 20/08/2018]


CS LNG comment: We wonder if GasLog have a patent or copyright on the expression “broadly in line with mid-cycle rates”: just how vague can this be? and given current fixtures are around $50000 capex no-one is getting rich quick here. But of more significance is the concern that looms for their older steam ships and early DFDE which will struggle to find profitable employment when they are redelivered from Shell.

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2. LITHUANIA TO PURCHASE LNG TERMINAL'S SHIP

Lithuania will purchase the Klaipeda LNG terminal's floating storage and regasification unit (FSRU), named Independence, from Norway's Hoegh LNG after 2024, informs LETA/BNS referring to the government's Economic Infrastructure Development Commission. Long-term borrowing from banks by Klaipedos Nafta, the LNG terminal's operator, will help reduce the terminal's costs for users, particularly the fertilizer manufacturer Achema, the energy producer Lietuvos Energijos Gamyba (LEG) and other large energy producers. In the commission's opinion, this is the most economically advantageous and strategically sustainable option for Lithuania, the government said. "Given Lithuania's need for securing long-term LNG supply in the future, both for its energy security and competitive prices, we chose the option that provides the greatest economic effect and is strategically the most sustainable in the long term," Energy Minister Zygimantas Vaiciunas said. "Lithuania will retain access to international LNG markets, while at the same time having the greatest flexibility and the ability to swiftly respond to the changing market situation in the future," he said. A long-term lease of the FSRU was the other option considered by the commission. It is proposed to spread the terminal's costs for users over a longer period of time, which will help reduce these costs by at least €23m – from €66m to €43m – annually starting in 2019, the government said. Estimates of the FSRU purchase price range between €121m and €160m, but the exact price set in the contract with the Norwegian company is confidential. [Source: The Baltic Course 20/08/2018]


CS LNG comment: Not sure where these estimates come from, but we believe some clarity maybe sought from the Hoegh website where from our memory that purchase price was effectively the NPV of the remaining charter period with a slight discount. And then who is going to operate it? But we believe the best way to reduce the costs would be to actually use the FSRU to somewhere near capacity!

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3. PANAMA AND US SIGN AGREEMENT TO BROADEN REGIONAL ACCESS TO LNG

Panama has signed an agreement with the US Treasury and Energy departments that aims to encourage more private investment to expand the importation and distribution of US LNG in Latin America, as reported by Reuters. On a visit to Panama last week David Malpass, Treasury Undersecretary for International Affairs, said he hoped the “framework agreement” is the first of several with countries in the region to encourage investment to increase access to cheaper, cleaner energy. The agreement is part of a Treasury-led initiative called America Crece, incorporating the Spanish word for growth, aimed at boosting US LNG exports, developing Latin American energy resources and downstream demand. Malpass also visited Panama for the signing and the inauguration of a major new LNG terminal and 381 MW gas-fired power plant in Colon, Panama, run by US power company AES Corp. He said in an interview that new investments encouraged by the agreement will help turn the AES Colon project into an LNG distribution hub, with cargoes imported from the US sent to countries such as Guatemala, Honduras and Nicaragua. These countries and many Caribbean islands now rely largely on oil to generate electricity, with Venezuela a major supplier. The US$1.15 billion AES facility on Panama’s Caribbean coast – which is expected to begin commercial generating operations on 1 September, and LNG tank distribution operations in 2019 – took in its first US LNG cargo in June. The Panama agreement allows for the US agencies to help address regulatory and other barriers to investment, Malpass said, which can create opportunities for downstream demand and distribution. “The framework agreement itself squarely addresses the obstacles that the private sector may be finding in that country,” Malpass said. In the case of Panama, he added, the framework agreement with the US is a signal from Panama to the world that it welcomes investment, in particular private sector funding of projects. The agreement also aims to encourage increased electrical grid access in rural areas of Panama and Central America and adoption of new technologies such as battery storage to improve reliability and foster economic development, he said. [Source: LNG Industry 20/08/2018]


CS LNG comment: Well this will only happen if Panama pays the current Asian pricing! Maybe they will regret offering LNG discounts on the Panama Canal transits!