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Opinion

By CS LNG, Mar 18 2019 10:54AM

1. TRADE WAR CUTS U.S. LNG EXPORTS TO CHINA

Only one LNG vessel that left the United States in 2019 went to China, Reuters shipping data show, as the eight-month trade war between the two nations starts to cool. The governments of the world’s two largest economies have been locked in a tariff battle as Washington presses Beijing to address longstanding concerns over Chinese practices around technology transfers, market access and intellectual property rights. The countries are working to achieve a trade deal that matches their interests, including eliminating tit-for-tat tariffs. The only vessel to head to China from the United States this year was the Adam LNG, which left Cheniere Energy Inc’s Sabine Pass export terminal in Louisiana on Jan. 30, according to the shipping data. The data shows a handful of LNG vessels from the United States in the Pacific Ocean, some of which could end up in China. In 2018, 27 LNG vessels went from the United States to China, down from 30 in 2017. Most of those, however, left U.S. ports before the trade war started in mid-2018, with 18 tankers going to China in the first half of the year and just nine during the second half. The United States and China started imposing tariffs on each other’s goods in July. As the dispute heated up, China added LNG to its list of proposed tariffs in August and imposed a 10-percent tariff on LNG in September. The United States is the world’s fastest-growing exporter of LNG, while China is the fastest-growing importer of the fuel as the government weans the country off coal to reduce pollution. In 2017, China imported about $447 million, or about 15 percent, of the LNG shipped from the United States, making it the third biggest buyer of the U.S. fuel. Prior to the slowdown, China was on track to import 141.6 billion cubic feet (bcf) of U.S. LNG in 2018, up from 103.4 bcf in 2017 and 17.2 bcf in 2016. It imported no U.S. LNG in 2015.

[Source: Reuters 13/03/2019]


CS LNG comment: As a fact fewer US cargoes have gone to China but could pricing have something to do with it? And perhaps the SE Asia and ME producers can land the LNG more competitively?

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2. QATAR PETROLEUM BUYS STAKE IN MOZAMBIQUE EXPLORATION BLOCK FROM OPERATOR ENI OF ITALY

Italian Energy company Eni has sold a stake to Qatar Petroleum in an exploratory block offshore Mozambique, where several LNG projects are being developed from other blocks in the Rovuma Basin. Qatar Petroleum has acquired a 25.5 percent participating interest in Block A5-A located in the deep waters of the Northern Zambezi Basin, about 1,500 kilometres northeast of the capital Maputo. Eni was awarded the block in the fifth competitive Licensing Round launched by the government of Mozambique and an exploration and production concession contract was signed in October 2018. It extends over an area of 5,133 square kilometres in a water depth between 300 metres and 1,800 metres, in a completely unexplored zone in front of the town of Angoche. Eni is the operator of the Block A5-A consortium with a 59.5 shareholding, which would be reduced to 34 percent after the farm out is approved. Other partners are South Africa’s Sasol with 25.5 percent and the state energy company of Mozambique ENH with 15 percent. “The transaction represents another milestone in the strategic path that Eni and QP undertook to further strengthen their partnership worldwide,” said Eni Chief Executive Claudio Descalzi. Eni has been present in Mozambique since 2006 when it acquired the Area 4 licence in the offshore Rovuma basin where total gas in place is estimated to be more than 85 trillion cubic feet after discoveries in the Coral, Mamba and Agulha fields. The Coral field is subject to a floating LNG development with production capacity of 3.4mtpa. Construction of the Coral FLNG joint venture began in June 2017 the start-up is scheduled for 2022. The development programme also includes the construction of an onshore plant composed by two liquefaction Trains for gas treatment and liquefaction capacity of 15.2mtpa in the first phase of the Rovuma LNG project. The onshore joint venture is expected to be sanctioned in 2019 and production is being targeted for 2024. Eni and Qatar Petroleum are already partners in upstream developments in Oman and Mexico.

[Source: LNG Journal 12/03/2019]


CS LNG comment: So, just how cosy is Eni getting to Qatar? Maybe we will see them feature in the new Qatari expansion (at the expense of Exxon?)!

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3. COSCO DALIAN SHIPYARD TERMINATES DALIAN INTEH LNG CARRIER

Cosco Shipping Heavy Industry’s Dalian shipyard has terminated a newbuilding contract with Dalian Inteh Group for a 28,000 cu m LNG carrier due to payment delays. Dalian Inteh Group, a chemical logistics company, signed a RMB560m ($83.4m) EPC contract with Shanghai Bestway Marine & Energy Technology in 2013 for the design and construction of the vessel, and Shanghai Bestway awarded the construction contract to Cosco Dalian. The contract was the first and only LNG carrier order secured by Cosco Dalian. According to Shanghai Bestway, the owner failed to make further payments following an initial payment of 10% of the EPC contract, while Shanghai Bestway has already paid 40% of the construction contract to Cosco Dalian. Last year, Shanghai Bestway reported the risk of not being unable to receive payment from Dalian Inteh due to the owner’s financial issues. Shanghai Bestway said the company will do its best to coordinate with Dalian Inteh and Cosco Dalian to continue the project, however, it will also reserve the right to take legal actions against Dalian Inteh. The construction of the LNG carrier is near completion and the ship will be ready for delivery soon. Shanghai Bestway is now in deep financial trouble with lawsuits against the company stacking up. The company’s controlling shareholder Liu Nan failed in three separate deals to dispose of his shares in the company.

[Source: Splash 24/7 12/03/2019]


CS LNG comment: Clearly someone had bigger ambitions than a wallet!

By CS LNG, Mar 18 2019 10:50AM

1. RUSSIA BECOMES BIGGEST LNG SUPPLIER TO EUROPE IN FEBRUARY FOR FIRST TIME WITH LOWEST PRICES

Russia delivered a record amount of liquefied natural gas to Europe in February from the Yamal export plant in the Arctic region and became the biggest monthly supplier to the continent for the first time, overtaking Qatar, Nigeria and Algeria. According to shipping data a total of 19 cargoes, or 1.41 million tonnes, were delivered to European regasification terminals during the past month. They were unloaded at terminals such as Zeebrugge in Belgium, the Gate terminal in Rotterdam in the Netherlands, the Isle of Grain facility in the UK and the Montoir-de-Bretagne plant on the Atlantic coast of France. The next Russian cargo from Yamal is scheduled to be unloaded at Rotterdam on March 5 from the 172,000 cubic metres capacity carrier “Boris Vilkitsky”. The February Russian shipments were the largest monthly amount of LNG from Yamal to arrive in Europe since the first cargo departed from the plant in December 2017 in the presence of President Vladimir Putin. Russia’s deliveries to Europe were used by European customers instead of being trans-shipped to Asia as the additional cost of shipping would have made such trades uneconomic. No Yamal shipments were trans-shipped to Asia in February, though they had been for the previous eight months. In February, shipments from the US to Europe dropped to nine cargoes, or 0.64MT, the lowest level since November 2018. Qatar delivered 18 cargoes to Europe in February, or 1.33MT, Nigeria unloaded 16 shipments and Algeria 18 cargoes, mostly from Medmax vessels with 75,000 cubic metres capacity.

[Source: LNG Journal 01/03/2019]


CS LNG comment: This would tend to suggest that the EU policy of trying to move away from Russian pipeline gas could be a wasted political move unless it was a policy focused against Gazprom

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2. SHELL, PETROCHINA JV ARROW WINS LEASES FOR BIG AUSTRALIAN GAS PROJECT

Royal Dutch Shell and PetroChina joint venture Arrow Energy on Thursday was granted leases for a A$10 billion ($7.2 billion) project to develop Australia’s biggest coal seam gas resource. The Queensland government said it had granted 14 leases to Arrow Energy for the Surat project, which holds 5 trillion cubic feet (140 billion cubic meters) of gas. Arrow agreed in December 2017 to a 27-year deal to sell output from Surat to the Queensland Curtis LNG (QCLNG) project run by Shell. As part of the deal, Arrow will be using QCLNG’s gas processing and pipeline infrastructure, helping to cut project costs and allowing Arrow to sell its gas both for export and into the domestic market. “This approach has two major benefits: it will get gas to the market faster and it significantly reduces the project footprint and the potential impact on local communities and the environment,” Queensland state Mines Minister Anthony Lynham said in a statement. Queensland and the federal government are eager to see the Surat project start up as Australia’s southeastern states face a looming gas shortage by the mid-2020s. While state Premier Annastacia Palaszczuk said the project is expected to start producing in 2020, Shell and PetroChina have yet to give the go-ahead for development amid a spat over gas sales pricing and technical issues. “The approval of these petroleum leases is a critical milestone in Arrow delivering 5 trillion cubic feet of gas into the market,” Arrow CEO Mingyang Qian said in a joint statement with the state government.

[Source: Reuters 28/02/2019]


CS LNG comment: The Gladstone projects desperately need sustainable feedgas but will domestic gas get the lion’s share of the supply?

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3. CROATIAN LNG CONTRACTOR AGREES IN PRINCIPLE TO FSRU CONVERSION

Golar has entered agreements with Croatia’s LNG Hrvatska to convert the 2005-built Golar Viking vessel into a floating storage and regasification unit. Under the proposals Golar would sell the converted FSRU and then operate and maintain it for a minimum of 10 years. Go-ahead for the project remains subject to confirmation of project funding and receipt of a notice to proceed from LNG Hrvatska.

[Source: Offshore Magazine 28/02/2019]


CS LNG comment: If LNG Hrvatska pays a dollar more than $55m for this vessel any EU subsidy should be withdrawn but no doubt the contract figure will be nearer $110m!


By CS LNG, Feb 25 2019 09:19AM

1. INDIAN LNG IMPORTS DECLINE AMID RISING COSTS AS FIRST EAST COAST FACILITY SET FOR COMMISSIONING

Indian liquefied natural gas imports fell last month by 11.6 percent with cargoes arriving at a slower pace from the main suppliers in Qatar and West Africa as the nation prepared to start commissioning the first import terminal on the East Coast. The shipments to India’s three main import terminals at Dahej, Hazira and Dabhol near the West Coast port of Mumbai in January fell to 1.57 million tonnes (2.13 billion cubic metres) compared with 1.78MT (2.41 Bcm) in January 2018. Indian Oil Corp., the refining and fuel marketing company, is set to begin commissioning India’s first import terminal on the East Coast near the city of Chennai. State-owned Indian Oil has purchased an LNG cargo that is scheduled to arrive around February 26, possibly from Equatorial Guinea, a regular supplier to India. The new terminal is located at Kamarajar Port in the southeast state of Tamil Nadu and is one of several being planned on the East Coast to redress the gas supply balance. India’s cumulative April-January imports for the current 10 months of the fiscal year to date were up by 5.6 percent year-on-year at 16.90MT compared with 16.01MT in the previous fiscal year, according to the figures from the Indian Ministry of Petroleum and Natural Gas. The monthly costs of the shipments in January were around $800 million, little changed from the same month a year ago. However, the costs of the cargoes for the 10 months from April 2018 to January 2019 were projected to be around $8.3 billion compared with $6.1Bln in the previous fiscal year to date. Domestic natural gas production increased by 5.4 percent to 2.84 Bcm in January 2019 compared with 2.69 Bcm in the same month a year ago. Gas output for the 10 months to January was up 0.4 percent to 27.49 Bcm versus 27.38 Bcm in the 10 months of the previous fiscal year. The new Indian import facility at the East Coast port of Kamarajar, formerly one of India’s main coal ports and previously called Ennore, will have annual capacity of 5 million tonnes per annum once commercial operations begin. Kamarajar is located about 25 kilometres north of Chennai Port and initially the imports will supply natural gas to industry in the Manali area, including Madras Fertilizers Ltd., Chennai Petroleum Corp. and Tamil Nadu Petroproducts.

[Source: LNG Journal 21/02/2019]


CS LNG comment: So, the stark reality hits home again: the huge potential growth markets of China and India are just that, potential providing the price is right. Traders beware!

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2. NOT ENOUGH GAS: QUEENSLAND’S CSG-LNG SECTOR FACES SUPPLY CRUNCH

One third of Queensland’s $84 billion liquified natural gas industry will be on the brink of closure come 2025 due to a shortage of coal seam gas reserves, says consultancy EnergyQuest. According to a new 130-page report which is set to be released in full next week, the supply concerns stem from an emerging forward reliance for feedstock on gas reserve estimates that could fall well below delivery expectations. There are currently three LNG projects operating on Curtis Island, off Gladstone, comprising six trains. The projects rely on CSG sourced from Queensland’s Bowen and Surat Basins. In addition to the majors Shell and Santos, some smaller companies exploring in these basins include Blue Energy and Comet Ridge, with Senex Energy actually producing. Should EnergyQuest’s supply crunch be realised by 2025, output could be cut to four LNG production trains. The forecast supply deficit could be exacerbated by potential political pressure for Gladstone LNG operators to divert gas to the domestic market, namely New South Wales and Victoria. EnergyQuest’s analysis, which is underpinned by corporate and government drilling data from around 10,000 Queensland CSG wells, would certainly not come as a surprise to many industry spectators. The simultaneous development of the LNG export projects a few years ago prompted an unprecedented CSG construction boom, as CSG explorers such as Arrow Energy, capitalised on the demand from the LNG developers to feed the massive plants. When construction of the plants was underway, many analysts warned the LNG operators Shell, Origin Energy and Santos, that they had been too bullish in their reserve estimates. EnergyQuest chief executive officer Dr Graeme Bethune told Small Caps that market dynamics had changed since that initial criticism over gas supply. “The LNG operators were hoping there would be enough domestic gas in the market and there would also be significant gas development in NSW and/or unconventional gas discoveries in the Cooper Basin,” he said. “But, in fact, none of that has really happened and what has happened instead is that reserves in offshore Victoria have declined faster than expected.” “One of the reasons we expect at least one of the LNG trains to effectively be mothballed is because of the need to divert gas into the sovereign states,” Dr Bethune explained.

[Source: Small Caps 21/02/2019]


CS LNG comment: No surprises here and further evidence that the majors should have been more sensible in the development of Queensland LNG. No doubt at least one of those plants should be mothballed and concentrate exports from fewer facilities.

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3. KEEPING THE LIGHTS ON AFTER BREXIT: NO-DEAL'S IMPACT ON ENERGY

The U.K. will leave the European Union on March 29 and so far there’s no agreement to replace the rules and regulations that govern vital trade between Britain and the rest of the world. If a no-deal happens, here’s what it could mean for the country’s energy industry. Will the Lights Go Out? Almost certainly not. The amount of power the U.K. imports from continental Europe fluctuates but was 6.6 percent of total supply in the third quarter of 2018, according to government data. After Brexit, British electricity systems will be decoupled from the European Internal Energy Market. That doesn’t mean gas and power will stop flowing, according to Joseph Dutton, a policy adviser at climate change think tank E3G, but trading could become less efficient and longer-term supply less certain, increasing costs for consumers. This would be especially true in times of unplanned supply interruptions or extreme weather. There are four high voltage direct current (HVDC) interconnectors linking the U.K. electricity system to mainland Europe. The EU doesn’t currently charge import duties on electricity and has a small tariff of around 0.7 percent on natural gas, which it doesn’t apply in practice. If the U.K. exits the EU without a deal it would default to World Trade Organization rules for energy imports and exports. According to the majority of experts Bloomberg spoke with, tariffs aren’t expected to be placed on energy imports.

[Source: Bloomberg Quint 21/02/2019]


CS LNG comment: Was this headline suggesting the lights might go out in Europe? Given that the UK energy market is about 80% controlled by EU utilities (RWE, Eon, Engie, EDF and Iberdrola) with some of the highest prices in Europe we believe the supply will continue.