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Opinion

By CS LNG, May 29 2019 08:21AM

1. ASIA LNG SPOT PRICE DROPS BELOW $5/MMBTU AS SUPPLY FLOODS MARKET

The Asian spot price for liquefied natural gas (LNG) has dropped to below $5 per million British thermal units (mmBtu) this week as sellers flooded the market with spot cargoes, trade sources said. The price is at its lowest level since the beginning of April. Oil majors Shell and BP each offered a July loading cargo at $4.60-$4.65/mmBtu on Wednesday in Platts market on close (MOC) window, at a price well below the $5.35/mmBtu levels seen last Friday, they added. A large tender by Egypt to sell up to 13 cargoes, as well as several sell tenders by Indonesia's Pertamina, Angola and Australia are also weighing on the market, sources said.

[Source: Energy World / Reuters 23/05/2019]


CS LNG comment: Well, it is still only May so they winter rush has not started yet, but it is looking ominous for pricing especially with more LNG supply coming on stream from US this summer. And just what impact will this have on charter rates? Let us wait and see!

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2. SAUDI ARAMCO INKS 20-YEAR DEAL WITH SEMPRA FOR LNG SUPPLY

Saudi Aramco signed a 20-year agreement to buy LNG from a forthcoming export terminal in Texas that U.S.-based Sempra Energy is developing, the two companies said on Wednesday. The Saudi state oil giant plans to become a major global gas player, and this deal will provide it with access to some of the world’s cheapest and most abundant natural gas via the U.S. shale boom. Aramco has been developing its own gas resources and eyeing gas assets in the United States, Russia, Australia and Africa. Demand for supercooled LNG hit a record in 2018 at 42.1 billion cubic feet per day (bcfd), according to the International Gas Union, and growth is expected to keep rising as countries wean themselves off dirtier coal. One billion cubic feet of gas is enough to supply about 5 million U.S. homes for a day. The sale-and-purchase agreement is for 5mtpa of LNG, equivalent to about 0.7 bcfd of natural gas. This is Saudi Arabia’s first known nonbinding agreement to buy LNG, and the largest such LNG deal since 2013, according to energy consultancy Wood Mackenzie. Aramco will also buy a 25% equity stake in the first phase of the multibillion-dollar project, to be constructed in Port Arthur, Texas, about 90 miles (145 km) from Houston, the companies said. “Port Arthur LNG could be one of the largest LNG export projects in North America, with potential expansion capabilities of up to eight liquefaction trains or approximately 45mtpa of capacity,” the companies said. Global LNG demand is expected to grow by about 5 percent a year through the mid-2020s, according to U.S. Energy Information Administration (EIA) projections. Since February 2016, when the United States started exporting the fuel from the Lower 48 states, it has become the world’s fourth biggest LNG exporter.

[Source: Reuters 22/05/2019]


CS LNG comment: Does this mean that the new LNG team at Sempra (now that Octavio and Co. have left) really knows what they are doing and what may have been missing for the past 10 years? Certainly, a deal of this magnitude with that off-taker is a real coup. DES or FOB?

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3. NOVATEK ANNOUNCES 3RD LNG PROJECT IN ARCTIC

As if in a great rush to develop its Arctic resources, Russian natural gas company Novatek this week made clear that it is starting the development of a third LNG project in the Yamal region. The Ob LNG will be based on the resources of the Verkhnetiuteyskoye and Zapadno-Seyakhinskoye fields, two structures located in the central part of the Yamal Peninsula. The fields hold a total of 157 billion cubic meters of natural gas and the projected new plant will produce up to 4,8 million tons of LNG per year. The plant and adjacent infrastructure will cost $5 billion and is to come in operation in year 2023, newspaper Kommersant reports with reference to a high-ranking representative of Novatek. The development of the Ob LNG will run parallel to the Arctic LNG 2, the company’s far bigger project currently under development on the nearby Gydan Peninsula. The Arctic LNG 2 will produce up to 19,8 million tons, and the first of the projected three trains is to be ready by year 2023. The announcement of the Ob LNG comes a the same time as Novatek signs a major contract with UK-based TechnipFMC on engineering and construction of the Arctic LNG 2. Novatek’s first Arctic project, the Yamal LNG, is already operating at full speed, which means an annual production of up to 16,5 million tons.

[Source: The Barents Observer 23/05/2019]


CS LNG comment: A step too far too quick? Does Novatek and its partners have the resources to manage two simultaneous projects?

By CS LNG, May 20 2019 08:11AM

1. RUSSIA'S GAZPROM CONSIDERS LINDE, SHELL TECHNOLOGIES FOR BALTIC LNG

Russian gas producer Gazprom is considering using technology made by industrial gases group Linde or Royal Dutch Shell at its Baltic LNG project, Gazprom board member Vitaly Markelov said on Tuesday. Russia does not have its own LNG technology. "We've looked at the efficiency of both technologies and they basically have the same indicators in terms of workability. The rest is a question of negotiation," Markelov said. Royal Dutch Shell quit Gazprom's liquefied natural gas project near the Baltic Sea port of Ust-Luga last month after the Russian company moved to integrate its Baltic LNG project and gas processing plants. Gazprom has already started designing the Baltic LNG complex, Markelov said

[Source: Yahoo / Reuters 14/05/2019]


CS LNG comment: Well they might be considering Shell technology, but no doubt Linde will win. (unless the recent Shell charter of the Gazprom FSRU is an entry ticket!).

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2. HOW SOUTH AFRICA CAN BENEFIT FROM MOZAMBIQUE’S LNG

Mozambique’s LNG reserves, highlighted this week by the government’s approval of ExxonMobil’s Rovuma project, represent a major opportunity for South Africa, Standard Bank oil and gas analyst Paul Eardley-Taylor argues in research this week. Rovuma can deliver 15.2m tonnes of LNG per year and has the potential to help turn Mozambique into the fourth-largest LNG producer globally, according to Standard Bank. The International Energy Agency predicts that gas will overtake coal in the global energy mix by 2030, with LNG playing a major role. Mozambique’s reserves imply capital expenditure of $128bn over the next decade, and South African companies are well-placed to win contracts, Eardley-Taylor says. Though South Africa is relatively poor in terms of gas, the country’s limited shipping distances from Mozambique will help favourable delivery prices, he argues. Crucially, South Africa’s peak demand period in the winter falls at a different time to that in the northern hemisphere, meaning that South Africa is in an ideal position to make competitive LNG purchases and even take risks in the spot market, he argues, adding that South Africa’s government needs to be talking directly with Mozambique project operators. Standard Bank and its shareholder, the Industrial and Commercial Bank of China, are the largest lenders to Mozambique’s Coral floating LNG development. Costs at state energy utility Eskom are at the core of many of South Africa’s problems. Costs of dollar-priced diesel used by Eskom could be slashed if Mozambique’s LNG is used, according to Eardley-Taylor.Spot LNG is currently around $32 barrel of oil equivalent (BOE), while contract LNG is around $37. Diesel costs more than double, at $77-$80, Eardley-Taylor says. Moody’s, the only ratings agency that continues to rate South Africa at investment grade, has said that Eskom is South Africa’s main source of contingent liability risk. Loss of that rating would have a catastrophic effect on the country’s investability. Eskom has set aside R50bn ($3.5bn) over the next five years just to keep its ageing electricity infrastructure running.

[Source: The Africa Report 16/05/2019]


CS LNG comment: South Africa can and should benefit from MzLNG but we doubt they will receive LNG. It is more likely to get gas via new pipelines given the recent track record of SA failing to do anything on the LNG front.

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3. TRADE WAR LEAVES LNG MEGA PROJECTS VULNERABLE

The escalation of the trade war between the United States and China could jeopardize several LNG mega projects awaiting final approval. That’s according to Rystad Energy, which said increased tariffs will create additional headwinds for U.S. LNG projects currently awaiting final investment decisions. “Rystad Energy expects China to be one of the biggest contributors in sponsoring new LNG projects over the coming years, and there will be a reluctance to signing new deals with U.S. projects as long as this trade war persists,” Sindre Knutsson, senior analyst at Rystad Energy’s gas markets team, said in a company statement. “For example, Cheniere and Sinopec agreed late last year on a 20-year deal that would supply 2mtpa of LNG to China starting in 2023. This deal could have been signed once the trade tensions were resolved, but due to the heightened tensions this has not happened,” Knutsson added. According to Rystad Energy, China’s decision to impose tariffs on U.S. LNG will make LNG projects outside the United States more attractive. On Monday, China’s ministry of finance revealed that the country would impose a 25 percent tariff on U.S. LNG from June 1. On May 10, the office of the United States trade representative revealed that the United States had increased the level of tariffs from 10 percent to 25 percent on approximately $200 billion worth of Chinese imports. According to a report published by DNV GL last month, the majority of LNG-focused oil and gas professionals believe several new LNG infrastructure projects will need to be initiated this year to ensure supply can meet demand after 2025. DNV GL’s report drew upon a global survey of 291 senior LNG professionals, conducted in December 2018. The report also includes findings from DNV GL’s annual study on the outlook for the oil and gas industry, based on a survey of 791 senior oil and gas professionals, conducted during late October and early November 2018.

[Source: Rigzone 16/05/2019]


CS LNG comment: And how long do we expect the trade war to last? Will DT win another term? But China needs the US LNG in the game otherwise the SE Asian producers will hike their prices.

By CS LNG, May 10 2019 08:52AM

1. EUROPEAN LNG RELOADS ABSENT BUT NOT IMPOSSIBLE IN SUMMER

European reloads – an important flexible source of supply in recent summers – have disappeared from view this year with current forward spreads meaning the arbitrage window is not open. Europe’s location and depth of traded gas markets have supported reload activity in recent years, with more of a focus on sourcing volumes from northwest Europe than historically-favoured Spain. But the global oversupply that kicked in from late 2018 has meant the market has other supply options. The viability of reloads depends on a number of factors, including the availability of shipping. Typically, an Asian price premium of $2.00/MMBtu or more to Europe has encouraged reloads from European terminals. Asia’s premium to the Dutch TTF has collapsed in 2019 but in the last couple of weeks has edged back up to over $1/MMBtu for July. The arrival of more US LNG to the market in the coming months should mean European reloads are not needed, even if Asian prices rise further above European gas markets. But delays to US production and any cut in the availability of other Atlantic-basin supply could mean European reloads make an unlikely recovery in the event of strong Asian summer demand. Indian and Middle East markets are well placed for European reloads, although Egypt has turned from importer to exporter over the last year. Currently, the lack of LNG carriers in the Atlantic is pushing up prompt charter rates.

[Source: ICIS 08/05/2019]


CS LNG comment: But what about the poor shipowners who are banking on bumper pay days? Our advice: take what is on offer as sitting idle cost around $2-2.5m per month! How do you make a small fortune in LNG? Start with a large one!

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2. GRAIN LNG PUTS 2025 CAPACITY ON OFFER

UK’s Grain LNG import terminal said that up to 8.3 mtpa of capacity and over 100 berthing slots could be made available at the terminal in 2025. Grain LNG said that the capacity on offer was a combination of newbuild and existing capacity which comes out of contract in 2025. The expansion will increase the size of the terminal to approximately 1.2 million cubic meters, the operator said in its statement. Nicola Duffin, commercial manager for Grain LNG, said, “Grain already has the largest storage tanks in Europe […]. With the expansion of Grain we will further optimize our existing assets, which means we’ll be able to be more competitive than typical new build capacity.” Grain could also benefit from proposed changes to the gas specification rules in the UK, which would significantly reduce variable costs for LNG shippers. The UK’s Wobbe Limits currently require some sources of LNG to be blended with nitrogen to meet UK gas specifications. Plans are underway to increase these limits, which could come into force by April 2020 as part of the Gas Safety Management Regulations (GSMR). Proposals call for the Wobbe Limit to be changed to 52.85 MJ/m3 – a limit that would allow all but rich LNG to enter the grid without blending. Duffin added, “LNG would be subject to lower processing and variable costs. Lower costs will make the UK a more attractive destination for LNG, which ultimately benefits UK energy consumers.” Additional services available at Grain include reloads, transshipments and a multi-bay facility for reloading road tankers, and ISO containers. A marine breakbulk facility is also planned for 2021/22. UK terminals have seen a considerable increase in utilization this winter as new global supplies have come online and the economics of moving LNG from the Atlantic to the Pacific basin have failed to stack up.

[Source: LNG World News 09/05/2019]


CS LNG comment: So will Ofgem finally reverse its decision granting South Hook and Dragon as well as IOG the waiver on third party access which was deemed absolutely necessary when the terminals were built?

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3. GIBRALTAR OPENS LNG TERMINAL

Gibraltar on Monday opened a liquefied natural gas regasification terminal, moving the British territory away from diesel-fuel power, Kallanish Energy reports. The project comes as part of Gibraltar’s effort to power its homes and businesses with cleaner energy. The 80-megawatt power plant was built by Anglo-Dutch giant Shell and its fully owned subsidiary Gasnor, which is also the facility's operator. LNG cargoes will be delivered by ship twice a month and at night, to minimize disruption to the port, located on the southern coast of Spain. The facility has five storage tanks of 35,314 cubic feet capacity each. “I would like to congratulate Gibraltar on bringing its vision of a cleaner energy system to reality,” said Maarten Wetselaar, Integrated Gas & New Energies director for Shell, in a release.

[Source: Kallanish Energy 08/052019]


CS LNG comment: So, was this decided before a Brexit vote? and an 80 Mw plant is hardly huge when you consider the average luxury hotel consumes about 30Mw per day!