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Opinion

CS LNG News Update: 17th May 2019

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.

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