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Opinion

CS LNG News Update: 22nd February 2019

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.

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