By CS LNG, Nov 29 2018 01:26PM
1. TANKERS GOING NOWHERE INDICATE LNG MARKET BECOMING MORE LIKE OIL
Some liquefied natural gas sellers aren’t in a rush to deliver their multimillion-dollar cargoes. With uncertain demand and no signs yet of bitter cold, some traders are preferring to keep their fuel inside vessels in the hope prices will rise. While the sight of stationary cargoes might not be unusual in the more-established oil market, technology has only recently made it feasible to keep LNG at minus 162 degrees Celsius for longer periods. “There are cargoes parked close to Singapore, apparently waiting for the right market conditions to be delivered,” said Dumitru Dediu, an associate partner at McKinsey Energy Insights, which monitors LNG flows. “Some of the players are speculating.” There are about 30 vessels currently flagged as floating storage globally, two-thirds of which are in Asia, the biggest LNG consuming region, according to cargo-tracking company Kpler SAS. That’s still a fraction of a global fleet of more than 500 vessels. The practice of using tankers as floating storage is common in the more developed oil market. It happens during periods of contango -- when storage on land is used up, immediate demand is weak and the cost for later delivery is high enough to cover the expense of storing crude on a tanker. Trading houses and oil majors from Vitol Group and Glencore Plc to BP Plc and Royal Dutch Shell Plc collectively made billions of dollars from 2008 to 2009 stockpiling crude at sea. At the peak of the floating storage spree, sheltered anchorages in the North Sea, the Persian Gulf, the Singapore Strait and off South Africa each hosted dozens of supertankers. LNG, the fastest-growing fossil fuel, is starting to resemble the oil market in that sense. Holding it back is that some LNG is lost to keep it cool during its journey, known as boil off, and that most sales are through traditional long-term contracts without destination flexibility. But that’s rapidly changing. Modern tankers are capable of serving as floating storage, especially for markets such as China that lack that capacity. They have lower boil-off rates, bigger capacity and re-liquefaction units on board to keep the cargoes cool. If a cold snap suddenly comes and the spot price rises, a well-diversified player storing fuel may boost earnings by $2 million to $5 million, despite current high shipping rates and boil off, Dediu said. “Playing contango on LNG has not been traditionally popular, but given the price volatility for gas we do see a lot more players doing this,” he said. “With higher volatility and given the unpredictable winter weather patterns, from one week to another, it might be a real option for some of the players.”
[Source: Bloomberg 27/11/2018]
CS LNG comment: The problem with floating storage on LNG ships especially the older ones, is that the cargo is boiling off so every 10 days you are losing about 1%. The question is though was this a planned move by the traders or a reaction to the lack of market demand in the Asian area?
2. AFRICA LNG SET TO SURGE AS FLOATING PROJECTS CUT TIME TO MARKET
Africa is on the cusp of a liquefied natural gas boom. That’s in part due to accelerating global demand. It’s also down to a fast-track method of getting the fuel to market. Kosmos Energy Ltd.’s project in Mauritania and Senegal, set to get the go-ahead next month, will use a floating vessel to convert gas from the offshore Tortue field into LNG. Such units, which can be built out of existing tankers, reduce the time from exploration to export, helping to lure investment and boost enthusiasm for gas development in a region traditionally focused on oil. “Africa is the hot spot for floating LNG,’’ said Lucas Schmitt, a senior gas analyst at consultants Wood Mackenzie Ltd. “Confidence in floating facilities is firming up.’’ Kosmos and partner BP Plc are targeting first gas from Tortue by 2022, bringing it online four years after Africa’s first floating LNG facility -- a Cameroonian project that started output earlier this year. The last bureaucratic steps are on track and a final investment decision is just “weeks away,” Kosmos spokesman Thomas Golembeski said last Wednesday. Rising gas consumption in Asia is driving growth in global demand. That’s prompted a change in attitudes to African gas finds since the Tortue field was discovered in 2015, with developers now keen to tap the fuel rather than sidestepping discoveries in favor of oil. The Tortue discovery “was not met with jubilant praise,” said Tracey Henderson, senior vice president of exploration at Dallas-based Kosmos. “You went from ‘gas is valueless,’ to everyone trying to figure out how to monetize it.” The project is just one of a slew of African LNG ventures expected to spur gas production on the continent. The expansion could see Africa’s total LNG output capacity almost double by 2030, according to consultants Rystad Energy SA.
]Source: Bloomberg 27/11/2018]
CS LNG comment: Dream on! And floating does not cut time to market: just ask Shell about Prelude!
3. BULGARIA TO TAKE STAKE IN PROPOSED ALEXANDROUPOLIS LNG TERMINAL
Bulgaria's efforts to diversify its sources of natural gas deliveries includes plans to take a minority stake in the proposed LNG terminal near Alexandroupolis, in northern Greece, Bulgarian Energy Minister Temenouzhka Petkova said on November 26. Speaking at a round-table discussion on gas market integration and Bulgaria's priorities for improving energy security in the region, Petkova said that LNG offered the opportunity of further diversification of sources, on top of the one billion cubic metres of gas from Azerbaijan, for which Bulgaria already signed a contract several years ago. "When we talk about the Greece-Bulgaria [gas] inter-connector, we must note the importance of another opportunity for diversification of gas deliveries and that is our participation in the Alexandroupolis terminal," Petkova said. "It is a project of extreme importance to the entire region. It is in full synergy with the Greece-Bulgaria inter-connector and that is why the Bulgarian Government discussed the prospect and took the decision to participate in this project as a shareholder, so that we have the opportunity for gas deliveries from various LNG sources, including the US, Qatar and Algeria," she said. The current plans envision Bulgaria's state-owned gas grid operator becoming a minority shareholder in the Alexandroupolis terminal, although Petkova did not mention how large a stake it might take. Bulgarian Parliament energy committee chairperson Delyan Dobrev told the same round-table that a motion to approve Bulgartransgaz's participation as a shareholder in the terminal would be put on the National Assembly's agenda later this week. Greek ambassador to Bulgaria Grigorios Vassiloconstandakis told the round-table that securing diversified energy sources for the entire region was one of Greece's main priorities, with the vertical gas corridor, of which the Greece-Bulgaria inter-connector was part, set to deliver gas to Bulgaria, Romania, Serbia, Hungary and other Central European countries. US ambassador in Sofia Eric Rubin also emphasised the importance of diversified energy sources, re-iterating his country's support for Bulgaria's efforts in that sense. The LNG floating terminal off the Greek coast near Alexandroupolis, developed by gas company Gastrade, is currently undergoing the market test process. Gastrade envisions construction on the 5.5 billion cubic metres a year terminal starting in the second quarter of 2019 and commercial operations launching before the end of 2020.
[Source: The Sofia Globe 20/11/2018]
CS LNG comment: Blind leading the blind? No doubt Brussels will throw more money at this unnecessary project.