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Opinion

By CS LNG, Nov 19 2018 11:11AM

1. TANKERS STORING LNG IN ASIAN WATERS DOUBLE AS PRE-WINTER DEMAND DISAPPOINTS

Tankers storing LNG in Asian waters have more than doubled in number since late October as traders have been caught off guard by warmer-than-expected temperatures that have capped demand and pulled down prices. Spot market demand ahead of winter has been slowed by the forecasts for warmer temperatures this year in North Asia, with onshore storage tanks filling up. "People were expecting China to buy as much as last year in the spot market, but the weather so far has been quite mild and I don't think they were anticipating that," a Singapore-based LNG trader said. LNG prices last year climbed steadily from mid-July to January as China's gasification push for winter heating sparked higher imports. But this year, buyers from the world's top natural gas importer — via pipeline and tanker — have been spreading out their purchases more. Now about 15 to 20 LNG tankers holding at least 2 million cubic metres of LNG worth more than US$400 million at spot market prices are floating in Asian waters, industry sources said. That's up from a half-dozen tankers being used for storage in Asia three weeks ago. Globally, the number of such LNG tankers stands at 20 to 30, one of the sources said. This has helped to drive up LNG tanker rates to record highs, the ship broking and trading sources said. Most of the traders storing cargoes in the tankers are "seeking better winter pricing ... holding out against rising charter rates to achieve an acceptable profit on the molecules," shipbroking firm Braemar said in a weekly LNG report last week. This is "creating pain for those producers who are still forced to lift cargoes from terminals which are approaching tank tops." Refinitiv Eikon data shows at least eight tankers storing LNG in Singapore waters while two were in Malaysian waters. More than five vessels that had been storing LNG are now on the move or have discharged the cargoes, the data shows. Storing LNG on tankers out at sea, unlike crude oil, is generally seen as a risky bet, given the high costs of storage and the fact that cargoes degrade over time by evaporating.

[Source: The Edge Markets 15/11/2018]

CS LNG comment: And this explains the rise in charter rates in the short term so when these cargoes are delivered the rates come crashing down in Asia but maybe premium rates can be achieved in the Atlantic.

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2. SINGAPORE'S PAVILION MULLS INVESTING IN NOVATEK'S LNG PROJECT

Pavilion Energy said on Tuesday it has signed an initial agreement with Russian natural gas producer Novatek for the Singapore company to consider participating in Novatek’s Arctic LNG 2 liquefied natural gas (LNG) project. The companies will also collaborate on marketing LNG, cargo swaps and trading as well as joint investments and commercial arrangements for shipping and transhipment facilities, Pavilion said in a statement. [Source: Reuters 13/11/2018]

CS LNG comment: A variation on an old saying “You can take the man out of Russia but you can’t take Russia out of the man!” Frederic Barnaud recently left Gazprom to take over at Pavilion. But how will this sit with the US?

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3. NATURAL GAS JUMPS TO 4-YEAR HIGH IN PANICKY TRADING AS SNOW, COLD PUSH ACROSS US

Natural gas prices surged to a more than four-year high in panicky and volatile trading Wednesday, after the latest cold weather forecasts raised fears that the U.S. is heading for a potentially colder-than-expected winter with too little gas supply. Futures for December settled up 18 percent at $4.837 per mmBtus but had been up as much as 20 percent in an early morning rush of panic buying. Prices also rose across futures contracts that that would cover the winter months through March, indicating that prices could be pressured all winter by dwindling supply, which is at a 15-year low for this time of year. CME Group said trading in natural gas futures hit an all-time daily volume record of more than 1.2 million contracts, as the price had its biggest one day jump in years. The price for the front month futures for Decemeber is now the highest since Feb. 26, 2014. "Overnight, there was another round of cold trends, and that kind of lit the fuse and everything exploded," said Jacob Meisel, chief weather analyst at Bespoke Weather Services. "Some of the later overnight weather models trended much colder...the six to 10 and 11 to 15 day [forecasts] both saw rather significant cold trends. It wasn't like we were looking at periods of very major sustained warming. We've just been continually trending colder and colder." Meisel said the price could get to $7 or $8 per mmBtus, if the months of December and January are very cold. "This looks like a capitulation move today, but if cold weather really takes off, the sky is the limit," said Meisel. As forecasts have been adjusted for colder temperatures, natural gas prices have been on a tear, and are now up 49 percent since the start of November. [Source: CNBC 15/11/2018]

CS LNG comment: This could be bad news for US exports as this will certainly push up the cost of US LNG exports which invariably have a Henry Hub element in the pricing formula.

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By CS LNG, Nov 5 2018 11:44AM

1. ICHTHYS $40B PROJECT PLAGUED BY CONTRACTUAL DISPUTES WITH OPERATOR INPEX AND CHIEF CONTRACTOR JKC

The $US40 billion Ichthys project that delivered its first LNG to Japan this week is mired in multibillion-dollar contractual disputes between operator Inpex, chief contractor JKC and many subcontractors. US engineer KBR, a JKC joint venture member with Japan’s JGC and Chiyoda, revealed the full extent of the problems in a filing this week to the US Securities and Exchange Commission. JKC, of which KBR has a 30 per cent stake, was awarded the contract to build the Darwin LNG plant in early 2012 with the first LNG scheduled for 2016. KBR chief financial officer Mark Sopp told analysts this week that it had claims of about $US950 million against Inpex for changes to the project, equivalent to a $US3.2 billion total claim from the joint venture. Last month an arbitration ruling that Inpex was liable for subcontractors’ costs from delays resulted in KBR receiving $US330 million of its claims. KBR chief executive Stuart Bradie said JKC had a number of legal cases against Inpex. “We're hoping, with the customer now producing LNG and the venture starts to get cash as a consequence, we can sit down with the customer and actually conclude a negotiated settlement,” he said. JKC is paying for the completion of the project as it waits for the disputes to be resolved. KBR said it would put $US507 million into the project to complete it by June 2019. This equates to a total of $US1.69 billion from the joint venture. The company said it might have to contribute more than its share if a joint venture partner could not fulfil its obligations. Chiyoda’s share price fell 46 per cent this week after problems on a US LNG project. JKC is also claiming about $US1.9 billion from a consortium of companies that abandoned building the Ichthys power station in January last year. The filing said JKC believed the consortium breached its contract and made it more difficult for others to complete the power station. Arbitration is set for early 2020.

[Source: The West Australian 02/11/2018]


CS LNG comment: We doubt this consortium may win in the long run as they could be excluded from future work in LNG construction but then again it could be worthwhile as we doubt Inpex will do another plant! Probably bigger problems for Chiyoda though.

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2. IRAN’S FIRST LNG TERMINAL PROJECT STALLS DUE TO US SANCTIONS

Iran’s first LNG export terminal project with a planned capacity of 10.8mtpa has stalled due to the impact from the US sanctions, a company executive said. The project’s condition underscores the impact of Washington’s sanctions on Iran’s petroleum sector that are set to take effect on November 5 and the debilitating impact it is having on Tehran’s long-term plans to exploit its gas reserves. Iran LNG, a project jointly owned by the National Iranian Oil Company Pension Fund and the National Iranian Gas Export Company, had already started construction near the port city of Assaluyeh, Mostafa Sharif, general manager for market research and economic appraisal at NIGEC said. “This project’s storage capacity has been built and gas intake facilities are available, but the liquefaction facility has not been built due to the sanctions,” Sharif said at the Gas Asia Summit of Singapore International Energy Week. “After the sanctions removal we hope that we can revive the project,” he added. Iran LNG is located in the Pars Special Economic Zone on the country’s southern coast, around 75 km from Assaluyeh. It was expandable to four LNG trains from its initial plan of two trains, according to project plans, and also considered a proposal for a floating liquefaction facility at one point. Tehran has also been forced to shelve other LNG export plans that were on the drawing board. Iran holds nearly 18% of the world’s natural gas reserves, making it the world’s second-largest gas reserve after Russia, according to the US Energy Information Administration. “We have been in discussions with large companies previously like BP, Total and Shell, but given the current situation all projects have stalled at the moment,” Sharif said. He said Iran’s first priority under the grip of US sanctions was to supply gas by pipeline to its neighbouring countries, mainly Turkey where it supplies around 10 Bcm/year, and that Iraq has very good potential for importing gas for the large number of gas-fired power plants. Iraq had some plans to utilize its own gas reserves but the plans are not on schedule due to the country’s security situation, Sharif said. “I hope that the [sanctions] situation is temporary and we will return to a good situation very soon,” Sharif added.

[Source: Hellenic Shipping News 02/11/2018]


CS LNG comment: The mistake of Iran was not rushing through completion of this terminal as soon as the previous sanctions were lifted. Perhaps had they had more US involvement in the first place a waiver may have been given. However, given how much gas Iran exports by pipeline we doubt they will suffer from the lack of LNG export facility: it is just this one makes the headlines!

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3. GOLDBORO LNG RECEIVES KEY PERMIT, BUT FID STILL IN OFFING

Goldboro LNG obtained a construction permit on Wednesday but set no date to use the favorable decision from the Nova Scotia Utility and Review Board (NSUARB) to build its proposed Canadian east coast liquefied natural gas (LNG) export terminal. Project owner Pieridae Energy Ltd. responded to the regulatory advance with a statement that Hatch Ltd. has been engaged for engineering advice and only promised work would begin “as soon as a positive financial investment decision (FID) is taken.” The NSUARB reported that only seven of 197 comment letters collected during the review of the LNG terminal construction application expressed concerns, while 190 applauded Pieridae for raising hopes of economic development and jobs. Permit conditions include obeying provincial industrial benefits regulations that require employment and training for Nova Scotia residents as well as opportunities for local suppliers to bid for materials and service contracts. Pieridae promised to comply with provincial rules. The firm continues to work on securing gas supplies in Alberta and British Columbia, arranging cross-country pipeline service, closing the takeover of producer Ikkuma Resources, and applying for up to $3.5 billion in German government loan guarantees. The Goldboro LNG plan calls for eventual investment of more than $10 billion in construction of two production lines capable of exporting 1.4 Bcf/d. But after Pieridae devised the proposal seven years ago, Canadian offshore natural gas wells depleted and provincial bans against fracking ruled out tapping nearby substitute shale supplies in Nova Scotia and New Brunswick.

[Source: Natural Gas Intelligence 02/11/2018]


CS LNG comment: Well this sounds like someone is out on yet another fundraising round: another ‘key’ permit!

By CS LNG, Oct 1 2018 07:40AM

1. SHELL’S $31 BILLION LNG CANADA PROJECT MOVES AHEAD WITH CHINA APPROVAL

Royal Dutch Shell Plc’s Chinese partner in a liquefied natural gas venture in western Canada approved its share of the investment, pushing the C$40 billion ($31 billion) development one step closer to a final approval. The board of PetroChina Co., the nation’s largest oil and gas company, approved its $3.46 billion share of the LNG Canada project, the company said in a filing to the Hong Kong stock exchange Friday. The Beijing-based company holds 15 percent of the development. All the partners, including Malaysia’s Petroliam Nasional Bhd, Japan’s Mitsubishi Corp. and Korea Gas Corp., need to make similar moves for the venture to approve a final investment decision. Shell didn’t immediately respond to requests for comment. "PetroChina’s board approving their portion of funding for the project is a clear sign that the project is sprinting toward FID now," Bloomberg NEF analyst Fauziah Marzuki said by email. LNG Canada would be Canada’s largest-ever infrastructure project. With the capacity to eventually export as much as 26mtpa, primarily to Asia, it would also be the biggest new LNG terminal to be sanctioned in years. The decision may be the start of a wave of investments for major gas export projects after a supply glut and a price collapse forced the three-year hiatus. Booming demand growth means that 11 projects, including LNG Canada, are likely to receive final investment decisions by the end of 2019, according to BNEF. Shell and its partners are set to announce an FID on the project as soon as next week, Bloomberg News reported Wednesday. Preparations for an October 5 announcement followed by an LNG Canada event at a local golf club the next day are underway in Kitimat, British Columbia, the site of the proposed project, said people with direct knowledge of the activities, who asked not to be identified. [Source: Bloomberg 28/09/2018]


CS LNG comment: If this FID goes ahead it will be THE killer blow to US Gulf ambitions of capturing Asian market. If we look at the shareholders we can see where the market is and how the discount works: equity always wins!

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2. ARGENTINA AIMS TO START CONSTRUCTION OF FIRST LNG EXPORT TERMINAL IN 2019

Argentina's government wants construction of the country's first LNG liquefaction terminal to start in the second half of 2019, making it possible to export an increasing surplus of production from the giant Vaca Muerta shale play, an official said Thursday. "We are confident that the decision to push the button on this project will come after the next presidential election in October 2019," Daniel Dreizzen, the country's secretary of energy planning, said at a Moody's finance seminar in Buenos Aires. He said companies have brought forward proposals for building the terminal, which will be evaluated. Earlier this month, the country's biggest gas transporter, Transportadora de Gas del Sur (TGS), and Texas-based Excelerate Energy, which operates two floating LNG import terminals in Argentina, agreed to study the possibility of a liquefaction project in Buenos Aires province. They said they would present the proposal to the government by the end of this year for evaluation. But if no company is ready to advance by next year, Dreizzen said the government will hold an auction to find a builder and operator of the project. The terminal will have six trains for exporting supplies and should start operations by 2023, with the capacity to ship an initial 40 million cu m/d from Vaca Muerta, Dreizzen told S&P Global Platts on the sidelines of the event. The likely spot for the terminal will be in Bahia Blanca, a deep-water port in southern Buenos Aires province, where it will be fed with gas from Vaca Muerta in the southwestern Neuquen Basin, he added. The gas for export will be delivered over a dedicated pipeline under a contract that guarantees it can't be redirected to meet domestic demand, providing more confidence about the supply stability for the project's investors, Dreizzen said. [Source: Platts 28/09/2018]


CS LNG comment: Has this guy spent too much time in Columbia with over exposure to local ‘talcum powder’? They can’t even pay for the import cargoes on time let alone afford to invest in liquefaction: or is he thinking if they produce LNG they won’t have to import the product!

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3. QATAR'S LNG PLANS GET EVEN BIGGER AS U.S. TRADE WAR OPENS NEW OPPORTUNITY

Qatar Petroleum is primed to boost its natural gas output by adding a fourth liquefied natural gas (LNG) production line to raise capacity from the North Field, as it aims to steal another march on its competitors, particularly emerging U.S. exporters. U.S. LNG is one of Qatar’s major competitors for new supply development. But U.S. President Donald Trump is engaged in a tariff war with China, the world’s largest growth market for LNG. “Qatar could see this as an opportunity. It has recently signed a contract doubling the volumes that it will sell to PetroChina and is likely to be looking at further opportunities to supply the Chinese market,” said Giles Farrer, an expert in global gas and LNG supply at consultancy Wood Mackenzie. The world’s top supplier of the super-cooled gas said on 26 September that output from the field, which is shared with Iran, will rise from 77 million to 110 million tonnes of LNG per year. Qatar is well-placed to compete with any other LNG supplier because it has very low LNG production costs due to the co-production of valuable natural gas liquids from the North Field. “Based on the good results obtained through recent additional appraisal and testing, we have decided to add a fourth LNG mega train,” said Qatar Petroleum’s chief executive, Saad Sherida al-Kaabi, in a statement. Last year, Qatar announced it was planning to develop additional gas from the North Field and build three new LNG mega-trains. Qatar could probably add an additional train without significant additions to capital investment, said Farrer. Wood Mackenzie estimates capital expenditure for the three mega-trains previously announced was around $24 billion, covering both the upstream and liquefaction parts of the project. With worldwide activity in the oil and gas industry still low, now is a good time in the cost cycle to invest in a new project, added Farrer. “There are likely to be economies of scale from developing a bigger project, particularly in light of the promising appraisal results at the North Field…these economies of scale will make what is already the most competitive new LNG project worldwide even cheaper.” “Since Qatar announced its initial plan, the market environment has improved. Forecasts of future oil prices are higher, and forecasts of future LNG demand have grown stronger, particularly in Europe and China. Having already taken the decision to compete for LNG market share, Qatar is doubling down, making sure that it will be fully able to benefit from LNG market upside,” he added.

[Source: Forbes 26/09/2018]


CS LNG comment: Now this is a real story and one that supports our belief that US Gulf exports are not economically viable for Asian trade. Qatar will use US exports to hit Europe leaving Qatar exports to reach Asia.

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