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Opinion

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?

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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!

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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.

By CS LNG, Nov 29 2018 09:15AM

1. FLORIDA LNG PROJECT ADVANCES WITH PLANS TO SUPPLY CARIBBEAN POWER AND MARITIME MARKETS

The Federal Energy Regulatory Commission has prepared a draft environmental impact statement for the mid-scale Jacksonville project in Florida proposed by Eagle LNG Partners to supply regional power and fuel markets. Eagle LNG is planning its facility for the north bank of the St. Johns River in Jacksonville and would comprise about 1mtpa of LNG output from three small liquefaction Trains, each was capacity of around 330,000 tonnes. One LNG storage tank is also proposed with a net capacity of 45,000cu m. The marine facilities would have a loading platform and two liquid loading arms capable of docking and mooring a range of LNG vessels with cargo capacity of up to 45,000cu m. LNG truck-loading facilities would have a dual bay capable of handling between 260 and 520 trucks per year. Eagle has said that the facility would serve both domestic and international markets. The company will load the fuel onto ocean-going vessels for export to countries in the Caribbean where heavy fuel oil or diesel is currently in use for power generation. It will also supply the domestic marine fuel market. Feed-gas would be delivered to the Jacksonville plant via a 120-foot-long non-jurisdictional pipeline that would be constructed, owned and operated by Peoples Gas, a subsidiary of Teco Energy. “We determined that construction and operation of the project would result in some limited adverse environmental impacts, but impacts would not be significant with the implementation of Eagle LNG’s proposed and our recommended mitigation measures,” said a FERC statement. The regulator added that its decision was based on a review of the information provided by Eagle and further developed from data requests, field investigations, scoping and contacts with federal, state and local agencies. “Although many factors were considered in this determination, the principal reasons are: the LNG terminal site would be in an area currently zoned for industrial use and is along an existing, maintained ship channel in the St. Johns River,” the FERC stated. The draft EIS comment period closes on January 7, 2019. “The Commissioners will take into consideration the FERC environmental staff’s recommendations when they make a decision on the project,” the agency added.

[Source: LNG Journal 19/11/2018]

CS LNG comment: Why would FERC encourage an LNG project in the “sunshine state” when there are enough projects in the “industrial redneck states” in the Gulf?

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2. SAGA LNG ORDERING UP TO FOUR LNG CARRIERS AT CMHI Saga LNG Shipping, the LNG shipping unit controlled by Landmark Capital, is going to order up to four 80,000cu m LNG carriers at China Merchants Heavy Industry (CMHI). The contract will include a firm order for two vessels, with options for another two. An official at Saga LNG confirmed to Splash that the company has signed an MOU with CMHI for the shipbuilding contract. Currently the final design and contract work are under way and an official order will be placed in the first quarter of 2019. Saga LNG is expected to take delivery its first ever ship, a 27,000cu m LNG carrier from, CMHI’s Jiangsu yard early next year.

[Source: Splash 24/7 16/11/2018]

CS LNG comment: In the UK Saga is a holiday firm for over 60’s so having an image of zimmer framed LNG carriers is hard to shake! But it is just an MOU.

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3. TWO THIRDS OF LNG ORDERS PLACED THIS YEAR ARE SPECULATIVE

Two thirds of the LNG orders placed this year have been speculative, according to Norwegian owner Awilco LNG, in a sign of the changing scene in this historically conservative sector. A total of 42 newbuilding orders have been placed year to date of which about 27 are assumed speculative, Awilco LNG stated in its latest quarterly report. Historically the LNG sector had a very small spot market, with the hugely expensive newbuilds tending to be ordered with long term contracts already secured. However, with the entrance of many new players in recent years the ratio of long term versus spot has changed considerably in the LNG trades. The current orderbook for LNG vessels above 100,000 cu m – excluding FSRUs and FLNGs – is 93 vessels, of which 37 are potentially available for contract, Awilco LNG stated. “Although the orderbook represents almost 20% of the fleet, market analysts expect the 91mtpa of new LNG production scheduled to start up from 2018 to 2021 to require more vessels than the current available tonnage and orderbook during periods of high ton-mile demand,” the Norwegian owner stated yesterday.

[Source: Splash 24/7 16/11/2018]

CS LNG comment: And that is why rates will not stay in 6 figures!

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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