ENERGY TRANSFER/BG GET LNG EXPORT APPROVAL - WILL THEY BUILD?
Energy Transfer gets go-ahead for Lake Charles LNG project
The OK is an victory for the liquefied natural gas export facility and its backers, the Dallas-based midstream company Energy Transfer and the United Kingdom’s gas giant BG Group. But whether the export facility will be built on schedule remains an open question.
Energy Transfer, which will provide pipeline services to the plant, and its partner on the project BG Group, which will build the facility and handle the gas it liquefies, expect to make a final investment decision in 2016. And with a glut of liquefied natural gas export capacity due to come online and low prices eating into margins the projects were expected to capture, the final nod from the two companies is far from certain.
If built to its full capacity, the Lake Charles LNG project would be capable of exporting as much as 2 billion cubic feet of natural gas per day, or about 15 million tons of LNG per annum. That’s about half the gas that flows from the Gulf of Mexico, though a much smaller fraction of the 92 billion cubic feet of natural gas per day produced across the U.S. in September.
Liquefying and then shipping abroad that much natural gas would have made a great business in earlier in the decade. At that point, natural gas prices were low in the U.S. and high elsewhere, meaning that there was plenty of incentive to build the billion-dollar infrastructure to let producers ship natural gas overseas.
Today, natural gas prices are still low in the U.S., but they’ve collapsed internationally. The margins that many producers hoped to capture by shipping gas abroad have shrunk, and the massive liquefied natural gas projects are on much shakier ground. Further, a rush to build LNG capacity means there’s a glut of capacity due online in the next few years.
Some projects still be viable, the infrastructure itself makes money though toll-like fees that producers pay to run their gas through it, not on the price on natural gas. And producers may be able to find attractive deals despite a glutted market.
But boom is over for now, said Robert Ineson, managing director of global LNG at IHS Energy.
New liquefaction capacity is coming online in Australia and the U.S.; the price gap between markets is narrower; and demand for natural gas is shaky or slowing, he said.
Ineson and IHS said they expect Lake Charles LNG to get approved, but slightly later than originally planned. “We have it in our outlook coming on stream after 2020.”
On Thursday, Energy Transfer said construction on the project would take four years, and could begin as early as 2016.
Views: 597
Replies to This Discussion
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Permalink Reply by tc on
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If only they could find a technology breakthrough to drastically cut the cost turning NG into LNG then exports would really soar.
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Permalink Reply by Skip Peel - Mineral Consultant on
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I would hate to be the CEO or member of a board faced with making a decision to go forward with a construction commitment of a billion or so dollars. The future for LNG is so uncertain at this point in time. Those managers and directors get paid well to make those decisions and I expect most have some experience in making big bets.
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But for a very few CEOs its like being a kid in a candy store at Christmas and the manager announced that they will soon have a "everything most go sale". All those bargain choices.
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Its easier to make those bets when you aren't using your own personal money and get to collect rewards for years before the results of your bets are determined.
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Permalink Reply by Skip Peel - Mineral Consultant on
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Chevron agrees deal to sell Australian Gorgon LNG to Chinese firm
Tue Dec 22, 2015 2:03am GMT reuters.com/
SYDNEY Dec 22 (Reuters) - Chevron Corp on Tuesday said it has agreed to sell up to 1 million tonnes a year of liquefied natural gas (LNG) from its Australian Gorgon project to China Huadian Green Energy Co over 10 years starting in 2020.
The non-binding heads of agreement comes amid a deterioration in Asian LNG prices LNG-AS, aggravated by mounting supply from Australia, which aims to overtake Qatar as the world's top producer in coming years.
The price has slid two-thirds since 2014 to under $7 per mmBtu.
"This is an important step in the commercialisation of Chevron's natural gas holdings in Australia," Pierre Breber, executive vice president of Chevron Gas and Midstream, said in a statement.
Chevron in January signed a contract with South Korea's SK LNG Trading Pte Ltd to supply 4.15 million tonnes of LNG from Australia over a five years starting in 2017.
The Gorgon Project combines the development of the Gorgon field and the nearby Jansz-Io field and is capable of producing 15.6 million tonnes of LNG a year.
China Huadian Green Energy is a subsidiary of state-owned power generator China Huadian Group.
The Gorgon Project is a joint venture between Chevron, which holds a 47.3 percent stake, ExxonMobil and Royal Dutch Shell, each with 25 percent, and three Japanese utilities. (Reporting by James Regan; Editing by Richard Pullin)
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Permalink Reply by Skip Peel - Mineral Consultant on
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American LNG Exporters Turn to Europe as Asian Demand Sputters
Tim Loh Christine Buurma Harry Weber HarryRWeber bloomberg.com
December 21, 2015 — 6:01 PM CST Updated on December 22, 2015 — 8:39 AM CST
American suppliers no longer see need to brush up on Korean
For years, U.S. gas companies looking to export liquefied natural gas dreamed of a booming Asia. Now, with demand there falling and the first shipment weeks away, Europe has emerged as the unlikely savior.
European gas production is down and countries there want to get more of the heating and power plant fuel from places other than Russia –- a major supplier, but one that’s brought plenty of headaches.
“It’s going to make a lot more sense for the U.S. gas to flow into the European market,” said Jason Bordoff, director of Columbia University’s center on global energy policy. “European energy security” comes from having “a diversity of supply," he said.
It’s the latest twist in the U.S. gas boom. A decade ago, Cheniere Energy Inc. was building LNG import terminals on the Gulf Coast because people thought the U.S. didn’t have enough of the fuel. Then came the shale revolution, prompting Cheniere to convert its Sabine Pass facility to export LNG. The first tanker is set to dock there as soon as next month.
Five U.S. liquefaction projects are now being built and they could have a combined capacity to ship 7.76 billion cubic feet of LNG a day by 2019, according to Bloomberg New Energy Finance. That’s enough to put the U.S. in the company of Russia and Qatar, the world’s largest gas exporters.
Companies like Annova LNG LLC are adapting to the shifting market. A couple of years ago, Annova President David Chung was brushing up on his Korean, thinking that’s the language buyers would speak. Increasingly, the Houston-based company is finding English will do.
“We have definitely been surprised by the level of interest in Europe,” said Mitchell Walk, director of LNG for the company, which is backed by Chicago-based electricity producer Exelon Corp.
Slowing Asian demand for gas is one factor behind the shift. China will only accept 77 percent of contracted cargoes in 2015 amid the country’s slowest economic growth since 1990, according to industry consultant IHS Inc.
Then there’s the fact that Asian gas prices are more heavily linked to crude oil than in Europe. In February 2014, spot LNG to northeast Asia fetched a record $19.70 per million British thermal units, according to the World Gas Intelligence publication in New York. Now, after the worst oil rout in a generation, it’s closer to $7 -- not much higher than European prices -- reducing the incentive to ship U.S. product halfway around the world.
U.S. gas has fallen 35 percent this year. Futures for January delivery were down 3.8 cents, or 2 percent, to $1.873 at 9:13 a.m. in New York.
“At a time when the Asian market is growing less strongly than before and there are so many export terminals under construction, a lot of this LNG is going to have to go to Europe,” said Massimo Di Odoardo, research director for European gas at Wood Mackenzie Ltd. in London.
Europe will probably double LNG imports between 2014 and 2020, the International Energy Agency projects. One reason for that is the Netherlands, where officials are slashing output at Europe’s most prolific gas field, Groningen, after years of earthquakes tied to drilling. Just a few hours south, at the country’s first LNG import terminal in Rotterdam, Rolf Brouwer is hoping to make up for the shortfall.
“We’re ready to accept more ships,” said Brouwer, managing director of the Gate terminal, which opened in 2011. “Some of that supply could potentially come from the U.S.”
Lithuania’s importing LNG, too. The small country on the Baltic Sea illustrates the continent’s concern about being dependent on Russia -- and why it is looking more and more to the U.S. For years, the former Soviet republic procured all its oil and gas from Russia. And while the countries share a border, Lithuania paid some of Europe’s highest prices for the fuel, the country’s Energy Minister Rokas Masiulis said at a November conference in Istanbul.
Frustrated by that, Lithuania decided to build a floating LNG import terminal. Before the facility could even open, it negotiated a 23 percent discount from Gazprom PJSC, Russia’s energy giant, Masiulis said.
In February, Lithuanian gas trader Litgas signed an agreement with Cheniere to gain access to U.S. LNG.
“By being firm on this decision, we will always have the power in negotiations,” Masiulis said at the conference with a grin. "I would clearly recommend this to other countries in Europe and the world."
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