Qatar warns Japan not to push too much in LNG contract talks
(Reuters; May 30) - Qatar Petroleum is warning Japanese liquefied natural gas buyers not to press too hard in long-term supply talks or they could be squeezed out of Qatar's LNG projects, sources told Reuters. Qatar faces rising competition from a tide of new suppliers including Australia, which is expected to surpass it as the world's top exporter by 2019. That has emboldened buyers as they look for lower prices and more control via shorter contracts and the rights to divert or resell unwanted cargoes, for example.
In Japan, Qatar Petroleum, which owns LNG producers Qatargas and Rasgas, counts on customers led by JERA, a joint-venture between Tokyo Electric and Chubu Electric. At stake in current contract talks with Japan are annual supplies of 7.2 million tonnes of LNG expiring in 2021, about 10 percent of Qatar’s output. Underlining the depth of Qatar's ties to Japan, Marubeni Corp and Mitsui & Co each own 7.5 percent stakes in the three-train Qatargas I project. Mitsui also holds a 1.5 percent stake in Qatargas 3.
"If Japan pushes too hard or decides to buy LNG from other buyers like Australia, Qatar has said it could force Japanese companies out of their stakes in Qatargas projects," a Japanese diplomat told Reuters. A Qatar Petroleum official confirmed supply renewal talks could impact Japanese ownership stakes in Qatar's LNG projects. Losing its foothold in Japan would force Qatar to seek sales among less creditworthy buyers in Africa, the Middle East and south Asia that are riskier to deal with.
Japanese buyers value longstanding business ties with Qatar and are unlikely to drop deals altogether, but they are insistent on winning more buyer-friendly terms. The flexibility to divert and cancel shipments, reduce volumes, sign shorten deals and align pricing formulas with market conditions will be important, a source said.
Qatar signs up engineering company to look at LNG production boost
(Platts; May 31) - Qatar Petroleum is considering raising the production capacity of its liquefaction trains to handle gas from a planned new project at the giant offshore North Field, the state-owned company said in a statement May 31. It signed an agreement with Japanese engineering company Chiyoda to carry out a detailed study to identify modifications required to debottleneck capacity at Qatar's LNG trains at Ras Laffan.
The study is expected to be completed before the end of this year, allowing Qatar Petroleum to kick off the front-end engineering and design work early next year, it said. The debottlenecked facilities will process additional quantities of gas produced from a new North Field gas project, after a 12-year moratorium on development at the world's largest conventional gas field was finally lifted in April. Last year, Qatar exported about 78 million tonnes of LNG to Asian and European markets — ranking it first in the world.
Qatar announced in early April its plan to develop a new gas project in the southern sector of the North Field with a capacity of about 2 billion cubic feet per day for export. The proposed project, expected to take five to seven years to complete, would increase the current North Field gas and condensate output by about 10 percent, adding about 400,000 barrels per day of oil equivalent to Qatar's oil and gas production.
Japanese company wins order for floating LNG plant in Mozambique
(Nikkei Asian Review; June 1) - A consortium including Japan’s JGC Corp. has reached a 700 billion yen ($6.33 billion) deal to build a floating liquefied natural gas platform off the coast of Mozambique, as expected demand from emerging economies rekindles interest in LNG plants despite the fuel's languishing prices. Developers on the East African project include the state-backed Italian oil and gas multinational Eni, plus China National Petroleum Corp. and Korea Gas.
JGC will handle planning, procurement and construction, together with French competitor TechnipFMC and South Korea's Samsung Heavy Industries. The floating platform will produce about 3.4 million tonnes of LNG annually by tapping an offshore field estimated to hold 16 trillion cubic feet of gas. BP has contracted to buy the plant’s the entire output for 20 years. Eni had not confirmed the JGC construction order as of May 31, though Reuters had reported an Eni decision was expected this week.
The Mozambique platform is JGC's first new LNG construction order since winning a project in Yamal, in the Russian Arctic, in 2013. There is a glut in the LNG market at present, but the prevailing view is that demand from nations including China and India should rise sharply, and demand will outstrip supply in 2023 or 2024. As LNG plants generally take about five years to build, investors have slipped back into action. Separate from the Eni-led venture, Anadarko is leading plans for a larger onshore LNG plant in Mozambique, but no final investment decision has been announced.
Sumitomo will build LNG import terminal in switch away from coal
(Nikkei Asian Review; May 31) - Sumitomo Group members including Sumitomo Chemical and Sumitomo Metal Mining plan to construct a liquefied natural gas receiving terminal and a gas-fired power plant in Ehime Prefecture, moving away from coal as they upgrade domestic infrastructure. The project will cost more than $500 million, with work slated to start this fiscal year. The companies have operated coal-fired plants over the years but are now switching to LNG.
Sumitomo Joint Electric Power, financed by a number of Sumitomo Group members, will operate the plant with a new company to be formed by Tokyo Gas and Shikoku Electric Power. The gas-fired plant, tanker moorings and LNG storage tanks will be built on the site of a Sumitomo Chemical factory in Niihama, Ehime Prefecture, more than 400 miles southwest of Tokyo. The partners plan to have the facility operational in 2020.
The new facility will serve nearby Sumitomo Group members. Once it is online, Sumitomo Joint Electric Power will shut down coal-fired facilities at the Niihama plant that have been in operation for more than half a century. The Niihama area hosts the Besshi copper mine, to which Sumitomo companies trace their roots.
Developer gives up on plan for smaller Australia LNG project
(The Observer; Queensland, Australia; May 31) – A proposed LNG export project at Fisherman's Landing in Gladstone on Australia’s East Coast has been scrapped. Liquefied Natural Gas Ltd. CEO Greg Vesey said the closure of the project was not an easy decision. “After many years without success in securing the long-term economic gas supply that would be needed to proceed with project construction, we made a strategic decision to close the project," he said.
The Perth-based company said it is "completing efforts" to give the site back to Gladstone Ports Corp. The company’s website says it had spent about $(US)50 million over the years trying to develop the project. The Perth-based company had been attempting to develop a natural gas liquefaction plant and marine export terminal with capacity to produce 3.5 million tonnes of LNG per year. Plans have been on hold since 2010. Several projects in Australia have been put on hold or scrapped since the country embarked on an LNG building boom this decade, adding to a global oversupply.
Spanish buyer will be among first to receive Yamal LNG cargoes
(LNG Journal; May 30) - Russian gas producer Novatek said Spanish energy company Gas Natural Fenosa would be one of the first customers to receive cargoes from the Yamal liquefied natural gas export project when it starts commercial operations, planned for later this year. Novatek Chairman Leonid Mikhelson said Gas Natural Fenosa signed a 25-year contract in 2013 for 2.5 million tonnes of LNG per year from the liquefaction plant being built on the Yamal Peninsula in the Siberian Arctic.
Though it will start up with one liquefaction train, Yamal LNG will have three trains when it is at full operation, with annual capacity of 16.5 million tonnes of LNG. Partners in the $27 billion project are Novatek, France’s Total and China National Petroleum Corp. Gas Natural Fenosa is Spain's biggest LNG player. The company's diverse LNG supply portfolio includes shipments from Algeria, Qatar and Nigeria.
In addition to signing up for Russian LNG, the company holds a 20-year contract to start taking significant volumes from Cheniere Energy’s Sabine Pass, La., LNG export plant and its Corpus Christi terminal under construction in Texas.
Cheniere sends out 18 LNG cargoes in May as business grows
(Bloomberg; May 31) - America’s natural gas is flowing out of the country at a record pace, helping to ease a supply glut at home while tumbling prices for the fuel entice overseas buyers. When the liquefied natural gas tanker Ribera Del Duero Knutsen left Cheniere Energy’s Sabine Pass export terminal in Louisiana late May 30, it became the 18th ship to depart the terminal in May. That’s the highest monthly total since the first vessel sailed from the facility 15 months ago.
Natural gas from U.S. shale basins is flooding the global market, reaching customers from China to the Dominican Republic, and more is on the way as Cheniere prepares to start up a fourth liquefaction unit at Sabine Pass. The shipments are putting the U.S. on the path to becoming a net gas exporter by next year — a welcome development for the nation’s gas bulls, who need exports to bolster prices as mild weather leaves a stubborn stockpile glut intact.
“The pace of exports is pretty impressive,” said Jason Feer, head of business intelligence at ship broker Poten & Partners in Houston. The reputation that Cheniere is building now as a reliable provider of LNG may help it weather a tougher market over the next few years as a global surplus of the fuel balloons, Feer said. Though Cheniere is currently the only exporter from the Lower 48 states, Dominion Energy is scheduled to bring its Cove Point terminal in Maryland online by the end of the year. By 2020, the U.S. is poised to become the world’s third-largest operator of LNG export facilities.
South Korea can rely on LNG during coal plant shutdown
(Platts; May 31) - South Korea will shut eight aging coal-fired power plants for a month on June 1 as part of government-led efforts to tackle worsening air pollution. The country's energy ministry said there would be no power supply shortages in the period due to the availability of more costly but less polluting gas-fired power plants, which are mostly privately run.
"The eight coal-fired power plants aged 30 years or older will be closed June 1-30 as part of efforts to reduce air pollution," the Ministry of Trade, Industry and Energy said. "The temporary shutdown will be held every year in spring when electricity demand is relatively low.” The same eight plants will subsequently be closed for four months March to June during the off-peak spring season each year starting in 2018, the ministry said.
"LNG-based fired plants will get ready to boost electricity production to respond to any power supply shortages," a ministry official said. Operating rates at gas-fired power plants have been below 40 percent since the second half of 2014 due to increased capacity at coal-fired and nuclear power plants and an economic slowdown. South Korea’s coal plants supply 39 percent of the country's total electricity. The balance is generated by nuclear (31 percent), gas (about 19 percent), oil (6 percent) and renewable sources such as hydropower, solar, wind and fuel cells (5 percent).
India’s largest gas producer says fixed price is below production cost
(The New Indian Express; May 27) – India’s state-owned Oil and Natural Gas Corp. says producing natural gas is no longer profitable, as the government-mandated price is significantly below the company’s cost of production. The government in October 2014 settled on a new pricing formula using rates prevalent in gas-surplus nations such as the U.S., Canada and Russia to determine rates in India, a net-importing country. Prices have halved to $2.48 per million Btu since the formula was adopted.
"Natural gas is no more a profitable business because cost of production is very, very significantly higher than current gas prices," said ONGC Chairman Dinesh K. Sarraf. The company lost more than $750 million on its gas business last year. “It does not make economic or commercial sense to invest in new fields or augmenting production from existing ones … if the price it will get is below the cost of production,” he said.
India currently imports half of its gas needs, and Prime Minister Narendra Modi is keen on cutting down the country’s import bill by raising domestic production. ONGC has asked for a review of the natural gas pricing formula. India's largest gas producer is demanding a floor or minimum price fixed at $4.20 per million Btu for the business to make economic sense. ONGC accounts for 80 percent of India’s output of 2.5 billion cubic feet per day.
Incoming B.C. government pledges to stop oil sands pipeline
(Globe and Mail; Canada; May 30) - British Columbia’s new governing coalition on May 30 issued a firm commitment to halt expansion of the Kinder Morgan pipeline or any other line to move raw bitumen through the province, according to an agreement signed by the New Democrats and Greens. Under a pact reached between the parties, they have agreed to “immediately employ every tool available” to stop the pipeline and the resulting tanker traffic increase. There were no details about how that would occur.
The agreement on the oil sands pipeline expansion project was the centerpiece of a deal that will ensure the two parties can defeat the Liberals in a confidence motion and form a new government, which would immediately be at loggerheads with the federal Liberals and the neighboring NDP in Alberta. Earlier in the day, Prime Minister Justin Trudeau made it clear his government was committed to pushing through the project, while Alberta Premier Rachel Notley said there was no stopping the pipeline.
The agreement also spells out a referendum next year on electoral reform and promises to ban corporate and union donations to political parties. Premier Christy Clark said she would not immediately resign but would instead recall the legislature for a confidence vote — though she acknowledged her government appeared destined to fall. Her party was reduced to 43 seats in the May 9 election, one short of a majority, which prompted negotiations to win the Greens’ support. The NDP have 41 seats and the Greens hold 3.
Alberta warns British Columbia not to block oil sands pipeline
(Reuters; May 30) - Canada's energy-rich province of Alberta on May 30 warned its neighbor not to block a Kinder Morgan pipeline project, ratcheting up the inter-provincial political tension. Kinder Morgan plans to more than double the capacity of its Trans Mountain pipeline from Alberta to British Columbia, where two political parties that oppose the project have struck a deal to control government. The project would boost exports of Canada's landlocked crude, a move that would help the country's oil industry.
Alberta Premier Rachel Notley, noting that the federal government has already approved the project, said no one province could unilaterally block the pipeline. "We will use the means at our disposal to ensure that the project is built," she said. The new coalition government in British Columbia has pledged to stop the pipeline, citing the environmental risks. While there is some dispute over whether British Columbia has a formal veto right, it can raise multiple hurdles — such as denying local construction permits — that could effectively make the pipeline impossible to build.
FERC denies request to resume construction work on gas pipeline
(EnergyWire; May 31) - Federal regulators have denied a request to resume tunneling under waterways in construction of Energy Transfer Partners' Rover pipeline, a 713-mile, $4.2 billion project to deliver natural gas to the Midwest and Northeast. The line, which will originate in Pennsylvania and West Virginia and snake across Ohio and into Michigan, won a construction permit in February from the Federal Energy Regulatory Commission. Since then, the developer has reported numerous drilling fluid spills during construction, including a 2-million-gallon spill in wetlands near a river in eastern Ohio.
Earlier this month, FERC officials ordered Energy Transfer Partners to stop drilling activity at certain sites while the company and FERC brought in an independent contractor to assess why the spill happened and how the company might need to change its operations to avoid a recurrence. Less than a week later, the developer sought permission to resume activity at two sites where horizontal directional drilling was being used to cross underneath creeks.
In a notice last week, FERC denied that request. Federal regulators noted that a resumption of drilling at the two sites and other locations along the pipeline path where work has not yet begun would depend on the outcome of the third-party analysis of the project's drilling problems. On a website about the project, Energy Transfers downplays the environmental damage stemming from the drilling fluid spill.
Proposed North Dakota refinery near national park raises objections
(The Associated Press; May 27) - When Meridian Energy Group set out to develop "the cleanest refinery on the planet," it chose a spot in western North Dakota's oil patch near highways, railroads and a national park named for a former president revered for his conservation advocacy. Now a former leader of Theodore Roosevelt National Park, the state's top tourist attraction drawing 760,000 visitors last year, is among those urging officials to deny a permit for the 700-acre refinery due to pollution concerns.
Meridian, formed by a partnership with agricultural interests in North Dakota to develop the refinery, plans to push forward on the $900 million project, which it says will be a model for environmentally friendly technology. The proposed refinery would process up to 55,000 barrels of Bakken crude per day into a variety of fuels. Because of its proximity to the park, it must meet more stringent air quality standards, which the company says it will achieve through the most modern emissions control technology.
"To put an oil refinery within view of the park would be a betrayal of the conservation values of the park's namesake," said retired Park Superintendent Valerie Naylor, an outspoken opponent. "An oil refinery has no business at the doorstep of a national park. We wouldn't allow an oil refinery to be built within view of Yellowstone or Yosemite, and it should be no different for Theodore Roosevelt." Many worry the refinery will add to haze from the region’s coal-fired power plants and vehicles from the nearby interstate.
Equatorial Guinea becomes 14th and smallest OPEC member
(LNG Journal; May 26) - Equatorial Guinea, the West African nation with one operating onshore liquefied natural gas export plant and a floating LNG project being developed by U.K. and international companies, has joined the Organization of Petroleum Exporting Countries as its 14th member. Analysts say few advantages can be seen from joining OPEC, though the move will lead to the oil-producing club taking account of Equatorial Guinea’s 300,000 barrels of daily output, the lowest among OPEC members.
The move comes at a crucial time for U.K.-based Ophir Energy, the licence holder for the Fortuna LNG project offshore Equatorial Guinea, as a final investment decision is imminent. The venture’s other shareholders include the Equatorial Guinea government and a joint-venture of Golar LNG of Norway and oil services company Schlumberger. Ophir intends to produce cargoes using a converted LNG carrier as a liquefaction hull, charging about $6 per million Btu to cover the cost of gas and liquefaction.
The country’s Minister of Mines and Hydrocarbons, Gabriel Mbaga Obiang Lima, reassured investors it would be business as usual. The Fortuna floating LNG project is scheduled for a final investment decision in June, with first gas expected in mid-2020. The development would have a capacity to produce 2.5 million tonnes of LNG per year.
New England’s largest coal-fired power plant closes down
(ClimateWire; May 30) - For Pat Haddad, a good day is when she sees steam rising from Brayton Point Power Station's 497-foot-tall cooling towers. New England's largest coal plant has long powered the economy in her hometown of Somerset, a community of 18,000 people on the south coast of Massachusetts. But her good days are coming to an end. Brayton Point will extinguish its boilers for the final time on May 31. When it does, coal will have all but disappeared from this six-state region of 14 million people. Two small and seldom-used coal plants in New Hampshire will be all that remain.
If President Trump is to fulfill his promise of reviving the coal industry, it will have to be without New England. In 2016, Brayton Point's last full year of operation, coal accounted for 2 percent of the region's power generation. New England policymakers, united by a common electricity market, are increasingly looking to wind, solar and hydro to meet the region's needs. Their task amounts to a test for states seeking to decarbonize their power sectors without compromising reliability or sending electric bills skyrocketing.
Connecticut, Massachusetts and Rhode Island have committed to slashing carbon emissions 80 percent by 2050. The challenges are formidable. Cleaner-burning gas, already 50 percent of the region's power generation, accounts for most of planned power plant additions. Aging coal, nuclear and oil units are retiring at a rapid clip, raising concerns about what will replace them. The spate of plant retirements has brought to a head long-simmering tensions over how to integrate renewables into the system.