Sales contracts would help Novatek raise financing for Yamal LNG
(Reuters; June 4) - Yamal LNG, led by Russia's Novatek, has recently clinched several deals to sell some of its liquefied natural gas output as a prerequisite for much-needed funds that have been hampered by Western sanctions against select Russian companies and executives, the company’s CEO said. Leonid Mikhelson said Russian banks had preliminarily agreed to provide $4 billion in support to the project, which also is seeking financing from Chinese banks and international export credit agencies.
Novatek has announced sales agreements with Shell and French energy company Engie, which has agreed to take 1 million metric tons of LNG per year (about 14 cargoes per year) for 23 years. Mikhelson told reporters on the sidelines of the World Gas Conference in Paris that Yamal LNG will soon strike a sales deal with energy trader Gunvor. Gennady Timchenko, Gunvor’s co-founder and a major stakeholder in Novatek, has long sought to join forces with Novatek to sell LNG in Asia and elsewhere.
Novatek has been courting buyers for its LNG as guaranteed contracts may help the partners obtain financing for the $27 billion development, which is key to Russia carving out a greater share of the global LNG market. The project needs $20 billion in loans for 15 years, Mikhelson said. Novatek holds a 60 percent stake in Yamal, and France's Total and China National Petroleum Corp. each hold 20 percent of the project that is scheduled to start shipping LNG in late 2017.
IEA predicts higher LNG demand in Europe
(EurActiv; June 4) - Europe is set to become a major importer of liquefied natural gas as markets prepare for a flood of new supplies coming from Australia and the U.S., the International Energy Agency said in its annual medium-term gas market report. The report, published June 4, projects a 40 percent rise in global LNG export capacity by 2020, 90 percent of which is expected to come from Australia and the United States.
Demand in Europe is expected to pick up, fueled in part by a move away from coal-fired electricity and a rise of back-up power for renewable energy. Europe’s gas import needs are set to increase by almost one-third by 2020 as a result, the report said, which could be largely covered by LNG. With weaker than expected demand for LNG in Asia, Europe appears in a strong bargaining position to bid for “LNG exports struggling to find a home,” the IEA said.
Europe will prepare energy action plan to diversify gas supply
(EurActiv; June 2) - The European Commission is preparing a “diplomatic energy action plan” due next year to diversify the EU’s natural gas supply sources, with plans for tapping Algeria’s huge unexploited reserves and a comprehensive LNG strategy. Miguel Arias Cañete, commissioner for climate action and energy, has agreed on a “coherent approach” with EU foreign affairs chief Federica Mogherini.
The commission will convey a business forum early next year to analyze the reasons behind Algeria’s chronic under-investment in gas extraction capacity, and possibilities for tapping Algeria’s unexploited reserves — both conventional and non-conventional. The offensive is part of the Energy Union, a project that received a political push from the conflict in Ukraine, exposing the EU’s dependence on Russian gas imports.
At issue is Algeria’s preference for long-term contracts while markets are now more driven by spot prices, Cañete said. EU officials also said investors are often deterred by Algeria’s strict ownership rules, which force foreign companies to engage in a minority joint-venture with the country’s state-owned oil and gas company. An additional major aspect of the EU’s approach will be to make sure Europe’s pipeline networks are interconnected, in order to make way for an expected surge in liquefied natural gas imports. “We think there is a real possibility with LNG,” Cañete predicted.
India asks Qatar for lower LNG prices
(Deccan Herald; India; June 7) – India’s Oil Minister Dharmendra Pradhan has pushed for reduced liquefied natural gas prices charged by Qatar, India's largest supplier, to be more in line with lower global prices of the past year. India pays an average of close to $13 per million for Qatar LNG cargoes, compared with spot-market prices that have been as low as $7. India’s Qatar LNG pricing is linked to the previous 12-month average for oil imports to Japan, with limits based on the average price of the past 60 months.
While this formula cuts down volatility, it does not reflect price drops as quickly or as much as spot pricing. The LNG price floor linked to the average oil price over the past 60 months blocks India from the benefits of lower oil prices of recent months. India buys 7.5 million metric tons a year of LNG (about 360 billion cubic feet of gas) on a long-term 25-year contract, indexed to the moving average of crude prices.
Pradhan made the plea when he called on Qatar's Energy Minister Mohammed Saleh Abdullah Al Sada on the sidelines of the OPEC summit in Vienna on June 4, official sources said. The Qatari minister, sources said, was sympathetic to India’s cause, but wanted the issue negotiated between the companies involved and not the governments. The sources said the high cost of LNG under the long-term contract has pushed users in India’s fertilizer and power industry to cheaper alternatives like naphtha and fuel oil.
India soon to overtake Japan for oil demand
(Bloomberg; June 4) - India’s growing middle class will soon make it the world’s third-biggest oil consumer, reshaping the global energy map as China uses less oil and the U.S. produces more. India will overtake Japan this quarter, International Energy Agency estimates show. The country’s galloping demand growth may eventually surpass China’s, a shift that was unforeseen just a few years ago.
As living standards improve, the number of Indians buying cars and trucks has risen, boosting gasoline use 19 percent in April from a year earlier. The International Monetary Fund predicts the economy will swell by 7.5 percent this year as Prime Minister Narendra Modi institutes business reforms, beating China’s growth for the first time in a quarter-century. India “reminds me of China a decade ago … the demand growth is unbelievable,” said Amrita Sen, chief oil analyst at London-based Energy Aspects.
The country’s unbridled thirst for oil has helped bolster crude prices as they start to recover from a six-year low. It’s a further jolt to the energy market after the U.S. shale revolution pushed Russia out of the top spot for natural gas production and paved the way for the first U.S. LNG exports. The International Energy Agency estimates India will consume about 4.1 million barrels of oil a day this quarter, compared with Japanese demand of 3.8 million barrels a day. “India will be a big center of oil and gas demand growth in the next few years,” said IEA Executive Director Maria van der Hoeven.
Australia’s Woodside may take stake in proposed Texas LNG project
(Bloomberg; June 3) – Australia’s Woodside Petroleum is looking at becoming a partner in a potential $8.5 billion liquefied natural gas project in the U.S., a sign it’s setting its sights on the major leagues. The company’s initial pact with Sempra Energy to develop the Texas terminal shows it’s moving toward a model that looks more like that of energy giants Shell and BG Group, according to UBS Group.
“We see our customers wanting more flexibility,” Woodside CEO Peter Coleman said in an interview in Paris, where he’s attending the World Gas Conference. “We need to broaden our markets, to change the way we offer our products.” The talks for the Port Arthur, Texas, terminal with Sempra follow Woodside’s agreement last year to buy LNG from Cheniere Energy’s proposed Corpus Christi project in Texas.
Woodside also holds a stake in the proposed Kitimat LNG project in Canada and the Wheatstone plant under construction in Australia. Woodside already supplies LNG from the Pluto and North West Shelf projects in Australia. “They can say to customers, ‘You aren’t buying from a specific project, you are buying from Woodside, and we will source that LNG from within our portfolio,’” said Nik Burns, a Melbourne-based analyst at UBS. “It’s attempting to emulate a BG or Shell approach to have multiple sources of LNG.”
Critics play up Indonesian businessman’s role in B.C. LNG project
(National Observer; June 3) - B.C. Premier Christy Clark’s push for a liquefied natural gas industry isn’t going so well. The plan to build coastal export terminals, described as akin to the early days of the Alberta oil sands build-up, is floundering. None of the proposed LNG projects have reached a final investment decision. Some fear this could lead the province to approve a project deal with a company backed by Indonesian billionaire Sukanto Tanoto, a target of critics over tax deals and rainforest destruction.
“We should not, in my mind, be doing business with people like that,” said Patricia Heintzman, mayor of Squamish, B.C., population 17,000. "It’s difficult for the community to have trust that this person will not cut corners or be disrespectful to our environment.” Squamish is the proposed site for Woodfibre LNG, a small plant proposed by one of Tanoto’s companies for former pulp mill land north of Vancouver. The plant would be visible from the Sea to Sky highway between Vancouver and Whistler.
For an environmentally conscious community hoping to become a world-class eco-tourist destination with a post-industrial revival of wildlife — including orcas, herring and bald eagles — the LNG plant doesn’t fit into the Squamish picture. Nearly 2,000 tourism buses a year visit the area. Jammed city council meetings on Woodfibre LNG have flared with angry citizens. The council of nearby West Vancouver — one of Canada’s wealthiest municipalities — unanimously voted to ban LNG vessels in the sound.
Fuel export terminals face resistance in Pacific Northwest
(Portland Business Journal; June 4) - There’s a line running between the oil and coal fields of North America and energy-hungry customers in Asia. And it runs smack dab across the Pacific Northwest. From Coos Bay on the southern Oregon Coast to Prince Rupert, B.C., developers want to build or expand dozens of projects to move liquefied natural gas, oil, coal and other fuels to the West Coast and Asia by road, rail and river.
“We could become a speed-bump in the fossil fuel highway to Asia,” said Eric de Place, policy director for the Sightline Institute, a Seattle think tank. It doesn’t have to be that way, he said during a media briefing June 3 on the impact that fossil fuel infrastructure development could have on the Northwest’s culture and environment. “It’s up to us to decide if that stuff gets extracted, transported and ultimately burned,” he said.
While there’s not a unified effort to halt fossil fuel export projects in the Northwest, de Place said the Power Past Coal and Stand Up to Oil groups are leaders in the fight. In Portland, the Climate Action Coalition that formed to battle a propane terminal has set its sights on higher goals, including a fossil fuel export ban in the region. The Portland Planning and Sustainability Commission recommended the city approve the $500 million propane export terminal so long as the developer pays a $6 million “climate” fee.
Canadian city questions property tax deal for LNG import terminal
(CBC News; June 5) - The New Brunswick city of Saint John and Irving Oil have had informal discussions about possible changes to a 25-year tax deal at Irving's Canaport LNG property, but they did not go well for the city, said Councillor Shirley McAlary. "They [Irving Oil] said … we can't make any changes to it or do anything about the tax deal.” The city council received a report last February suggesting the city might be able to challenge the tax deal since Irving began using the LNG wharf to unload oil last year.
The 2005 tax deal says it is to apply to property "solely for the receiving and containment of liquefied natural gas." But last year, Irving Oil constructed an oil pipeline on the site so it could use the LNG wharf to handle oil shipments as a backup to its existing loading buoy. Over the past year, Port Saint John records show 12 ships have unloaded at the LNG wharf and six of them were oil tankers. The 2005 deal set property taxes at $500,000 a year; otherwise, the tax bill would be more than $5 million a year.
McAlary said a city attorney met with Irving Oil lawyers and reported that the company believes the tax deal is not materially affected by oil cargoes or the pipeline. "They have said that there is a small possibility that maybe part of the jetty or something we could get a few tax dollars on, but they feel the pipeline, at this point in time, we can't do anything about that," she said. Canaport opened as an import terminal in 2009, though the North American shale gas boom has limited the need to bring in gas from overseas.
Possible LNG cargo traffic on lower Fraser River attracts critics
(The Province; Vancouver; June 3) - Up to 120 smaller LNG delivery vessels a year could ply the south arm of British Columbia’s Fraser River if a project goes ahead to export liquefied natural gas from a plant just across the river from Vancouver, B.C. The National Energy Board has approved the LNG exports but the project — about 13 miles upriver from where the Fraser empties into the Pacific Ocean — requires a $175 million docking facility that is still undergoing a B.C. environmental assessment.
“You’re dealing with one of the world’s greatest salmon rivers. I’m certainly concerned about the explosive radius of any of these large ships,” said Member of Parliament Fin Donnelly, an opposition party critic for West Coast fisheries and oceans. Export approval was granted WesPac Midstream to ship from the liquefaction plant owned by FortisBC. The 44-year-old plant is undergoing a $400 million expansion. FortisBC looks to start deliveries to its own customers late 2016 — separate from WestPac exports.
FortisBC is looking at truck deliveries to the local market, while WestPac is planning for larger seaborne deliveries. The expanded plant would be small. With its expansion, the FortisBC plant would be capable of liquefying more than 40 million cubic feet of gas per day, compared to 1 billion to 2 billion cubic feet a day at some of the larger projects proposed for northern B.C. Malcolm Brodie, mayor of Richmond, B.C., just north of the plant, said he is deeply concerned with any further industrialization of the Fraser River.
Peru in royalty dispute with Shell over LNG cargoes
(Reuters; June 3) – PeruPetro, which oversees oil and gas contracts in Peru, is in a dispute with Shell over royalties related to the export of seven liquefied natural gas cargoes last year, the regulator said, adding it that hoped to reach a deal soon or would resort to arbitration. Supplies from Peru's single-train LNG export plant are handled by Shell, which acquired the asset from Spain's Repsol in 2014. The plant opened in 2010.
Under the contract, Shell must pay the Peruvian government a royalty based on the final destination price of where it sells the LNG, PeruPetro communications manager Oscar Miro Quesada told Reuters. But Shell in 2014 exported seven cargoes to Mexico, paying Peru a royalty based on the U.S. gas futures benchmark, one of the lowest prices in the world. It then re-sold the LNG to be exported to Asia, pocketing a much bigger sum and not sharing the proceeds with Peru, Miro Quesada said.
"In 2010 there were 10 cargoes that Repsol sold and did not share the full royalties. Shell did something similar last year. Right now Shell and PeruPetro are talking to solve this," Miro Quesada said. He could not give an indication of how much Peru wants Shell to pay. Shell did not immediately respond to requests for comment.
EPA study finds no widespread damage from fracking
(Wall Street Journal; June 5) - Fracking isn’t causing widespread damage to the nation’s drinking water, the EPA said in a long-awaited report released June 4. The four-year study — the U.S. government’s most comprehensive examination of the issue to date — concluded that hydraulic fracturing, as being carried out by industry and regulated by states, isn’t having “widespread, systemic impacts on drinking water.”
However, the EPA said there were a small number of contaminated drinking wells and highlighted potential vulnerabilities, including wastewater disposal and construction of durable wells. “Hydraulic fracturing activities in the U.S. are carried out in a way that have not led to widespread, systematic impact on drinking water,” said Thomas Burke, a deputy assistant administrator at the EPA. “The number of documented impacts to drinking water is relatively low when compared to the number of fractured wells.”
While the report doesn’t recommend any specific action, it is reinvigorating a years-long debate over fracking. Opposition has centered on the use of chemical-laced water and the potential to contaminate drinking water aquifers. Extensive scientific review — and the EPA study — haven’t borne out the worst of those fears. Some critics now focus less on water contamination and more on climate change, community health and the proliferation of earthquakes possibly tied to injecting fracking wastewater underground.
Manitoba nickel mine turns frack sand from by-product to a ‘bonus’
(Financial Post; Canada; May 31) - Victory Nickel executives didn’t initially see the value in frack sand, a by-product of one of the company’s mining projects in Manitoba for which there has been a “meteoric rise in demand,” according to a new U.S. Geological Survey report. Victory’s Minago mine in Manitoba was initially planned as a nickel mine, but company executives now say they understand the added value of the 11.2 million tonnes of frack sand the project can produce as a by-product.
“It is a bonus,” Victory’s vice president of public affairs Sean Stokes said. “It turned out to have significant value.” The company has since moved into the market and opened a frack sand processing facility in Alberta. A study published May 27 by the Geological Survey catalogues the known deposits of frack sand (high-quality silica sand) in the U.S. and Canada and describes how demand for the commodity has skyrocketed in conjunction with widespread hydraulic fracturing for oil and gas in North America.