Hawaii governor restates opposition to LNG, support for renewables
(Pacific Business News; Honolulu; Dec. 11) - Hawaii Gov. David Ige reiterated his stance on liquefied natural gas, saying that bringing in the fuel as a replacement for oil for power generation in Hawaii is an unnecessary diversion of resources, and that the focus should be entirely on renewable energy investments, he told Pacific Business News in an exclusive interview this week.
In August at an energy conference in Honolulu, Ige said the state does not need LNG as part of its energy future, and that renewable energy should be the state’s main focus. State statute sets a renewable energy goal of 100 percent renewables by 2045. “If we can make investments that help us arrive at that, we have fewer emissions because we’re burning less fuel and we believe that if we burn less fuel, because we have more renewables, we would get way more value,” the governor said this week.
“I think LNG as a transition is an unnecessary diversion of resources. LNG is still a fossil fuel. … The community would be better off not getting diverted and being focused on 100 percent renewable energy because that goal in and of itself is consuming and will require us to make investments that are better for the long run.” Regardless of the governor’s comments, Hawaii Gas and Hawaiian Electric are continuing with their separate plans to import bulk shipments of LNG to the islands as early as 2019.
Origin Energy, Conoco LNG plant in Australia ready for first shipment
(Sydney Morning Herald; Dec. 11) - After more than seven years of planning and construction, production has commenced at Origin Energy's Australia Pacific LNG project in Queensland — but the rout in oil prices means it will initially be barely profitable. Start-up of the first LNG train at the $24.7 billion project is a major milestone for the Queensland gas export industry and puts the APLNG venture on track to export its first cargo by year-end, only a few months behind schedule.
While the first liquefaction train at the plant is ready to start deliveries, construction of the second train is continuing, with start-up next year. Australia’s Origin holds 37.5 percent of the Queensland project, with ConocoPhillips also owning 37.5 percent and China’s Sinopec at 25 percent. The region's first LNG exports started in January, from a BG plant, while Santos' $18.5 billion LNG venture started shipments in October. The three plants are the world’s first to export LNG made from coal-seam gas.
Depressed oil prices mean cash flows from Origin’s APLNG project will at least initially be much lower than originally anticipated. Oil prices, which determine the project’s gas prices, are near the bottom end of the range that Origin says it needs to get any distributions from the project after paying financing costs. UBS analyst Nik Burns said the fact that all the coal-seam gas ventures require ongoing drilling to support production means their break-even point is higher than for conventional LNG projects.
Poland receives first LNG shipment from Qatar
(The Associated Press; Dec. 11) - Poland has received its first delivery of liquefied natural gas from Qatar as it tries to diversify its energy sources and cut the price of pipeline gas imports from Russia. The giant LNG ship Al Nuaman, which carries some 200,000 cubic meters of liquefied gas, arrived in the port of Swinoujscie on Dec. 11, after 21 days of travel from Qatar.
The gas will be used to start operations at the Swinoujscie LNG import terminal, which should be fully operational in mid-2016. The almost-$700 million project is about two years behind schedule. It is the biggest such terminal on the Baltic Sea and one of the largest in Europe. Poland’s Maritime Affairs Minister Marek Grobarczyk said the port is important for diversifying Poland's energy sources and to help in negotiating lower gas prices with Russia.
Poland consumes almost 600 billion cubic feet of gas a day, and in 2014 met about one-quarter of its needs with domestic production, buying the rest mostly from Russia.
Australia LNG project will spend $2 billion to add gas reserves
(Bloomberg; Dec. 10) - BP, Chevron and the other partners in Australia’s largest oil and gas venture approved a $2.7 (U.S.) billion expansion in the project, the fourth major gas development at the North West Shelf in the past seven years. The Greater Western Flank Phase 2 off the northwest coast will develop 1.6 trillion cubic feet of gas from six fields, the operator of the North West Shelf, Woodside Petroleum, said Dec. 11. The expansion will add gas supply but will not include any additional liquefaction capacity.
The project will start production in the second half of 2019, Woodside said. The North West Shelf, which accounts for more than a third of Australia’s oil and gas production, represents investments totaling more than $34 billion, according to the project’s website. The original LNG facility, with three production trains, started operations in 1989, adding an additional train each in 2004 and 2008, with total annual production capacity now at more than 16 million metric tons.
The six participants own a 16.67 percent share each. In addition to Woodside, BP and Chevron, the partners are BHP Billiton, Shell and Japan Australia LNG, which is a joint venture between Mitsubishi Corp. and Mitsui & Co.
Singapore ready to start market for LNG futures contracts
(Wall Street Journal; Dec. 10) - In a chilly market for frozen natural gas transported by ship, Singapore is working to entrench itself as the region’s primary trading hub for the energy source. The city-state’s main market operator, Singapore Exchange, is set to launch cash-settled futures and swaps contracts for liquefied natural gas as early as January, it said this week. The new contracts, which have received regulatory approval, will allow LNG traders to hedge the price up to a year ahead, the exchange said.
They will be the first contracts based on Singapore’s new benchmark price for LNG, known — after the city’s famous cocktail — as the Singapore SLInG. If the benchmark and market catch on, they could bring transparency to the opaque world of LNG trading in Asia, where demand for this easily transportable form of gas is expected to grow quickest in the coming years. Most LNG has been bought and sold in Asia on long-term contracts at prices linked to crude oil benchmarks like Europe’s North Sea Brent.
Asian traders of LNG are shifting from oil-link pricing to a more complex hybrid system that also links to U.S. gas prices, data from research firm Wood Mackenzie shows. But they have long called for a regional benchmark price, to create a fairer market for buyers and sellers. “It’s been an Asia-wide movement which says, ‘Why should Asia, which consumes 80 percent of the world’s LNG, be pricing its gas molecules off a little field in the North Sea?’” said Michael Syn, head of derivatives at Singapore Exchange. He said the exchange is responding to demand for a regional benchmark price in Asia.
With spare import capacity, Europe looks likely to buy more LNG
(Reuters; Dec. 10) - European utilities are expected to take center stage when a wave of liquefied natural gas hits Europe starting next year, as long unprofitable import capacity soars in value and bolsters the utilities’ clout in the global LNG trade. Underused gas import terminals in Britain, the Netherlands, Belgium, France and Spain, where the majority of import rights are held by utilities, are set to see more action, assuming gas prices can stay competitive with other fuels.
Utilization at Rotterdam's GATE terminal, for example, is expected to total just 35 billion cubic feet in 2015, a fraction of its 420 bcf annual LNG import capacity. European LNG imports are set to more than double from 2015 to 2017, said consultancy Energy Aspects. That promises to bolster the value of import capacity rights which utilities and others hold to deliver LNG into Europe, turning around recent annual losses in the millions of euros due to lack of use.
"Capacity is becoming traded like a commodity now, so as demand increases the price per import slot will rise," said one trader holding capacity at a European terminal. "The capacity holder will make money on selling the slot but also on selling the cargo of LNG into Europe's gas markets." Europe, with its available import capacity, can better absorb additional gas supply than other regions. Australia and the U.S are among the suppliers looking to sell more gas amid a market glut. If prices are low enough, Europe will buy.
Teck will try LNG-fueled haul trucks at British Columbia coal mine
(LNG Global; Dec. 9) - Teck Resources announced Dec. 9 it is piloting the use of liquefied natural gas as a fuel source in six haul trucks at its Fording River steelmaking coal operation in southeast British Columbia, marking the first use of LNG as a haul truck fuel at a Canadian mine site. Teck said the use of blended LNG/diesel fuel haul trucks has the potential for significant environmental benefits and cost savings.
The company said the switch could potentially reduce fuel costs by more than $20 million annually if LNG is adopted throughout the mine’s truck operations. FortisBC is transporting and supplying LNG to the mine site from its plant near Vancouver, more than 600 highway miles to the west. Teck, with support from FortisBC, has upgraded its truck maintenance shop, installed engine conversion kits and set up fueling facilities.
TOTE awaits completion of second LNG-fueled container ship
(New York Times; Dec. 8) - With its cavernous holds and gleaming superstructure, the 730-foot Perla del Caribe, nearing completion at a shipyard in San Diego, looks like any midsize container ship. But two huge steel tanks at the stern show it’s no typical vessel. The bulbous tanks, 90 feet long and painted an eye-catching green, together will carry half a million gallons of liquefied natural gas as the primary fuel when the ship begins moving cargo on a weekly basis from Jacksonville, Fla., to Puerto Rico early next year.
While LNG has been used for some ferries and other vessels, the ship and a second, identical one that began plying the Jacksonville-San Juan route last month, are the first container ships to use the fuel. Cleaner-burning gas can cut carbon dioxide emissions by 15 percent to 20 percent compared with the heavy tarlike fuels used on most ships.
“We came to a decision that rather than putting Band-Aids on things, we should look for ways to address core issues of maritime emissions,” said Peter Keller, executive vice president of TOTE, the shipping company that built the two vessels at a cost of about $350 million. TOTE also plans to convert its two ships on the Tacoma, Washington-to-Anchorage, Alaska, freight route to run on LNG.
Sabine Pass LNG plant wants to add truck-loading bays
(Bloomberg; Dec. 4) - Sabine Pass Liquefaction, a subsidiary of Cheniere Energy, has filed an application with the Federal Energy Regulatory Commission to expand its liquefied natural gas production and export plant under construction in Louisiana to include two loading bays for tanker trucks or insulated tanks that could be moved by truck. If approved, construction would take about a year, the company said.
The project would enable Sabine Pass to serve “a relatively new market segment in which there has been rapid domestic growth on account of LNG’s distinct advantages as a fuel for transportation and other industrial and heavy-engine applications,” the company said in its application. The LNG plant is expected to start overseas shipments early in 2016.
Marcellus Shale supply crowds out other gas from Northeast markets
(Bloomberg; Dec. 10) - For proof that the U.S. is about to become a net exporter of natural gas, look at what’s happening in the Northeast. The region extending from Maine to New Jersey and Pennsylvania has been a net exporter of gas at times this year, knocking down the region’s average pipeline gas imports from other parts of the U.S. and Canada to just 300 million cubic feet a day in 2015, according to data provider PointLogic Energy. That would be the lowest level back to 2007, if the trend persists.
The data underscore how the flood of gas from the Marcellus and Utica shale formations in the eastern U.S. is transforming the country’s role in the global market. “The Marcellus has really come into its own,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York. “There’s certainly no shortage of gas anywhere in the U.S now, and that means exports are around the corner.”
The U.S. is on course to become a net gas exporter in 2017, Jan Stuart, global energy economist at Credit Suisse Group in New York, said in a note to clients Dec. 9. The country’s production may climb 6.3 percent this year to 79.58 billion cubic feet a day, reaching a record for the fifth consecutive year, government data show. Natural gas futures have collapsed under the weight of the supply glut. Meanwhile, the first liquefied natural gas export terminal in the Lower 48 states soon will open in Sabine Pass, La.
Oil inventories push traders to charter tankers for at-sea storage
(Wall Street Journal; Dec. 11) - As the world’s oil supply continues to swell, the market is running out of places to store all that crude. With little room left to stockpile oil, more crude could soon hit the market adding further pressure to an oil price that is trading at seven-year lows. Storage in Western Europe is running at 97 percent of capacity. In the U.S., stockpiles are around their highest level in more than 80 years. In South Africa, one of the world’s largest storage hubs is already full, according to Citi Research data.
Consulting firm PIRA Energy Group estimates that by the end of 2015 global commercial inventories will hold 500 million barrels in surplus above typical levels for this time of this year. Oil markets are likely to run out of onshore crude storage in the first quarter of 2016, PIRA said. At Cushing, Okla., the trading hub for West Texas Intermediate crude, stockpiles have exceeded 80 percent of working capacity. The squeeze on space has left investors looking to oil’s last storage resort: the sea.
Traders have already chartered supertankers capable of storing a combined total of more than 30 million barrels of oil, the highest level since 2010, according to London-based consultancy Energy Aspects. Sea-borne storage is more expensive, however, providing a further headache for oil investors. Energy Aspects estimates that storing a barrel of oil on a tanker costs around $1.30 per barrel per month. Storage costs at Cushing run at around $0.40 a barrel.
Oil companies’ stock drop $230 billion in value in one week
(Bloomberg; Dec. 11) - Investors around the world have seen $230 billion wiped off the value of oil companies in the week since OPEC sent crude prices plunging to a seven-year low by abandoning its output limit. Companies producing, refining, piping and exploring for oil, along with those that provide them with services, had a market value of about $3.73 trillion as of Dec. 11, compared with $3.96 trillion on Dec. 3, the day before the Organization of Petroleum Exporting Countries’ meeting in Vienna.
ExxonMobil, the world’s biggest oil company, lost $11 billion of its value and PetroChina more than $16 billion, according to data compiled by Bloomberg. Crude’s slump has lasted for more than 18 months, making it one of the longest downturns in decades and forcing companies to slash spending, reduce their workforce and delay projects. Energy companies are the worst performers in the MSCI World Index this year, even below mining companies that have suffered a price slump from iron ore to copper.
“Companies must repeat the same size of cuts they’ve already announced to be able to cope with oil prices this low,” said Alexandre Andlauer, a Paris-based oil industry analyst with AlphaValue. There will be “further lay-offs to come with oil at $40 a barrel,” he said. The MSCI World Energy Sector Index, a measure of 107 companies, is down more than 23 percent this year, heading for the steepest loss since 2008. Chevron has lost 20 percent this year while Shell, Europe’s largest oil producer, is down 33 percent.