Australian LNG exports on the rise, but Japanese demand slipping
(Platts; Jan. 10) - The Australian government has increased its forecast for LNG exports for fiscal 2016-2017 (July-June) to 52.4 million metric tons, estimating 67.3 million tons for 2017-2018, the Department of Industry, Innovation and Science said Jan. 9. The 2017-2018 estimate is about 82 percent higher than the country’s 2015-2016 liquefied natural gas exports. Several LNG plants are nearing the final stages of construction, and when completed Australia will have an annual export capacity of 87 million tons.
Increased sales to Asia are expected to drive the rise in Australia's export volumes, the department said. Despite the expected rise in Australia's exports, however, Japan's LNG imports are forecast to fall by 2.1 percent per year to 80 million tons in 2018, the report said. "Subdued energy demand, a forecast decline in thermal coal prices, the expansion of renewable [energy] capacity, and the restart of nuclear capacity are all expected to weigh on [Japan's] LNG imports," it said. Platts is more pessimistic than the Australian government, with its 2018 forecast for Japan’s demand at 72 million tons.
The value for Australia's LNG exports is forecast to rise from an average $6.60 per million Btu in 2015-2016 to $6.70 in 2016-2017, then $8 in 2017-2018, the government report said. "The recent rally in spot prices is expected to be temporary, with the entry of new capacity in the U.S. and Australia ensuring that the market remains well supplied."
So far, U.S. LNG has not hurt Russia’s gas sales in Europe
(Reuters; Jan. 9) - Russia looks set to grab more market share in Europe's natural gas sector in the first half of this year after gaining ground in 2016 despite European Union efforts to diversify away from Moscow's energy supply during a global glut of liquefied natural gas. With the United States finally breaking the seal on its LNG exports last year, analysts envisaged the oceangoing tankers challenging Russia's land-locked pipelines supplying Europe in a race that would send gas prices ever lower.
But the United States sent only two shipments to Europe in 2016, analysts said. Most of the U.S. LNG went to Asian and South American buyers, earning higher netback values than available in Europe. Industry consultants expect LNG to stay scarce in Europe for at least the next six months, giving Russia's Gazprom — already supplying a third of Europe's gas needs — free rein to capture more market share.
"They (Gazprom) are now in a position to keep raising exports as European gas demand grows, domestic production falls, and Gazprom's cost-competitive sales strategy keeps LNG flowing to other regions," said Thierry Bros, a senior research fellow at the Oxford Institute of Energy Studies. However, Gazprom will not get a free pass indefinitely, as the situation begins to turn again from the middle of 2017. At that point, new LNG production growth from the U.S. and Australia should start spilling over into Europe as other markets will struggle to absorb the new supplies fast enough.
Hereditary chiefs file in court against LNG project in B.C.
(Globe and Mail; Jan. 10) - Two Gitxsan hereditary chiefs have filed a court challenge in a bid to block Pacific NorthWest LNG’s plans to construct a massive export terminal near Prince Rupert, B.C. The two leaders of the Gwininitxw and Luutkudziiwus house groups are asking the federal court to quash Ottawa’s approval of plans to build a liquefied natural gas terminal on Lelu Island. Yvonne Lattie of the Gwininitxw and Charlie Wright of Luutkudziiwus say the project will harm salmon habitat.
They filed an application on Jan. 10 for a judicial review of the federal cabinet’s decision in September to give the environmental go-ahead. In October, the Gitwilgyoots tribe of the Lax Kw’alaams First Nation, the Gitanyow hereditary chiefs and SkeenaWild Conservation Trust became the first three organizations to seek a court order to block the cabinet’s approval of Pacific NorthWest LNG. The latest legal filing marks the fourth application in court against the project led by Malaysia’s state-owned Petronas.
The key concern is the threat to Flora Bank, a sandbar next to the proposed export terminal site on Lelu Island in the Skeena River estuary. Pacific NorthWest LNG reportedly is looking at moving the LNG loading berths to another site on a nearby island to avoid building any structure over Flora Bank.
Winter demand pushes Europe to pay higher prices for LNG
(Bloomberg; Jan. 9) - The year has started off with a very cold snap, forcing Europe to pay a premium to stay warm. European countries from France to Greece are losing out in a search for liquefied natural gas cargoes amid a freezing spell, as ships sail to buyers in Asia willing to pay a higher price to meet peak winter demand. The lack of LNG has prompted France’s power grid to call for more fuel to be supplied by southern import terminals and to issue the highest warning level on supplies for a second day.
Shortages were experienced in Turkey, and Spain also boosted gas usage. It’s a sign of the times. The expansion of LNG supply has allowed the fuel to break out of conventional regional markets and become a global commodity. But while the growth has evened out access to gas worldwide, it has hurt some buyers by ratcheting up competition among consumers during periods of increased demand.
“It’s amazing what a bit of cold weather does,” said Trevor Sikorski, an analyst at Energy Aspects. “All markets are wanting gas at the moment.” Buyers in northeast Asia, the biggest consumer, are paying a two-year high of about $9.90 per million Btu for spot LNG cargoes shipped from Qatar or the U.S., meaning European countries, where prices have typically been lower, need to pay more. Hub prices in France’s southern hub almost doubled over the past month to about $11.40 per million Btu on Jan. 9.
Jordan bought 48 LNG cargoes in 2016; first full year of imports
(Natural Gas World; Jan. 9) - Jordan imported more than 180 billion cubic feet of natural gas as LNG in 2016 — 48 cargoes — the official Petra News Agency reported Jan. 8. The fuel was imported through a floating LNG terminal at Aqaba, which became operational in July 2015.
Jordan’s National Electric Power Co. has decided to increase its LNG imports as part of its shift to less expensive natural gas than diesel and heavy fuel for power generation. Jordan signed a memorandum of understanding in 2016 to buy LNG from Algeria.
Latest Chinese plan calls for slower energy demand growth
(Platts; Jan. 9) - China has set its energy consumption annual growth target at an average 2.5 percent over 2016-2020, 1.1 percentage points lower than the 3.6 percent annual gain in 2011-15, according to the country's newly released 13th Five-Year Plan. The lower growth rate was set because of China's "new normal" economic growth, deputy head of the National Energy Administration Li Yangzhe told reporters Jan. 5.
Meanwhile, the country also aims to reduce energy intensity by 2020 — energy consumption per unit of gross domestic product — by more than 15 percent from 2015, according to a joint release by the energy administration and National Development and Reform Commission. Another aim is to raise the share of non-fossil fuels of total energy consumption to more than 15 percent and the share of natural gas to 10 percent from 8 percent, while pushing down coal consumption to below 58 percent from 62 percent.
In addition, Beijing is encouraging the replacement of oil-based vehicle fuels with electric and natural gas, while increasing energy efficiency. China also plans to invest $360 billion in clean and renewable energy by 2020 to reduce air pollution.
Papua New Guinea sends in police to help protect LNG project
(Australian Broadcasting Corp.; Jan. 9) - The Papua New Guinea government has deployed troops and police to stop gun violence in the country's natural gas production region. About 150 police and soldiers are being deployed in Hela Province in the highlands in response to a spike in tribal violence that has left dozens of people dead in recent months. The ExxonMobil-led natural gas production and LNG export project started operations in 2014.
The security forces have been told to seize and destroy illegal weapons. The call-out is to secure the gas project, which has been disrupted recently by blockades from disgruntled landowners. Landowners in the area are waiting for royalties, development levies and dividends to be paid, and some claim the government is not honoring the original project agreement. But the government says the payments have been held up because some landowners won a court order blocking identification of beneficiaries.
"We've got a law and order problem up in Hela," said Isaac Lupari, the chief secretary to the government. "Services have been affected as a result, kids are not going to school, mums are not getting medical attention." Securing the LNG project was also a critical aim of the deployment, he said. "We've got a very important project that is located there. … It supports the economy, employs thousands of Papua New Guineans."
Busy year for construction deliveries to LNG project in Russian Arctic
(Barents Observer; Norway; Jan. 10) - According to customs authorities in the Yamal-Nenets region of the Russian Arctic, the value of the declared goods offloaded at the port of Sabetta in 2016 increased five-fold from the previous year. The increase comes as construction proceeds at the Yamal LNG plant. Russia’s Novatek and its French and Chinese partners intend to start up gas production in late 2017.
A total of 120 ships with goods subject to customs declaration docked in Sabetta in 2016, more than twice the number of 2015. They delivered a total of 505,000 tons of goods with a value of $5.2 billion, the Russian news agency reported. The cargoes came from China, Belgium, Germany, Egypt, Korea, the U.S., Finland and Spain. Separate from the privately managed LNG plant, the Russian government has invested an estimated $1.16 billion in developing port and airport infrastructure in the region. More than 22,000 people now work in Sabetta.
EIA raises U.S. natural gas price forecast to $3.55 in 2017
(LNG World News; Jan. 11) - The U.S. Energy Information Administration has raised its forecast for 2017 Henry Hub natural gas spot prices. In its latest Short-Term Energy Outlook, the agency said the U.S. benchmark would average $3.55 per million Btu in 2017, up from $2.51 in 2016. The estimate is up 28 cents from EIA’s December outlook.
“Higher average prices in 2017 reflect price increases in the second half of 2016 because of a hot summer and declining production, which reduced the inventory excess compared with the previous five-year average,” the EIA said. In addition, the agency forecasts that U.S. dry natural gas production in 2017 will be down about 1 percent from the 2015 record of 74.14 billion cubic feet per day.
In addition, gas exports are expected to continue growing. Pipeline gas exports increased by almost 22 percent to 5.9 bcf a day in 2016, largely because of rising exports to Mexico. The EIA forecasts pipeline exports to reach 6.3 bcf a day by 2018. Liquefied natural gas exports rose from essentially zero in 2015 to an average of 0.5 bcf a day in 2016 with the start-up of Cheniere’s Sabine Pass LNG plant in Louisiana. The EIA expects that number to climb to 1.4 bcf a day in 2017 and 2.6 bcf a day in 2018.
Largest coal power plant west of Mississippi River could close
(ClimateWire; Jan. 9) - The operator of the Navajo Generating Station, the largest coal plant west of the Mississippi River, is in talks to close the Arizona facility. Low natural gas prices prompted conversations on the 2,250-megawatt plant's future, said Scott Harelson, spokesman for the Salt River Project, the facility's operator. "The owners are now exploring every possible scenario in relation to the plant's future," he said. The plant could close as early as this year, or stay open. A decision is expected by spring.
Coal plants nationwide have struggled to remain competitive with their natural gas counterparts in recent years. But many of those facilities were older and less efficient. The Navajo Generating Station is relatively new by industry standards. Its three units came online in the 1970s and serve as the power supply for the Central Arizona Project, which delivers water from the Colorado River to Phoenix and Tucson.
The plant is located on Navajo land and has long been a major employer for the Navajo Nation. The facility and associated Kayenta coal mine, operated by Peabody Energy, employ almost 1,000 people. A Peabody spokeswoman said the company is in consultation with the tribe and federal government over the mine and the plant’s future. The Navajo Generating Station has also been a longtime target of environmentalists, who say it is among the dirtiest power generators in the country.
Opponents fight tax breaks for petrochemical plant in Texas
(EnergyWire; Jan. 9) - The small cities surrounding the site of a proposed $10 billion petrochemical plant near Corpus Christi, Texas, are preparing for major changes. ExxonMobil and Saudi Basic Industries Corp. have selected a 1,400-acre tract between Portland and Gregory as their preferred site, despite community protests that the project is too big and too risky. The plant is expected to generate 11,000 construction jobs and 600 permanent positions, as well as millions of dollars in annual property taxes.
The project's future is in the hands of the San Patricio County Commission and Gregory-Portland School Board, which will consider substantial 10-year property tax breaks that ExxonMobil and SABIC say are necessary to start building. School Board President Randy Eulenfeld said he's weighing the benefits of new jobs and more money for schools against the character alteration the two towns are likely to experience. "It's about a quiet community ... becoming more industrial," Eulenfeld said.
Exxon and the Saudi company said they selected the site because of its proximity to Texas shale fields, ports, railways and highways. The site would host the world's largest ethane cracker, which converts gas into ethylene, a key ingredient in most plastics. The plant could open as soon as 2021 Portland Citizens United collected more than 2,500 signatures for its online petition to reject the tax breaks. Gregory-Portland Schools Superintendent Paul Clore said he supports the project after touring an ExxonMobil petrochemical facility in Baytown, Texas. "All of it seems to coexist without conflict.”
Chile will import more LNG to fuel power plant for copper mines
(Platts; Jan. 6) - Shipments of LNG to northern Chile will rise more than 40 percent this year as a new gas-fired power plant begins supplying local copper mines, Mejillones CEO Jean-Michel Cabanes said Jan. 6. With the start of the plant, the ENGIE-controlled Mejillones LNG terminal is scheduled to receive 10 cargoes this year, up from seven in 2016, Cabanes said. That represents about half of the terminal's capacity. Mejillones is a joint-venture between French-Belgium ENGIE and Chile’s state copper company.
The 518-megawatt combined-cycle power plant began commercial operations in late December. Built and operated by Korea Southern Power Co. and Samsung C&T, the $600 million plant will supply electricity to BHP Billiton's copper mines in the region, including the giant Escondida pit, the world's largest by production.
The plant was initially expected to provide additional baseload capacity to meet rapidly rising demand from Chile's mining industry. However, the halving of the price of copper between 2011 and 2016 lead to the cancellation of numerous mine projects. During the first 11 months of the year, LNG accounted for 9 percent of electricity generated on northern Chile's grid, compared to 78 percent coal, 6 percent diesel and 4 percent solar.
New oil discoveries last year lowest since 1950s
(Bloomberg; Jan. 10) - The amount of oil discovered last year worldwide was the lowest since the 1950s as explorers slashed spending amid the worst downturn in a generation, according to Wood Mackenzie. The good news: It can probably only get better from here. Oil companies found only 3.7 billion barrels of so-called conventional crude in 2016, 14 percent less than the previous year and the lowest amount since 1952, according to updated figures from the Edinburgh-based global energy consultant.
The results for both 2016 and 2015 are better than forecast a few months ago, but still put discovered oil volumes at little more than a tenth of the yearly average since 1950. Spending on exploration has been gutted since oil prices started falling in 2014 and may drop further this year, said Andrew Latham, Wood Mackenzie’s vice president for global exploration. However, by making operations more efficient, focusing on easier targets and paying lower fees to contractors, oil companies are getting more for their money.
Coupled with renewed industry optimism sparked by an OPEC deal to curb output and boost prices, exploration activity could increase. “We’ll probably see 2016 as the turning point, the low point,” Latham said. “There will be a lag of at least a year, but we do think that investment will start to grow again and volumes will come back.” Companies cut spending on exploration to about $40 billion last year from $100 billion in 2014, and could invest as little as $35 billion in 2017, he predicted. Explorers are now passing on the most difficult wells in very deep reservoirs or harsh environments such as the Arctic.
B.C. adds its approval to oil sands pipeline expansion
(Vancouver Sun; Jan. 11) - The B.C. government has granted provincial environmental approval for Kinder Morgan to triple the capacity of its Trans Mountain oil pipeline from Alberta to Burnaby. B.C. Environment Minister Mary Polak announced the environmental assessment certificate Jan. 11. She said the province has placed 37 additional conditions on the pipeline on top of the 157 issued by Canada’s National Energy Board earlier this year.
The province concluded that while the $6.8 billion project will have adverse effects on vegetation, old-growth forest, wildlife and wildlife habitat, the federal and provincial conditions “will effectively manage” the concerns. B.C. had to undertake its own environment assessment after a court ruled that the province could not simply assign the matter on such projects to the National Energy Board. Canadian Prime Minister Justin Trudeau approved the project federally in late November.
The expansion would twin an existing route from Edmonton to Burnaby, adding 610 miles of new pipeline and tripling Kinder Morgan’s oil capacity to 890,000 barrels a day. If the company clears the many hurdles still in its way, it could begin shipping in late 2019. The pipeline still faces fierce local opposition from Metro Vancouver politicians and environmental groups, who say the environmental risk for a catastrophic oil spill offshore is too great. Among the province’s conditions is a requirement to provide opportunities for First Nations to participate in construction and monitoring of pipeline.