Japan faces challenges to meet nuclear power target

(Natural Gas Daily; Jan. 3) - Japan’s target for the return of nuclear power to provide more than one-fifth of its electricity supply in 2030 faces challenges, including mounting public opposition, aging reactors and limited storage space for spent fuel. This means fossil fuels are likely to make up a larger proportion of the country’s power mix in 2030 than the Ministry of Economy, Trade and Industry expects.

The share of natural gas in Japan’s power mix is projected to fall from about 45 percent currently to 27 percent in 2030, according to the ministry. While it is clear that demand for gas by Japan’s power sector will decline over the coming years as the country’s overall power demand falls and the share of nuclear and renewables in the mix grows, nuclear will struggle to meet its projected 20 to 22 percent share — and a mixture of LNG and coal will likely plug the gap at a higher percentage than the ministry expects.

Nuclear provided less than 1 percent of Japan’s power in 2015 and will struggle to supply 20 percent in 2030 because of the age of many Japanese reactors. About half of the 25 nuclear reactors that have applied for permission to restart from the Japanese Nuclear Regulation Authority will be more than 40 years old in 2030. If the government grants more license extensions, nuclear could meet its targeted power demand, but extending the life of reactors is not without its problems of public opposition and dwindling storage space for spent nuclear fuel.

Read more: Oil and gas news briefs Jan. 5, 2017

Japanese, European utilities in talks for joint LNG procurement

(Nikkei Asian Review; Jan. 1) - Tokyo Electric Power and Chubu Electric Power are in talks with about 10 European energy companies over possible joint procurement of liquefied natural gas, according to sources. The Japanese utility companies hope that joint procurement would allow them to obtain better fuel prices and lower the operating costs of their power plants. Such cooperation would also make it possible for companies to provide each other with LNG in times of shortages.

Tokyo Electric and Chubu Electric merged their fuel operations in July 2016 under Jera, a 50-50 joint venture. Jera is one of the world's largest LNG traders, shifting 40 million metric tons a year. It first contacted Centrica, the largest gas provider in the U.K., which operates under the British Gas brand. Others, including Electricite de France and German and Dutch utility companies, are also in talks with Jera. European utility companies import gas via pipelines and also buy LNG. Jera hopes to jointly procure LNG from multiple exporters in anticipation of winning lower prices for larger amounts.

Jera also wants to sell LNG that it takes from U.S. export plants to markets in Europe and elsewhere. The move is aimed at offsetting the expected fall in domestic LNG consumption as Japan's electricity demand shrinks and more nuclear power plants are put back online. For the European utilities, teaming up with Jera makes sense because the new joint venture has a strong presence in negotiations with gas producers.

Read more: Oil and gas news briefs Jan. 3, 2017

Petronas may have a plan to avoid salmon habitat at LNG terminal

(Bloomberg; Dec. 27) - Malaysia’s Petronas is seeking to move ahead with its proposed $27 billion liquefied natural gas plant on the British Columbia coast after identifying a new site for the marine terminal, a shift that could lower costs and ease local opposition. The Pacific NorthWest LNG project would continue as planned with the liquefaction plant on Lelu Island, near Prince Rupert, but the company would move the LNG-loading berths to neighboring Ridley Island, according to sources familiar with the negotiations.

A redesign would eliminate the costly suspension bridge and trestle-supported pier to marine berths that were part of the plan at Lelu Island, avoiding an environmentally sensitive marine area that has been a flash point of controversy — Flora Bank provides critical habitat for juvenile salmon. Under the new plan, the LNG would be piped to new marine berths at nearby Ridley Island, avoiding Flora Bank entirely. Petronas and its partners China Petrochemical Corp., Japan Petroleum Exploration, Indian Oil Corp. and Brunei National Petroleum Co.are expected to make their investment decision in 2017.

It is unclear how changing the design might affect the construction timeline. Petronas is in talks with the government and stakeholders to see if the modification could be carried out without sparking fresh regulatory delays, according to the sources. The project won Canadian government approval in September following more than three years of regulatory review. In that time, the global LNG market tanked with spot prices for the fuel falling by more than two-thirds amid a supply glut. Petronas is reassessing the project’s costs before it goes to its partners to make a final investment decision.

Read more: Oil and gas news briefs Dec. 29, 2016

Hawaiian Electric drops LNG plans for 100% renewables by 2040

(Honolulu Civil Beat; Dec. 23) - The Hawaiian Electric companies that power Oahu, Maui County and the Big Island have submitted a new plan to state regulators that lays out how they will achieve 100 percent of their electricity generation from renewable sources by 2040 — five years sooner than the state-mandated goal. The plan also says the companies are setting aside their pursuit of using liquefied natural gas instead of oil as a bridging fuel, instead focusing on a change straight to renewables.

Gov. David Ige has adamantly opposed using LNG for electricity generation, saying the investments to upgrade oil-burning power plants and other infrastructure costs would be better put toward renewable-energy projects. The state Public Utilities Commission has repeatedly told the electric companies that their power supply improvement plans fall short of its expectations and demanded they resubmit them.

“We have a solid plan that accelerates our progress to get to 100 percent renewable energy. We can do this,” said Alan Oshima, Hawaiian Electric president and CEO, in a news release issued Dec. 23. “We want to work with parties from all segments of our community — government, business, community and environmental groups – to refine the plans for Hawaii’s energy future.”

Read more: Oil and gas news briefs Dec. 27, 2016

FERC approves Golden Pass LNG export project in Texas

(Natural Gas Intelligence; Dec. 21) – The Federal Energy Regulatory Commission on Dec. 21 authorized the addition of liquefied natural gas production and export facilities, as well as related pipeline modifications, at the underutilized Golden Pass LNG import terminal near Sabine Pass, Texas. The project would add three liquefaction trains (each capable of producing 5.2 million metric tons per year of LNG), five storage tanks and two marine berths.

Qatar Petroleum owns a 70 percent interest in the export project, with ExxonMobil owning a 30 percent interest. The two companies also are partners in the Golden Pass LNG import terminal, which has been mostly idle since it opened in 2010, before the U.S. shale gas production boom dramatically reduced the need for imported gas.

If the partners proceed with construction, the project would cost an estimated $10 billion and take about five years to build. The project has Department of Energy authorization for exports to free-trade countries; consideration of the application for export authority to countries lacking a free-trade agreement with the U.S. has been pending completion of FERC’s environmental review. Already, five LNG export projects are under construction in the U.S., with Golden Pass and others waiting for corporate investment decisions.

Read more: Oil and gas news briefs Dec. 22, 2016

Japanese companies may cooperate with Novatek on Russian LNG

(Reuters; Dec. 16) - Novatek, Russia's second biggest gas producer, said Dec. 16 it had signed agreements with Japan's Mitsui & Co., Mitsubishi Corp. and Marubeni Corp. to cooperate in liquefied natural gas development and other energy sectors. Japan is the world's largest importer of LNG, while Russia wants to boost its global market share of the fuel, currently less than 5 percent.

Novatek CEO Leonid Mikhelson said the agreements focus on potential gas production, liquefaction and LNG transport. Novatek is interested in LNG deals with the three Japanese trading companies, he said. Marubeni said in a statement that it would explore opportunities to develop upstream and midstream areas for Novatek’s proposed Arctic LNG-2 project, while Mitsubishi said the agreement with Novatek implies consideration of alliances in "gas and other areas.”

Mikhelson said all three Japanese partners could potentially become Arctic LNG-2 stakeholders. The Arctic LNG-2 project would be a follow-up to the $27 billion Yamal LNG plant, scheduled to launch production at the end of 2017 with a capacity of 5.5 million tonnes per year, with output rising eventually to 16.5 million. Novatek also has French and Chinese partners in the Yamal project. The company proposes a 2025 start-up for Arctic LNG-2, at 16.5 million tonnes of LNG production per year. Arctic LNG-2 would be a floating facility designed for the shallow waters of Ob Bay, east of Yamal.

Read more: Oil and gas news briefs Dec. 19, 2016

India wants to renegotiate 2012 LNG supply contract with Gazprom

(Bloomberg; Dec. 12) - India’s biggest natural gas utility is seeking a price cut and other changes to a 20-year liquefied natural gas supply contract from Gazprom, the latest in a series of concessions sought by buyers amid a global LNG glut. GAIL India is pushing to overhaul the 2.5-million-ton-a-year contract with the Russian gas giant that starts in 2018, said B.C. Tripathi, chairman of the state-run company.

“It’s not only duration, it’s the price, source of supply, the terms and conditions,” Tripathi said. “There are a host of contractual issues. All these are being re-looked into,” he said Dec. 6. While there are talks on "adapting the contract terms," the deal signed in 2012 is legally binding, the Gazprom’s export arm said in response to a request for comment. No other details were provided. In renegotiating long-term contracts, India is seeking to take advantage of a global oversupply that has pushed down prices almost 60 percent the past three years. Last year the country’s biggest gas importer, Petronet LNG, reworked a 25-year contract with Qatar that cut prices by almost half.

GAIL also plans for short-term charters of four to five LNG carriers as it prepares to start receiving U.S. LNG cargoes. GAIL has a contract to buy 3.5 million tons a year for two decades from Cheniere Energy’s Louisiana terminal, with supplies expected to start in March 2018. It has also booked 2.3 million tons a year from the Cove Point LNG terminal in Maryland, which is set to start deliveries in December 2017.

Read more: Oil and gas news briefs Dec. 15, 2016

Shell-led LNG Canada looks for new prime contractor to cut costs

(Vancouver Sun; Dec. 9) - The consortium proposing a $40 billion liquefied natural gas project at Kitimat, B.C., is calling for bids to find a new lead construction contractor, looking to reduce costs while the project is under an indefinite delay. Shell-led LNG Canada initially awarded a contract in 2014 to a consortium of engineering firms under the name CFSW LNG Constructors but this week, in a statement, said it is “now undertaking a new competitive process” to pick its lead construction contractor.

“In the current industry and market context, cost competitiveness and affordability of the LNG Canada project remain a challenge,” said Susannah Pierce, LNG Canada director of external relations. The consortium of Shell, Korea Gas, PetroChina and Mitsubishi isn’t alone in grappling with the high costs of new projects in what remains a tough market for energy companies. The global LNG market has hit a period of oversupply, driving down prices and squeezing margins in the business plans for new projects.

LNG Canada was expected to make a final investment decision by the end of 2016, but in July announced an indefinite postponement. The delay has allowed the company to “return to the market and rebid the construction contract to ensure the project remains cost competitive and affordable,” Pierce said. LNG Canada has embarked on a competition with a pre-qualified group of companies to find a new prime contractor responsible for managing all design and construction work.

Read more: Oil and gas news briefs Dec. 12, 2016