In this issue

 

This year, 2016, should see the much-awaited Final Investment Decision (FID) on the Shell-led LNG Canada project. It’s tipped as the front-runner after NorthWest LNG is beset by quarrels over fishing rights and financing woes. 

Several US firms have submitted proposals in a USTDA tender for a Feasibility Study to assess and plan the development of LNG-related projects in Panama. The tender closed on January 29. 

Oblivious, and seemingly unfazed by the forthcoming glut in global LNG supply, an array of new liquefaction and export projects have been speedily sanctioned by US regulators the first half of the past year, in what Wood Mackenzie calls a “blistering pace”. Faced with demand destruction and a plunge in the price of contracted LNG in line with oil, US project developers started to court buyers in emerging markets as they sniff out opportunities in the Middle East/Africa [and northwest Europe.]  

Tuesday, 16 February 2016

Societe Generale recommends to go ‘long’ on the Mar-17 US natural gas contact, anticipating a March 2017 price to rally next year as the market becomes much less oversupplied. Bank analysts see scope for the price to eventually reach $3.50.

US spot gas prices at Henry Hub are forecast to rise through much of 2016, spurred by rising industrial consumption and moderate supply growth due to falling rig counts. Starting into 2016 near $2/MMBtu, Henry Hub spot prices will rebound to $2.65/MWh, according to EIA estimates. 

Liquefaction is energy-intensive; hence the construction of such a facility tends to significantly increase the power load already being served in an area. An array of LNG export projects have been proposed along the ERCOT Gulf Coast, notably Freeport LNG and Cheniere’s Corpus Christi project – both due to export first cargoes in 2018. As the regional power grid operator, ERCOT is wary about project partners eyeing expansions and another six LNG projects seek grid connection in the Brownsville area. 

Steward, a sleepy former gold and silver mining town on Canada’s northern Pacific Coast, might be revived by a liquefaction project after regulators granted an export licence to a firm, backed by Chinese investors. The National Energy Board (NEB) authorized Canada Stewart Energy Group to ship 25 Tcf of natural gas over 25 years in tanker cargoes to be loaded at a rate of up to 4.6 Bcf/d. 

Houston-based Sanchez Energy said it has made further progress with the Catarina shale-gas wells underpinning plans for a liquefaction plant in South Texas. Sanchez and its partner Targa said they would build the LNG plant and pipelines on the western part of the Eagle Ford. 

A ‘facility development permit’ has been granted to Royal Dutch Shell for development of up to 13 mtpa LNG Canada project, to be near Kitimat on British Columbia’s Pacific coastline. Green light from the provincial regulator, BC Oil and Gas Commission, marks another step towards a final investment decision, though project partners still need to finalize cost projections on EPC works. 

Canada's National Energy Board (NEB) has awarded its first 40-year LNG export license to the Shell-led LNG Canada Development Inc. Project developers, including PetroChina, were seeking a 6.1% annual tolerance and a maximum annual export quantity of 38.056 Bcm of natural gas. 

Expanding US LNG exports beyond 12 billion cubic feet per day (Bcf/d) would benefit the US economy while maintaining cheap gas prices at home that give the domestic industry a competitive  edge. In disregard of stalling demand in Japan, South Korea and China, analyst project a mid-term 20 Bcf/d of external demand for US LNG and suggest that stepping up exports to 12-20 Bcf/d could reap $7-20 billion annually from 2026 to 2040 in today's prices. 

With the liquefaction process at Cheniere Energy’s Sabine Pass terminal now in full swing, it looks like the first cargo will leave the Louisiana facility as planned in the third week of January. Cheniere officially flipped the switch on December 30, after having invested close to $11 billion in the first US LNG export project. 

Neal Shear, interim chief executive at Cheniere Energy, has been given the green light to continue in his post until June 15, 2016. He succeeded the famed Charif Souki, who was replaced on December 13 because of policy differences with new shareholders, notably the activist investor Carl Icahn. 

US gas prices are likely to stay low for longer, as the Energy Information Administration (EIA) expects gas production to rise by 1.5 Bcf/d in 2016 despite declining rig counts – largely thanks to improved efficiency in shale gas drilling. 

News Nudges

Rio Grande LNG gears up for stock market listing

Next Decade is following the trend of US Gulf Coast liquefaction projects to get their project companies listed on the stock exchange. Kathleen Eisbrenner’s NextDecade has signed a letter of intent for a business combination transaction that will allow the privately-held company to become a publicly-listed company. To that end, Eisbrenner is using the services of Harmony Merger Corp. The listing is meant to ease the fund-raising process for Next Decade’s 27 mpta Rio Grande LNG project that is currently advancing through the FERC permitting process. Tellurian Inc., meanwhile, recently completed a reverse takeover of a small oil and gas exploration firm to gain a Nasdaq-listing that is meant to boost the prospects for Driftwood LNG.


Driftwood LNG aims to raise $200m in Nasdaq listing

Preparing a first share offering, Tellurian in mid-March issued a prospectus proposing to sell shares valued up to $200 million on the Nasdaq Capital Markets stock exchange. Tellurian Inc., developer of the Driftwood LNG project in Louisiana, recently chose SG Americas Securities to provide a financial strategy for the venture. SG Americas is the US broker-dealer subsidiary of France's Societe Generale. Charif Souki, Tellurian founder and ex-Cheniere Energy chairman, completed a reverse takeover in February 2017 to get Tellurian listed in a move to efforts of ease fund-raising. Meg Gentle, president and CEO, said that with SG’s expertise at hand, financial structuring of Driftwood LNG would advance swiftly, hence “we anticipate construction in 2018 and first LNG from Driftwood in 2022.”


CB&I ‘optimistic’ for growth

Philip K. Asherman, President and CEO of US engineering and construction company Chicago Bridge and Iron (CB&I) said he was “optimistic” that stability in commodity prices and major capital programs, particularly in North America and the Middle East, “will result in resumption of substantial backlog growth by mid-year of 2017.” CB&I posted an operating loss of $665.6 million last year but Asherman stressed that all proceeds from the divestiture of the company’s Capital Services business will be spent to reduce debt to optimize the balance sheet. The firms Engineering& Construction (E&C) backlog was $9.9 billion in December 2016 versus $12.8 billion at the end of the previous year.


First gas for Kosmos-BP FLNG Train 1 eyed in 2021

Kosmos Energy is drilling an exploration well with total discovered resource of 25 Tcf of feed-gas. The US firm cooperates with BP on plans to produce LNG floating hulls offshore Senegal and Mauritania; to that end it successfully drilled the Teranga-1 exploration well in 2016. First gas from Kosmos-BP FLNG Train 1 is scheduled for 2021, the company said, and the start of FLNG Train 2 is set for 2023.


Sabine Pass Train 3&4 to come onstream in 2017

Cheniere Energy, owner of the Sabine Pass liquefaction plant in Louisiana, the first US LNG export facility, said transition and execution will remain central themes for Cheniere in 2017. “We expect Trains 3 and 4 at Sabine Pass to begin commercial operations, with Train 3 having produced its first commissioning cargo in January,” Jack Fusco, Cheniere's President and CEO stated when presenting the company’s annual report. Once all six Trains come on stream, Sabine Pass will have a have nameplate capacity of 27 mtpa. Corpus Christi LNG, Cheniere’s second venture on the Texas Gulf Coast, is designed to produce an initial 13.5 mtpa, with Trains 1 and 2 expected “to reach substantial completion in 2019.”