An LNG futures market could be created in the US on the back of the increased movement of shale gas.
Even though thermal coal prices increased by nearly 50% this year, the effect on fuel switching is not enough to make the use of LNG economically viable for power generators. For coal-to-gas switching in Asia, analysts say that LNG would have to fall by another third from its recent lows around $6/mmBtu.
Looking ahead to the autumn and winter season, the State Energy Commission, California’s Public Utility Commission (CPUC) and the system operator CASIO have agreed contingency measures to cap gas-burn in the power sector. Propping up gas storage with spot LNG purchases is being evaluated as an emergency option. Regasified LNG could be delivered into the SDGE system from Sempra’s Costa Azul regas terminal in Mexico, using the Otay Mesa receipt point. Sempra, the operator of the 7.6 mtpa Costa Azul facility has expressed interest – the Energy Commission and CPUC are in talks to sort out issues raise over affiliate rules.
The world’s largest lithium-ion battery power storage – a 20 MW/80 MWh Tesla Powerpack – will be put in place at SoCal Edison’s Mira Loma substation in an effort to better harness renewable energy sources. California Public Utilities Commission (CPUC) had mandated an accelerated procurement of power storage to counteract energy shortages following the Aliso Canyon gas leak.
Short-term oversupply of global LNG markets will – beyond 2020 – gradually get absorbed and make way for, new liquefaction projects on the east coast of Africa (Mozambique, Tanzania). Yet, sub-Saharan Africa is also likely to evolve as a niche market for US LNG supply, notably via flexible floating LNG storage and regasification units (FSRUs).
Ivory Coast, Ghana and South Africa are tipped to become front-runners in setting up integrated LNG-to-power projects. Developers can arrange attractive import terms as a glut of new gas supply is entering global markets while demand from key Asian buyers remains subdued.
Japan's JGC Corp, joint venture partner of Boston-based Energy Management Inc., has offered its expertise to build a 1.3 Bcf storage facility for regasified LNG in Maine – suggesting LNG imports may come cheaper than expanding gas pipelines to New England’s most northern state. The Maine Public Utilities Commission (PUC) is currently considering the use of the proposed Maine Energy Storage for ‘peak-shaving’ during the winter season.
US LNG equipment maker Air Products has marked the roll-out of the first completed LNG heat exchanger manufactured at its new production facility in Manatee County, Florida. Air Products has won contracts to supply Cameron LNG in Louisiana, the Freeport regas and export facility in Texas, and the Cove Point LNG Maryland.
Chart Industries, the supplier of liquefaction, storage and fueling equipment to the LNG industry, said the US Patent and Trademark Office had awarded the company a patent for its latest processing technology.
Low-cost LNG imports gains attractiveness in the United Arab Emirates (UAE) as gas-burn for power generation is outstripping domestic production, while upstream investments stall. Abu Dhabi now resorted to chartering an FSRU in July, following Dubai’s example – yet while “Dubai is expected to source more LNG cargoes from the US, Abu Dhabi gets all its requirement this year from ADGAS’s Das Island plant – and that is domestic gas supply” says Priyank Srivastava, oil & gas analyst.
LNG cargoes from Sabine Pass going to Argentina face challenging economics on a purely point-to-point basis, data released by the US government and Argentine state energy firm Enarsa show. A free-on-board (FOB) price of $4.51/mmBtu was paid for each of the six cargoes sold by Cheniere from its Sabine Pass liquefaction plant, according to figures by the US Department of Energy (DOE) – not quite enough to cover costs. As South America loses some attractiveness for US LNG, delivery of a fist cargo to China has just opened up a potentially vast export market.
Assertive buyers ask for reworked terms of long-term LNG imports, making use of their rising bargaining power increases as a wave of new supply from the US and Australia enters a subdued global gas market. ‘Homeless LNG’, estimated to amount to up to 50 mtpa by 2020, is prompting Indian and Japanese buyers to ask for changing terms of trade of LTCs to better match spot rates. Resale of excess cargoes through swaps is yet another trend to reign in the LNG glut.
Despite challenging market conditions, global capital expenditure on floating import units is anticipated to surge, with more than 14 countries are expected to commission their first FRSU during 2016-2022.
Det Norske Veritas and Germanischer Lloyd (DNV GL), an international classification society, have given IHI the approval in principle for its design of a Floating LNG Power Station (FLPS). The concept is a combination of a FSRU and a power plant.
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.”