In this issue

 

Destination-free LNG cargoes from the United States have stirred up short-term trade worldwide and voyages from the US Gulf Coast to Asia are now easier thanks to the Panama Canal expansion. Shippers, however, made little use of this waterway so far, mainly because price parity between the Atlantic and Pacific has been limiting arbitrage opportunities – apart from the cold winter 2016/17 when some profits were made on spot cargoes from the USGC to northeast China, South Korea and Japan.

Wasteful flaring of natural gas is meant to be a thing of the past, yet the wasteful burning of gas at wellhead increased over the past few years – notably in the United States during the rush to tap hydrocarbon-rich shale rock formations. ‘Zero Routine Flaring by 2030’ is the explicit aim of the World Bank-led Global Gas Flaring Reduction (GGFR) initiative – but there is a risk that funding for gas-gathering initiatives runs dry as the goal has lost political traction under Trump’s US presidency.

Ambitious plans, set out by South Korea’s newly instated Government, herald a U-turn away from coal and nuclear towards cleaner-burning natural gas and renewables. If instated, the removal of LNG tariffs would propel up gas-burn for power generation which would cause additional demand for up to 50 mtpa of LNG imports.

Three new gas pipelines between the US and Mexico are due to come in service by early July, with a combined capacity of about 3.3 Bcf/d: their routes are Encino-to-Laguna, Guaymas-to-El Oro and Ojinaga-to-El Encin. Timely operational start of these lines, and how they work in conjunction with existing gas infrastructure, is critical for boosting supply of cheap U.S. shale gas to Mexico’s electric power utilities and industry.

As the world’s second largest emitter, the U.S. stance on climate matters greatly as a role model for rapidly developing countries like China and India. Analysts are concerned that Mr Trump’s election will adversely affect the US-China co-operation, an important pillar of the climate policy agenda. 

The US state of California has teamed up with several German states in the ‘Under2Coaltion’ to tackle climate change. Edmund G. Brown, Governor of California said US President Trump’s withdrawal from the Paris Agreement underscored the “significance of subnational actors.”

Top forecasters anticipate energy demand growth through 2035, but projections on rates and market size vary significantly between Wood Mackenzie’s 'Energy View to 2035' and similar outlooks by BP, ExxonMobil (XOM) or the IEA’s New Policies Scenario. Natural gas displaces coal as the second largest fuel across all forecasts, except in the IEA New Policies Scenario (IEA NP), with demand growth for LNG and pipeline gas seen strongest during 2015-2025. 

Demand for LNG keeps rising globally, as the super-chilled gas becomes a fuel of choice in new markets such as shipping, transport and heavy-horsepower machinery. In its annual World LNG Report, the International Gas Union (IGU) pointed out the fast rise of LNG-powered tankers, with 31 newbuilds delivered in 2016 from shipyards to the LNG shipping fleet.

Most of the ships laden with US LNG set sail for South America in May – in contrast to April when some shipments from Sabine Pass were also delivered to US allies in Asia and the Middle East, the latest data from the US Department of Energy shows.  China and India were not on the list. 

For several Arab states which border the Persian Gulf, deploying Floating Storage and Regasfication Units (FSRU) to import LNG is a need, not an option. Benefitting from its geographic proximity of Qatar, and plentyfold new supply on global markets from United States and Australia, buyers in Kuwait, the UAE, Egypt, Jordan and increasingly also in Bahrain getting ready to absorb some of the surplus. 

The United States and China have reached a landmark agreement designed to reduce America’s growing trade deficit and promote LNG shipment to China. US Commerce Secretary Wilbur Ross underlined the deal was part of a broader effort to remodel the relationship between the world’s two largest economies. 

LNG-to-energy solutions, notably for distributed power, have made Wärtsilä one of the biggest supplier of gas- and liquid fuel-fired power stations in the 5 - 600 MW range. Such baseload and/or grid stability plants are used predominately as ‘wind chasers’ and ‘sunset balancers’, compensating for intermittent supply of renewable energy – soon also on the island of Aruba. 

LNG development in British Columbia has created a paradox: people want investment in their communities, however, there is uncertainty associated with long-term environmental and social effects. These non-technical risks, if not managed, can stop a project in its tracks. To manage these uncertainties, Environmental Assessment (EA) processes are followed; these were developed to identify and predict both positive and negative effects of a project on the environment and society and are required for projects above a certain size and complexity. 

South America’s demand for natural gas is forecast to grow by some 50 Bcm to reach 191 Bcm by 2030, as overall energy demand increases and more gas-fired plants are being installed to balance renewable power supply. However, the region’s potential to develop its LNG market remains largely uncertain, and is very much linked to local weather scenarios. 

News Nudges

Chiyoda gets nod for power barge concept

The American Bureau of Shipping (ABS) has given the green light to Chiyoda of Japan for its concept of converting a disused LNG carrier into a floating power plant, with electricity sent to land via heavy duty electrical cable. Chiyoda said it had received approval in principle from ABS some three weeks ago for what it calls a ‘floating LNG power plant, storage and regasification unit design.


Macquarie to buy Cargill’s North America power, gas business

Australia’s Macquarie Group has agreed to acquire Cargill's North America power and gas business, for an undisclosed amount, just months after the bank bought the petroleum business of Cargill. Over the past year Cargill streamlined its business over the past year, reacting to a nearly 3-years slump in global oil prices. Following the divestment, the trading house said it would stay focused on the energy sector, mostly In terms of financial risk management, biofuels and tanker shipping. Cargill currently offers services in power and natural gas trading as well as gas storage, and transportation. Cargill initially planned to see its American and Canadian power and gas business to TrailStone Group, a private equity investor funded by Riverstone Holdings; however that bid fell through.