In this issue

 

A Canadian LNG export project, controlled by Indonesian billionaire Sukanto Tanoto and his Pacific Oil and Gas company, has taken the lead as the first venture in British Columbia is likely to be developed after years of stalemate. Woodfibre LNG received environmental approval from the federal ministry in Ottawa in late March, paving the way for the liquefaction plant and export terminal to be planned and built near the town of Squamish, north of Vancouver.

AES’ integrated LNG-to-power project at the entrance of the Panama Canal is set to come onstream in 2018. The French multinational Engie just signed a 10-year LNG supply accord with the US-headquartered AES, covering the entire fuel needs of the latter’s 350 MW combined-cycle power plant.

“Keep your eyes on the stars, and your feet on the ground,” said Teddy Roosevelt and US shale gas driller would be well advised to do just that. Headline-grabbing figures forecasting oil back over $100/bbl by 2030 have been touted by BP Group, in an effort to look beyond the current slump. Realities today are far different: Brent is forecast to average $38/bbl in 2016, while Henry Hub spot gas prices keep dropping below $2/mmBtu threshold. Worse still, a flurry of profit warnings from oil and gas majors is getting banks worried about debt repayments. 

Recipient of ‘Asia Vision’ - the landmark first shipment form Cheniere’s Sabine Pass Terminal - will be Petrobras of Brazil, rather than buyer in far-flung Asian markets. Netback calculations have singled out Brazil as the highest-yielding choice for shipments from the US Gulf Coast. 

Ottawa and Calgary seem not in sync these days. Pending changes to Canada’s federal environmental approval process risk to delay the beleaguered Pacific NorthWest LNG export terminal, off Lelu Island. Christi Clark has rushed to the capital to seek assurances that the timeline stays in place.

‘Hope dies last’, they say, and the International Energy Agency’s Fatih Birol has helped the LNG industry in British Columbia to keep up just that. “I am sure and our numbers show,” he stressed “that there is room for Canadian LNG after 2020. Especially, if pressure continues to keep the cost of production low. 

Another blow has been dealt to British Columbia’s LNG ambitions by AltaGas’ decision to halt works for its 0.55 mtpa liquefaction project on the Douglas Channel.

Short-cycle and flexible nature of US shale gas operations has made its economics more competitive than many conventional assets. In the face of depressed oil and gas prices, wildcat drillers from North Dakota to Texas have emerged as the swing producer. Fresh rumours of OPEC production cuts give some respite. 

US LNG exports, pushed back to early March, will come more dearly for European buyers than purchasing the gas on the spot market, Gazprom claimed, insisting that import volumes to the EU would be “limited”. 

Keen to maintain market share in oversupplied LNG markets with record low prices, Qatar now lures leading buyers by offering short duration cheap ‘teaser deals’ as it seeks to open opportunities for more strategic 20-year sales. After RasGas conceded to contract renegotiations with Petronet, Asian buyers are now mounting pressure on Woodside Petroleum which will see major long-term supply contracts expiring over the next few years. 

As the first LNG tanker set sail from Sabine Pass in the last week of February, Charif Souki should have been celebrating his bellwether project. Instead, he is gearing up to compete with his old employer, Cheniere Energy. 

Nuclear restarts are gathering speed in Japan with three reactors now back on the grid; hence the world’s biggest LNG buyer reported the steepest plunge in gas imports in more than six years.  By the end of March, five nuclear are set to be back operational, further depressing gas demand in the power sector. 

Two-thirds of the growth in fuel demand will take place before 2025, thereafter efficiency gains in installed generating capacity in the OECD32 countries, notably through the switch from coal-to-gas generation, is forecast to significantly reduce fuel-burn. 

Blind-sighted by the US shale gas revolution, a flurry of developers have been seeking to export LNG from the lower 48 states even though much of this capacity is not needed. On the flip-side, idled US regas facilities look like ‘sunk costs – but not quite: Cheniere Energy still gets paid for contracted regas slots, even if customers do not actually use it. 

News Nudges

US to stay ‘net exporter’ past 2018

The United States’ status as a net exporter is expected to continue for the rest of this year and past 2018 because of growing U.S. natural gas exports to Mexico, declining pipeline imports from Canada, and increasing LNG exports the US Energy Administration (EIA) forecasts. Meanwhile, Wood Mackenzie principal analyst, Patrick Kirby forecasts oil pricing dynamics will increase, through near-term $50-60 range.


Texas oil and gas boost

The Texas Alliance of Energy Producers said natural gas prices in July averaged $2.84 per thousand feet, increasing the value of Texas-produced gas by 2.3 percent to nearly $1.9 billion. Sizeable year-on-year improvements in the rig count, drilling permits and the value of Texas-produced crude oil and natural gas combined to push the Texas Petro Index up in July to 176.9, the eighth straight monthly increase. However, it is in oil where Texas and the US are excelling. “OPEC production curtailments did not achieve the desired price outcome,” said spokesman Karr Ingham. “Oil supplies remain plentiful because domestic producers are becoming increasingly efficient at producing crude oil at lower costs, so a $45 per barrel (US) oil market provides more incentive than in the past,” added Ingham, referring to the West Texas Intermediate (WTI) US benchmark oil price.


Florida LNG bunkering

Jax LNG, the port bunkering project in Jacksonville in Florida, has received a Letter of Acceptance (LOA) for the facility from the United States Coast Guard and approval to conduct ship-to-ship LNG fuel operations with the LNG barge “Clean Jacksonville”. The expectation is that ship-to-ship LNG bunkering will start in early 2018. Jax LNG already supplies fuel for the LNG-fueled container ships of US shipping line TOTE Maritime. The fuel is supplied by Pivotal LNG.