In this issue

 

Improved execution of oil & gas upstream projects is now being achieved thanks to greater corporate discipline, more pre-FID planning and reduced project scope. This allows project delivery to finally hit the mark after a period of dismal performance on project returns, a new Wood Mackenzie report shows. 

Despite harsh rhetoric, both China and the United States can still avoid a damaging trade war, industry participants hope. Strikingly, China has not included US agricultural products and LNG on a list of possible traffic, signaling the importance of natural gas in the power sector as Beijing strives to reduce air pollution. 

Skepticism abounds if the LNG Canada projects will ever be built in British Columbia but Shell Canada’s President Michael Crothers is adamant that project partners want to start construction at the end of this year. Seeking to swiftly monetize Canada’s abundant natural gas reserves, JV partners are going through a process with two remaining EPC contractors who are bidding for the scope of work at the liquefaction plant in Kitimat. 

U.S. gas companies have been persistently waiting for new Appalachia takeaway capacity – notably the Rover Phase-2 pipeline – to come online this year so the region can provide the bulk of 2018’s dry production growth. Analysts at the consultancy Energy Aspects anticipate output gains in the Lower 48 will grow by 7.3 bcf/d year-on-year, of which 4.0 bcf/d is scheduled to come from Appalachia region. 

Developing Alaska’s Arctic National Wildlife Refuge (ANWR) would substantially increase U.S. crude oil and natural gas production after 2030. The state of Alaska holds an estimated 36 billion barrels of crude oil and 137 trillion cubic feet of natural gas, so after the Trump administration lifted an ANWR drilling moratorium in December 2017, wildcatters are rushing north to tap America’s Arctic resources. 

Woodside Petroleum is close to making a decision about whether to continue to invest in Sempra Energy’s Port Arthur LNG project in Texas. Speaking at the World Gas Conference in Washington, Woodside CEO Peter Coleman put into questions the adequacy of return from any financial involvement in the venture.

‎The TechnipFMC-Kiewit partnership has selected as EPC contractors for transforming Sempra Energy’s LNG import terminal at Costa Azul in northern Mexico into a medium-scale export plant. The project will be built under a lump-sum EPC contract.

Dry natural gas production in the United States is about to reach a fresh record of 81 Bcf per day, spurring LNG export growth and pushing down prices this year. According to the U.S. Energy Agency (EIA), Henry Hub prices are forecast to average $2.99/MMBtu for the full year 2018, but notch up to $3.08/MMBtu in 2019. 

Gaining access to shale assets in Argentina, Qatar Petroleum has acquired a 30% stake in ExxonMobil’s prolific Vaca Muerta oil and gas play in the onshore Neuquén basin in Argentina. The deal is hoped to bring fresh drive to shale drilling in Argentina which had been rather slow due to local price controls for natural gas. However, President Mauricio Macri's right-of centre government lately doubled wellhead gas prices for existing fields and introduced incentive prices for new developments. 

Canada, the largest energy trading partner of the United States, consistently exceeds the value of U.S. energy exports to Canada by a large margin. According to EIA figures, energy accounted for $73 billion, or about 24%, of the value of all U.S. imports from Canada in 2017, while Canada merely imported energy worth $18 billion from its southern neighbour.

Unplanned downtime can cost an LNG facility as much as $4 million per day. With potential costs so high, profitability is largely linked with unplanned downtime. According to GE Power estimates, unplanned shutdowns in the process industry globally cost 5% of total annual production — that’s as much as $30 billion a year.

Shifting tact, Uniper CEO Klaus Schäfer has announced plans to expand the utility’s business supplying LNG to power generators in South America, Middle East and Asia. Speaking to investors he was adamant about Uniper’s aim to “remain independent” even after Fortum of Finland will acquire a significant stake in the German utility.

Nearly two-thirds of oil and gas sector leaders, surveyed by the Norwegian classification society DNV GL, plant to boost spending on gas projects in 2018, with gas expected to overtake oil as the world’s primary energy source in the mid-2030s. Thereafter, the energy transition will enter its final phase-out of fossil fuels, with hydrogen and renewables set to gain momentum. 

Against the run of play, LNG buyers are prepared to pay a premium for supply from Australia and the United States – described by Standard & Poor’s as “the swing”, meaning states with the highest cost production. Forward prices, notably for shipments to Asia, imply “LNG buyers are willing to pay above the variable cost of U.S. LNG production (delivered ex-ship),” which, according to S&P analysts “is not what you would expect in an oversupplied market.” 

News Nudges

Commissioning cargo departs from Corpus Christi Train-1

The first commissioning cargo has loaded and departed from Train-1 at Cheniere Energy’s Corpus Christi LNG export terminal in Texas. The LNG was loaded onto the 174,000 cubic metres capacity carrier “Maria Energy”, charted by Houston, Cheniere’s marketing unit. Start-up of Train-1 marks the first export of LNG from the state and from a greenfield liquefaction facility in the lower 48 states. All three Corpus Christi trains combined will produce up to 13.5 mtpa. The first two Trains are fully contracted and Train 3 is mostly contracted. Any excess capacity will be available for Cheniere Marketing to sell. Corpus Christi is being constructed at a cost of $15 billion.