LNG

Europe has now entered an unusual period of having a temporary natural gas glut in the mid-winter season as several European Union nations this week built gas storage levels amid very mild weather and the Germans preferred coal and oil to gas for electricity generation, while the LNG arbitrage window opened to over $2 for the Japan-Korea Marker price for spot cargo deliveries to Japan, China and South Korea.

Tellurian Executive Chairman Charif Souki, whose Driftwood LNG export venture in Louisiana has sold a combined 6 million tonnes per annum of cargoes to global commodities firms Vitol and Gunvor, has disclosed details of the timing of financing arrangements and the start of full construction.

Souki’s latest declarations set a target of the end of the first quarter of 2022 for engineering, procurement and construction (EPC) contract holder Bechtel to have a notice to proceed with full building work.

The Chairman added that Tellurian also expected to be able to announce the banking group that would finance the Driftwood plant by the end of 2021.

While the Driftwood project has permits to construction liquefaction Trains for up to 27.6 million tonnes per annum, the first phase was likely to be much less, between about 10 MTPA and 16 MTPA.

Souki noted that around 65 percent of the expected first-phase capacity had already been sold to Gunvor and Vitol.

He stated that Tellurian was continuing to work on securing more supply deals to cover the remaining capacity for the project's first phase.

In May and June 2021 Tellurian signed 10-year agreements to sell 3 MTPA LNG each to both Vitol and Gunvor.

Tellurian’s SPAs with Vitol and Gunvor are for volumes indexed to a combination of two indices, the Japan-Korea Marker price for spot cargoes and the European benchmark Dutch Title Transfer Facility (TTF), each netted back for transportation charges.

Tellurian said after the deals that at today’s prices, each of the SPAs with Vitol and Gunvor are valued at around $12 billion in revenue over 10 years for the Gulf Coast venture

The project also signed a long-term lease in June 2021 securing the site to build the plant on the west bank of the Calcasieu River, just south of Lake Charles

Tellurian has also said that it wanted to produce all the feed gas needed for the plant and would not sanction the project until it had secured sufficient upstream reserves for the first phase.

Based on its current drilling programme in the Haynesville Shale in northern Louisiana, Tellurian expects to have production by the end of the year, which is three times the volume it was producing at the end of 2020.

Souki said that the company would need to have substantially more drilling, about 1.5 Bcf per day, to reach its goal. 

Global natural gas demand is expected to rise by 3.6 percent in 2021 before easing to an average growth rate of 1.7 percent over the following three years, though by 2024 demand is forecast to be up 7 percent from 2019 pre-Covid-19 levels, according to the latest quarterly Gas Market Report from the Paris-based International Energy Agency.

Demand for liquefied natural gas worldwide is forecast to hit 700 million tonnes by 2040 and Asia is expected to drive nearly 75 percent of this growth as Asian domestic gas production declines and LNG imports are used to tackle air quality concerns, according to the fifth Royal Dutch Shell annual outlook on LNG.

“For instance, China’s heavy-duty transport sector consumed nearly 13 million tonnes of LNG in 2020, almost doubling from 2018, to serve the fast-growing fleet of well over 500,000 LNG-fuelled trucks and buses,” the Shell report noted.

“LNG-fuelled shipping is also growing, with the number of vessels expected to more than double and global LNG bunkering vessels set to reach a total of 45 ships by 2023,” it said.

As demand grows, a supply-demand gap is expected to open in the middle of the current decade with less new production coming on-stream than previously projected.

“Just 3MT in new LNG production capacity was announced in 2020, down from an expected 60MT,” added the report.

Shell explained that because of the net-zero emissions targets companies are having to make, the LNG industry will need to innovate at every stage of the value chain to lower greenhouse-gas counts.

The Anglo-Dutch company noted that over the past year LNG prices hit a record low early in 2020 but ended the 12-month period at a six-year high as demand in parts of Asia recovered and winter buying increased against tightened supply.

“LNG provided flexible energy which the world needed during the Covid-19 pandemic, demonstrating its resilience and ability to power people’s lives in these unprecedented times,” said Maarten Wetselaar, Director at Shell for Integrated Gas, Renewables and Energy Solutions.

“Around the world countries and companies, including Shell, are adopting net-zero emissions targets and seeking to create lower-carbon energy systems,” he added.

“As the cleanest-burning fossil fuel, natural gas and LNG have a central role to play in delivering the energy the world needs and helping power progress towards these targets,” stated Wetselaar.

LNG trade increased to 360MT in 2020 and despite the “unprecedented volatility” caused by the Covid-19 pandemic the industry is moving towards a period of expansion.

China and India led the recovery in demand for LNG following the outbreak of the pandemic with both countries increasing their LNG imports by 11 percent.

“Demand in Europe, alongside flexible US supply, helped to balance the global LNG market in the first half of 2020,” said the report.

“However, supply outages in other supply basins, structural constraints and extreme weather later in the year resulted in higher prices,” it added.

Indian liquefied natural gas imports increased by almost 12 percent last month and were on track for record fiscal-year and calendar-year totals as shipments increased due to rising demand, backed by higher terminal capacity use and a steady infrastructure build-out.

Russian natural gas company Gazprom said more than 30,000 workers were on site to complete the Amur Gas Processing Plant, part of the “Power of Siberia” project already bringing pipeline gas to China and with an affiliated LNG liquefaction plant to fuel trucks carrying containers of liquid helium for export.

The Amur venture is more than 70 percent complete and Gazprom said a recruitment process for the GPP’s future full-time staff was underway.

“Other aspects of the project include the building of a small-scale liquefaction plant for LNG trucking,” said Gazprom.

The company said in its update report that the first two Amur processing lines would be on stream in 2021.

“Start-up and commissioning operations continue at the first two Amur gas trains and external thermal insulation is being installed on the core equipment,” added Gazprom.

“This is the final stage of preparations for load testing,” stated the company.

The construction of the Amur GPP is one of the largest infrastructure projects of Gazprom in Russia’s Far East.

During the 2020 navigation season, 50 pieces of large equipment weighing a total of some 8,000 tons were delivered by sea and river vessels to the Amur GPP’s wharf.

The GPP will receive heat and electricity from the Svobodny thermal power plant.

The construction of the power plant’s main building and structures is already finished. In December 2020, the “Power of Siberia” gas pipeline started feeding gas to the TPP for the purpose of start-up and commissioning of the gas-using equipment.

The Amur plant will process multi-component natural gas received via the “Power of Siberia” gas pipeline from the Yakutia and Irkutsk gas production centres,.

“Valuable components extracted in the course of processing will be used as feedstock for the petrochemical and other industries,” explained Gazprom.

The Amur GPP is being built near the town of and will have final design capacity to process 42 billion cubic metres of per annum of natural gas.

The GPP will include the world’s largest helium production facilities with an annual capacity of up to 60 million cubic metres.

The plant will have six production trains. While the first two lines will start in the coming year, the other four would be consecutively put in operation before the end of 2024.

In addition to natural gas and helium, the GPP’s commercial products will include ethane, propane, butane, and pentane-hexane fraction.

A Gazprom subsidiary called, Pererabotka Blagoveshchensk, is the project company for the Amur GPP. Construction management is being carried out by NIPIGAZ, part of the Sibur Group.

gazprom said a central link in the export system for commercial helium, one of the components that will be extracted at Amur, will be the Logistics Centre for servicing thermally-insulated containers.

“The Centre, which is being set up near the city of Vladivostok, will be the world’s largest hub for delivering liquid helium to the global market,” Gazprom explained.

At present, construction of the hub’s off-site facilities is finished, the core and auxiliary process equipment is installed, and electricity is now being supplied to the Logistics Centre.

“A natural gas liquefaction unit is currently being built with the aim of refueling trucks that will carry the containers,” said Gazprom

The pipeline gas supplies for China started operations in December 2019 via Gazprom’s “Power of Siberia” trunkline from the Chayandinskoye gas field.

In the year since the launch of “Power of Siberia”, Gazprom said a total of 3.84 Bcm had been supplied to China via the trunkline, which was less than the expected 5 Bcm.

Gazprom and China National Petroleum Corp. have signed a 30-year supply agreement for Russian gas to be supplied via the eastern route amounting to 38 Bcm per annum once incremental increases had been met over a period of five years.

Executives from the leading LNG companies in North America and India took centre stage at the Gastech Virtual Summit on the key issues facing the natural gas industry, with Sempra LNG saying the energy transition was already happening in California and gave an estimate of natural gas needed in LNG terms to back up renewables.

Sept 7 (LNG) - Petronas, the Malaysian oil and gas company and leading Asian LNG exporter, said that there would be no reduction in the number of employees, though the group would trim capital costs and may cut pay to strengthen its resiliency after big losses. Petronas posted a first-half loss of 16.5Bln Malaysian ringgit ($3.97Bln) and a 23 percent year-on-year reduction in revenue to 93.6Bln ringgit ($22.5 billion) on the back of lower average realised prices and a drop in sales volumes for processed gas and LNG.

   Petronas President and Chief Executive Muhammad Taufik Tengku Aziz, said the company was considering pay cuts for its more than 47,000 employees in the light of the continued challenging market conditions. “The final deliberations are ongoing. Any decision on the matter will be conveyed to our employees first,” he said.

China Petroleum and Chemical Corp., or Sinopec, the largest Chinese owner of oil refiners and which has been seeking to increase US LNG volumes to match its Australian supplies, reported a heavy first-quarter loss.

Alaska Gasline Development Corp., the lead developers of the Alaska liquefied natural gas export project, said regulators had published the final environmental impact statement for the venture to monetize North Slope gas and ship it to Asia as LNG.