LNG

Santos, the operator of two Australian LNG plants and the largest stakeholder in the Papua New Guinea export facility, has signed a new memorandum of understanding  aimed at securing stable energy in various projects with the Japan Bank for International Cooperation.

Europe’s benchmark natural gas and LNG cargo prices lost some ground on the week but were still over $39 per MMBtu higher than last summer before the Russian gas supply crisis and remained $12 per MMBtu ahead of North Asia spot cargo valuations as liftings from global liquefaction and export plants increased.

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.

Japan’s liquefied natural gas imports again declined on an annual basis by 3.7 percent in 2020 with only Australian, spot and US volumes increasing, though shipments to Japanese terminals still outstripped China’s during the month of December.

Woodside Petroleum, the Australian LNG plant operator and international commodities company BHP, are advancing with their Scarborough gas field project to underpin the Burrup Gas Hub planned for Western Australia.

First Gen Corp., the largest provider of gas-fired power in the Philippines, has chosen Australia-based McConnell Dowell as its engineering contractor for an interim floating import terminal at Batangas City to help guarantee the Asian nation's energy security as a major domestic gas field depletes.

US LNG exports are back on track after Sempra Energy shipped its first cargo from the Cameron liquefaction and export plant at Hackberry in Louisiana following a shutdown due to a power outage and other damage from a Gulf Coast hurricane at the end of August.

Australia, a main exporter of LNG to Asian nations, said the spot price was recovering at a modest rate and heading for former higher levels, only partially offsetting the lower prices on the bulk of LNG supply which is still in the grip of weak oil prices.

Oil Search, the Papua New Guinea-focused oil and gas company listed in Australia, said its overall production increased by 5 percent, supported by a continued strong performance from the PNG LNG plant as talks continued on building three new processing Trains.

The LNG plant, located northwest of the capital Port Moresby, produced at an annualised rate of 8.7 million tonnes per annum in the first three months of 2020.

Total revenue from Oil Search’s overall operations from PNG to Alaska dropped 20 percent to US$395.4 million from US$446.7 in the previous quarter, impacted by a 13 percent fall in sales due to timing of shipments and the oil price drop.

Oil Search, headquartered in PNG and listed on the Australian Securities Exchange, said it was well placed to withstand a prolonged period of oil price weakness and advance its growth projects when market conditions improve.

The company noted that formal negotiations had been suspended in January on the LNG expansion between ExxonMobil, on behalf of the P'nyang co-venturers, of which it is part, and the PNG Government.

“Discussions have resumed with the State, aimed at reaching an agreement that is fair and balanced for all stakeholders,” said Oil Search.

“This agreement is required before the LNG expansion project can move into the front-end engineering and design phase,” it explained.

“Oil Search remains committed to progressing the three-Train integrated expansion project, a highly cost-effective development, at the appropriate time,” stated Oil Search.

The two existing LNG Trains at the plant northwest of Port Moresby have a nameplate capacity of 6.9 MTPA, though have consistently produced more and will be the site of any future expansion.

Three new liquefaction Trains are proposed in the delayed plan. The five Trains when operational would have capacity of nearly 20 MTPA and would give PNG a more substantial role as a regional producer.

The P’nyang gas field licence, controlled by PNG LNG plant operator ExxonMobil, also includes Australian-listed Santos as well as Oil Search.

The separate Papua Gas Agreement for other feed-gas resources has already been approved and signed.This comprises holders of the onshore PNG Elk-Antelope gas field licence, led by Total and also including shareholders in the P’nyang field lease, ExxonMobil as well as Oil Search.

Elk-Antelope onshore gas fields are covered by petroleum retention licence PRL15 and by the Papua Gas Agreement and the P’nyang onshore gas fields are in the PRL3 licence area of PNG.

“The first quarter of 2020 has been one of the most volatile periods in history for Oil Search and the global oil and gas industry in general,” said new Managing Director Keiran Wulff, who succeed Peter Botten.

“The company has taken swift steps to ensure that we are in the strongest position possible to weather a potentially protracted period of global disruption,” he added.

In its North American operations oil discovered at the Mitquq and Stirrup fields in Alaska, with flow rates above expectations