LNG

The BP 2024 Energy Outlook said that liquefied natural gas demand would grow robustly in the near term, driven by increasing needs in emerging economies in Asia as well as in the regional economic powerhouse China.

European LNG and wholesale natural gas prices dropped by almost 5 percent over the past week while North Asian spot LNG cargo prices were firmer even as cargo volumes pointing at Japan began to decline amid high storage levels as is normal at this time of year in the East and West of the Northern Hemisphere.

European natural gas entered backwardation as prices in Europe and Asia dropped to three-year lows even as demand increased as temperatures fell and gas storage levels registered large draws, while US and UK air raids on Yemen still failed to push oil over $80 a barrel.

European liquefied natural gas price benchmarks and Asian spot cargo margins dropped to under $1 per million British thermal units as over-supply compared with the past two-and-a-half years and mild weather offset global shipping security and navigation issues from Suez to Panama.

Russian natural gas company Novatek has plans to start commercial shipments from the Arctic LNG II project in mid-January 2024 and would likely send three to five cargoes per month eastwards to the Asian market, including China, while Russia’s Sakhalin LNG plant in the Far East has re-started after scheduled maintenance.

The European Union Agency for the Cooperation of Energy Regulators (ACER), whose responsibilities include assessing the prices of LNG cargoes, said that more LNG imports were needed to help energy security amid raised concerns about power-grid resilience in the 27-nation group and about subsidies making its citizens lax on saving electricity.

POSCO International, the energy subsidiary of South Korean steel company POSCO, has held a ground-breaking ceremony for a planned new LNG terminal near the site of the existing Gwangyang facility in South Jeolla province.

Japanese liquefied natural gas imports for the first six months of the current fiscal year rose by 4 percent and with deliveries from the Russian Far East Sakhalin liquefaction plant increasing year-on-year and costing 90 percent more than the previous year as more Atlantic Basin shipments pointed at Europe.

LNG Canada, the Shell-led project in the Pacific Coast province of British Columbia, may decide to double the current capacity from 14 million tonnes per annum to 28 MTPA if the five shareholders agree to proceed before the first cargo is shipped by around the end of 2024.

That’s the view of LNG Canada Chief Executive Jason Klein who is overseeing the construction of the plant near Kitimat which along with the Coastal GasLink pipeline bringing feed-gas from northeast BC will be 70 percent complete or even slightly more by year-end.

The largest private investment in Canadian history and with an export licence for 40 years it is ideally placed to satisfy the LNG cargoes needs of the growing Asia-Pacific market.

CEO Klein said in an interview with Canada’s “Financial Post” that he regularly hears the word “completion” of first phase followed by the word “expansion” in his calls with the project partners who are all Asia-based.

“There is more urgency, but we are already doing everything we can to build it as quickly as possible,” said Klein.

As European and Asian countries compete to secure gas shipments for delivery this winter amid the worst energy crisis in decades, Klein stated that Canada’s first LNG export project was progressing well.

The main engineers on the project are Fluor Corp. of the US and JC Corp. of Japan.

Investments

Among the shareholders, Shell owns 40 percent, Petronas of Malaysia has 25 percent, PetroChina holds 15 percent as does Mitsubishi Corp of Japan through its Diamond LNG subsidiary, while Korea Gas Corp. owns the remaining 5 percent. 

The five shareholders had agreed in October 2018 to invest C$40 billion (US$30.2Bln at the time) on the brownfield site that had been an energy products terminal before being acquired by Shell in 2011.

The work on the initial two mega-Trains each with capacity of 7 MTPA has suffered hold-ups because of Covid-19 amid a dispute over schedules with the pipeline company TC Energy, so the final cost of the overall project could be much higher.

“When we start up, that’s over 14 million tonnes of supply on phase one that’s going to go into the market,” said Klein in his interview.

“It’s probably going to land in Asia in the first instance, just because of the shipping synergies,” he added.

Asia centred

“I’m a firm believer that every cargo we put into Asia, frees up a cargo somewhere else to go to Europe. So I do think Western Canada has a role to play in this,” explained Klein.

He noted that the LNG Canada project was originally conceived as a potential supplier for premium Asian markets.

However, in the seven months since the start of the war in Ukraine energy prices have skyrocketed and gas exporters, particularly along the US Gulf Coast, have pivoted to Europe.

Klein acknowledged that one potential solution under discussion to curtail LNG Canada’s greenhouse-gas emissions in the second phase would involve complete electrification of the liquefaction process.

Currently, in the project’s first phase, the plant’s huge compressors are powered by natural gas.

FID considerations

“I think the case remains compelling. It is very strong. And we’re looking forward to a phase two positive (final investment decision) with our partners,” stated Klein.

“It comes down to five decisions in five boardrooms around the world,” he concluded.

He said the project was advancing quickly with its workforce expected to peak in 2023 at around 7,500 employees

CEO Klein was nominated to his position by Shell in April 2022, having begun his career with the major in 2016, following its acquisition of BG Group where Klein worked in the Middle East, Europe, North America and Australia in roles spanning the legal function, upstream operations and LNG developments.

Following the BG takeover, Klein became Vice President of US LNG within Shell’s Integrated Gas business, responsible for leading its development of the Elba Island LNG plant now operational near Savannah in the US state of Georgia.

He has a Bachelor of Science from Trinity University in San Antonio in Texas and a Doctorate in Jurisprudence from the University of Texas School of Law.

Global investment in energy is set to rebound by nearly 10 percent during 2021 to $1.9 trillion, reversing most of last year’s drop caused the Covid-19 pandemic, with Qatar and its LNG expansion praised by the International Energy Agency in its annual investment report.