LNG

Asian LNG spot prices narrowed the differential with European Union wholesale gas markets as futures trading signalled high prices in the third quarter and beyond as the gas complex remained underpinned by high Brent crude values even as an oil demand turnaround is awaited.

Japanese liquefied natural gas imports dropped almost 9 percent in December as the nation formally ceded the No. 1 spot to China as the top LNG importer for 2021, while Japan’s LNG shipments from the US jumped nearly 50 percent.

ENN Group, the leading non-state energy company in China with LNG and growing city-gas assets, reported a more than 18 percent jump in first-half profits as revenues soared, boosted by increased business in LNG and in expanding retail, wholesale and industrial gas supply markets.

The Intercontinental Exchange, the US-based operator of global trading platforms and clearing houses, reported record activity across its markets for European Dutch Title Transfer Facility (TTF) futures and Japan-Korea Marker futures for North Asia spot cargoes.

Natural gas prices and LNG cargo value indicators have been slow to gather pace in July with front-month futures and the Japan-Korea Marker price for Asian spot cargoes remaining lacklustre in contrast to more buoyant New York Mercantile Exchange US natural gas futures.

Oil prices partially recovered after two days of turmoil as US crude futures stayed in positive territory but the North Sea Brent oil price was weak amid the supply glut, also shared with the LNG market as the Asian spot price dropped.

Woodside Petroleum, the Western Australia operator of the North West Shelf and Pluto LNG plants, said it was keeping up production levels as demand has remained strong in its core north Asian market and its trading team has started trading spot shipments with Chinese buyers.

The Perth-based company said its base business was characterised by reliable, low-cost, high-margin operations which provide resilience to fluctuations in commodity prices.

“LNG and oil production have not reduced in the current environment, and deliveries to customers have continued,” said the company.

“Woodside has a high-quality, investment-grade customer base, and deliveries and performance under contracted arrangements have not been adversely impacted by recent events,” said Woodside.

It outlined its actions over the combined coronavirus and oil and LNG market gluts actions as being aimed at protecting local communities and the health and safety of its people and contractors while deferring some projects and spending.

“Demand has proven resilient for Woodside’s product in core north Asian markets. Woodside’s trading team has recently begun placing some spot production back into China as industrial output and demand restarts,” said Woodside.

“This trading capability, along with Woodside’s shipping capacity, provides flexibility to respond quickly to changes in market dynamics,” it added.

Woodside expected to see full impact of lower oil price late in the second quarter of 2020 due to the lag between the oil price and realised LNG price and was increasing hedging activities.

“The oil price is expected to be volatile at least in the near-term. To reduce exposure to potential further downside and increase revenue certainty, Woodside has hedged 11.85 million barrels of oil between April and December 2020 at an average price of US$33.47 per barrel,” said the company.

“Woodside has also agreed with a customer (unnamed) to fix the price of approximately 2.4 MMboe of LNG production over the same period, to further increase revenue certainty,” it added.

Because of the changed market and the drop in commodity prices and exchange rate issues, Woodside said its 2020 work plan had been reviewed and non-essential activities have been cancelled or deferred. 

“Total expenditure in 2020 is forecast to reduce by approximately 50 percent to approximately $2.4 billion,” said the company.

The company has delayed final investment decisions on the Scarborough and Pluto LNG Train 2 developments until 2021as will as target investments in the Browse Basin, offshore northwest Australia.

“Finalisation of commercial agreements and regulatory approvals will continue for Scarborough, Pluto Train 2 and Browse and there will be some ongoing engineering work in preparation for final investment decisions,” explained Woodside.

It also gave an update on its plans for the oil-led project offshore Senegal in West Africa.

“Work on the Sangomar Phase 1 development commenced early in 2020. Woodside is taking early action to proactively manage the emerging impacts of COVID-19 on the supply chain and project schedule,” said Woodside.

"We are working with contractors, the Government of Senegal and our joint venture partners to evaluate options to reduce total cost and near-term spend whilst protecting the overall value of the investment,” it added.

The company is also making efforts to maintain high production levels by deferring planned maintenance on natural gas facilities LNG Trains.

It made changes to the planned turnaround schedule at the Karratha Gas Plant with the major turnaround for LNG Train 3 deferred to September 2020 and the major turnaround for LNG Train 4 deferred to August 202.

Woodside has also delayed most proposed exploration activities, although some seismic acquisition will continue, reducing overall exploration expenditure by around 50 percent to $75 million.

On the hiring front. Woodside said employee numbers had been frozen but its intake of graduates would continue.

March 26 (LNGJ) - China will be unloading at least three LNG shipments in the days ahead. The 174,100  cubic metres capacity carrier “Cesi Lianyungang” will be unloading a cargo at the Qingdao terminal in eastern Shandong province from Australia-Pacific LNG at Gladstone in Queensland where terminal owner Sinopec is a shareholder. The 147,000 cubic metres capacity vessel “Min Lu” will deliver a cargo on March 26 to CNOOC’s Fujian terminal from the BP-operated Tangguh plant in Indonesia. The 147,000 cubic metres capacity “Dapeng Moon” will then discharge a shipment on March 29 at the CNOOC Shenzhen Diefu regasification facility from the Woodside Dampier export terminal in Western Australia.

Spot LNG cargo prices sprung into life after weeks of drift with December averages for North Asia breaking the $6.800 per million British thermal units level and with January 2020 shipments to China, Korea and Japan priced at around US$7.250 per MMBtu.

LNG spot cargo prices were flat over the past week with higher values quoted for December volumes with the second half of December window priced at $6.500 per million British thermal units for shipments to China, Korea and Japan.