LNG

Beijing Gas Blue Sky Holdings, a Chinese natural gas provider and operator focusing on the midstream and downstream, has presented an overview of the current LNG market and prices in China and the effects of Russia’s Ukraine invasion and that of the Covid-19 pandemic, which affected the Chinese for longer.

Woodside Energy, the leading Australian oil and gas company and LNG operator in the state of Western Australia, has criticised Federal Government moves to intervene in the Australian natural gas market, including with the imposition of price caps, and said the action was likely to make matters worse.

Yantai Port Group, the Chinese cargo transportation, warehousing and harbour management company in the northeast province of Shandong, is taking part in three liquefied natural gas storage and terminal projects to be completed between 2022 and 2025.

Port executives said government approvals for the ventures were making their way through the regulatory process to be located in Yantai Port, one of China’s industrial and petrochemical hubs.

The current terminal project under construction involves a partnership with Shandong Poly-GCL Pan-Asia International Energy and the storage tanks are now being built.

The terminal developers are negotiating future LNG supplies and hosted a visit in March 2021 of a Canadian diplomatic delegation to view the progress of the LNG terminal build-out.

Yantai port is initially aiming to construct two sets of tanks of 316,000 cubic metres of storage and receiving capacity of around 6 million tonnes per annum.

Yantai Port and its joint venture firm Yantai LNG also plan to offer contracts for the building of two other facilities, each with 5 MTPA of capacity.

Yantai is regarded by the government in Beijing as a core platform of what it calls the Northeast Asia economic circle.

The port is an important economic development hub for the areas of the Bohai Sea Rim, the Yangtze River Delta and Shandong Province itself.

Investment is also planned for a separate 5 MTPA storage and terminal project backed by China National Petroleum Corp. with a start-up date set for 2023.

Yantai would take a 49 percent stake in that project with CNPC holding the majority share of 51 percent, likely through its Hong Kong-listed affiliate PetroChina.

LNG Canada, the export project in British Columbia under construction near Kitimat, has PetroChina as one of its shareholders.

Shandong Oil & Gas and Yantai Port have signed an agreement to cooperate on what would be the third import venture.

Shandong Oil & Gas will take the lead in completing the project’s 530-kilometres pipeline that would connect the terminal to cities across Shandong province and to the national gas grid.

The plan for the Shandong Oil & Gas and Yantai venture is to build six 200,000 cubic metres LNG storage tanks in two phases. 

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.

ENN Energy Holdings, the Chinese city-gas company and owner of the Zhoushan LNG import terminal in eastern Zhejiang province, reported a jump in annual profits and increased retail gas sales.

PetroChina, the Hong Kong-listed arm of China National Petroleum Corp. (CNPC), reported a drop of just over 23 percent in nine-month net profits to 37.25 billion yuan ($5.28 billion) due to a lower oil price and intensified competition in refining as it also faced revenue problems with LNG and pipeline gas imports.