LNG

UK major BP shipped the first cargo on behalf of the Tangguh LNG production-sharing contract partners in Indonesia as the third liquefaction Train entered commercial operations.

Santos, the Australian operator of the Gladstone and Darwin LNG projects and with a portfolio in Papua New Guinea, reported a more than three-fold increase in net profits of US$2.11 billion, a reward for its years of investment in the industry.

The Australian Government has concluded an agreement with the East Coast LNG exporters in Queensland to ensure that uncontracted gas held by the three export plants in the state would first be offered to the domestic market before being offered to international customers.

European Union natural gas prices and LNG values hit record levels this week and the benchmark Dutch Title Transfer facility price was still just below $60 per million British thermal units after the Russian gas dispute escalated while Asian LNG spot cargo prices also gained ground on the week, though at a slower pace than the EU market.

Freeport LNG, the exporter of around 20 percent of US cargo volumes from three Trains on Quintana Island in Texas, has been hit by an explosive incident inside the facility and will shut for at least three weeks, affecting deliveries particularly to Japan.

Woodfibre LNG, the mid-scale project near the town of Squamish in British Columbia, has issued a notice to proceed to US energy engineering contractor McDermott International.

March 22 (LNGJ) - Peru’s LNG exports in March are heading for the North Asian markets of China and South Korea, according to data from energy company PeruPetro. Four vessels have left the Pampa Melchorita liquefaction plant on the Pacific Coast of Peru with three headed for South Korea on the 173,540 cubic metres capacity carrier “Megara”, the 135,400 cubic metres capacity carrier “Madrid Spirit” and on the 173,400 cubic metres capacity vessel “Sevilla Knutsen”.

   During the current winter season Peru has also shipped cargoes to Europe. The fourth cargo lifted so far in March from the Peruvian plant is heading for Tangshan in China on the 170,200 cubic metres capacity vessel “SFC Melampus”.

Australian LNG plant operator Santos, which has plant and project stakes in Queensland and in the Northern Territory as well as in Papua New Guinea, reported record free cash flow of US$1.5 billion and underlying profit of US$946 million after its merger with Oil Search.

The free cash flow was double the US$740 million posted in the previous year the underlying profits were 230 percent higher than the US$287M of profits reported in 2020.

The Adelaide-based company achieved net profits of US$658M versus losses of US$357M in the previous year.

“Net profit includes losses on commodity hedging and costs associated with acquisitions and one-off tax adjustments, and is significantly higher than the corresponding period mainly due to impairments included in the previous year,” explained Santos.

The Santos low-cost operating model delivered cash flow breakeven of US$21 per barrel of oil in 2021 and the Board resolved to pay a final dividend of US$0.85 cents per share, 70 percent higher than the previous final dividend.

Santos said the results reflected significantly higher oil and LNG prices compared with 2020 due to the recovery in global energy demand amid supply constraints from lower capital investment through the Covid-19 pandemic.

The earnings contained three weeks contribution from the Oil Search assets.

Highlight

“The highlight of the year was the completion of our merger with Oil Search,” said Santos Chief Executive Kevin Gallagher.

The CEO stated that the merger would drive “unrivalled growth opportunities” over the next decade.

“The financial results include only three weeks of the merged company. Had the merger been in place for all of 2021, the combined asset portfolio would have generated more than US$2.3Bln in free cash flow for the year,” explained Gallagher.

“We will now seek to further optimise the portfolio, reduce gearing and conduct a review of our capital management framework including returns to shareholders,” he added.

In the 2022 outlook, Santos said production was expected to increase to a range of 100 million to 110 million barrels of oil equivalent, primarily due to higher production from Papua New Guinea assets following the Oil Search merger.

This is expected to be offset by a lower share of Bayu-Undan production in the Timor Sea, which is expected to be about 10 million barrels of oil equivalent less than 2021, due to a lower average working interest following the 25 percent sell-down of a stake to South Korea’s SK E&S in 2021.

Santos noted that there would also be lower gross production from Bayu-Undan as the field approaches end of field life and lower net entitlement under the Production Sharing Contract due to higher forecast LNG prices.

Sales volumes in 2022 are expected to be in the range of 110 million boe and 120M boe.

Santos said major growth projects capital expenditure was expected to be in the range of US$1.15Bln to US$1.3Bln.

“A contingent amount of up to approximately US$400M could be added should the Dorado (Australia) and Pikka (Alaska) projects take final investment decisions. Guidance assumes current Santos interest in all projects,” said the company.

“At an average oil price of approximately US$65 per barrel in 2022, it is expected sufficient free cash flow would be generated to fund forecast major growth projects,” it added.

Santos said its AGM would be held on Tuesday, May 3 and the closing date for receipt of nominations from persons wishing to be considered for election as directors is Thursday, February 24.

Two liquefied natural gas LNG carriers, the “Boris Davydov” and the “Rudolf Samoilovich” after safely completing the final leg of their East-West voyages on the Northern Sea Route which has become ice-bound earlier in the 2021-2022 winter season.

“Two LNG carriers Boris Davydov (in the Laptev Sea) and Rudolf Samoilovich (in the East Siberian Sea) continue their voyages to the port of Sabetta without ice-breaker support,” said the NSR information office.

The 172,000 cubic metres capacity “Boris Davydov” was due to berth on November 25 at the Novatek-operated Yamal LNG export plant at Sabetta in northern Siberia.

The vessel had previously delivered an LNG shipment to the Chinese port of Jiangsu, according to the Russian NSR data.

The “Rudolf Samoilovich” was also heading for Sabetta and is scheduled to arrive on November 27. The ship had last visited the Russian Far East port of Nakhodka, though had delivered a shipment of LNG to the Tangshan terminal in the Caofeidian Industrial Zone of Hebei province.

Speed

“At the time of the report, their speed was 16-18 knots,” added the NSR body.

However, another vessel, the “Mechanic Pustoshnyy”, is drifting in the Laptev Sea, and a second ship, the “Mikhail Somov”, is adrift in the western part of the Vilkitskiy Strait.

The report concluded that in the western part of the NSR, the icebreaker “Yamal” finished the escorting of the ships “Yurii Arshenevskiy” and “Vitus Bering” at Cape Zhelaniya.

The Yamal plant is the focus of NSR energy shipping activity. It has three liquefaction Trains on stream, each with nameplate capacity of 5.5 million tonnes per annum, as well as a smaller fourth Train with 900,000 tonnes of output, taking overall production to 17.4 MTPA.

All the LNG vessels serving Yamal LNG are around 172,000 cubic metres capacity and have ice-class Arc7 notation.

The Arc7 design allows ice-class LNG carriers to break through ice that is up to 2 metres thick.

The Russian shipbuilding company, Zvezda Shipbuilding, is building a series of 15 next-generation Arc7 ice-class LNG vessels for Russian natural gas company Novatek’s Arctic LNG II project under construction on the Gydan Peninsula in the same region as the Yamal facility.

These newbuild Arc7 LNG vessels have increased ice-breaking and manoeuvring characteristics compared with the existing fleet used by the Novatek-operated Yamal LNG project.

The 15 carriers will be registered and flagged under the Russian Federation and operated by the Russian crew when delivered. 

The US government reported that the increase in the nation’s liquefied natural gas exports was supported by large prices differences between the benchmark Henry Hub and spot prices in Europe and Asia and forecast a surge in shipments through March 2022.