LNG

South Korean discussions are under way to create the nation’s largest energy company by merging two parts of the SK Group with LNG, oil and gas and chemicals assets into a mega-Korean corporation worth over US$75 billion if completed.

Temasek, the Singapore wealth fund that recently sold all liquefied natural gas interests to Shell, plans to focus on investing in Chinese companies with large domestic sales sales rather than those that depend on foreign markets.

Conrad Asia Energy, an Australian-listed natural gas exploration and production company, has entered into a binding gas sales agreement for the domestic portion of the Mako gas field in Indonesia and with an option to sell the balance of the pipeline gas to LNG importer Singapore.

Conrad has signed the agreement to sell domestic gas to Perusahaan Gas Negara (PNG), the gas utility subsidiary of Pertamina, the national oil and gas company of Indonesia.

The ASX-listed company said the deal with PGN for gas from the Mako gas field, in which Conrad has a 76.5 percent participating interest, is an important step in the commercialisation of the largest undeveloped gas field in the West Natuna Sea.

PGN is Indonesia’s largest gas company and a separate GSA is being negotiated with Singaporean parties for the remainder of the Mako gas resource to be exported by pipeline to the Asian city state.

Singapore pipeline

The West Natuna Sea gas gathering system is already connected to Singapore.

However, PGN is proceeding with constructing a tie-in pipeline to the island of Batam across the Malacca Strait that will connect the Natuna Sea volumes to the Indonesian market.

It was noted by Conrad that completion of both GSAs would be significant landmarks on the path to a final investment decision for the Mako project targeted for the fourth quarter of 2024.

Conrad said it was moving towards finalising a GSA for the Mako export gas for Singapore over the coming few weeks.

The gas will supply Singapore through an existing pipeline in competition to the LNG cargoes delivered to the Jurong Island LNG terminal.

UK company Empyrean Plc is also a shareholder in the project. The Mako field contains contingent resources of 376 billion cubic feet of which 21 Bcf are net attributable to Empyrean.

Long-term supplier

The West Natuna Sea gas fields have been supplying Singapore with natural gas for more than two decades and the Mako project is expected to continue this supply for at least another 10 years from 2026.

In addition to the significance for the Mako development, Conrad said that the accord builds an important platform for Conrad with Indonesia’s national companies.

Conrad said it would continue to grow its business relationship with PGN through its other discovered gas resources offshore Aceh and related to which the two parties signed an accord in February 2024.

“Our focus has been finalising the underwriting gas sales agreements between the Mako Joint Venture, the Indonesian Government and Regulator and Singapore,” said Conrad Chief Executive Miltos Xynogalas.

“These agreements are the essential documents that demonstrate financial viability of the project, which in turn underwrite value and financial sustainability,” the CEO added.

European LNG and wholesale natural gas day-head andfutures prices declined over the past week as mid-Summer arrived and storage began to swing towards peak levels while cargo deliveries slowed to Chinese and European regasification terminals.

UK major Shell is said to be finalizing the acquisition of liquefied natural gas assets of Pavilion Energy, the natural gas company set up by Singapore’s wealth fund Temasek, to give the Asian island state energy security.

GAIL (India) Ltd, the shareholder in Petronet LNG and the operator of the Dabhol import terminal in the West Coast state of Maharashtra, signed a long-term supply deal with global commodities firm Vitol.

Trafigura, the global commodities trading firm, said its traded liquefied natural gas volumes declined slightly in the past year and while market volatility had eased the energy supply chain remained “brittle” amid changing inventories and continuing geopolitical concerns.

China National Offshore Oil Corp. and French energy and utility company Engie have completed a yuan-settled liquefied natural gas trade through the Shanghai Petroleum and Natural Gas Exchange, the third such LNG trade achieved by the Chinese.

The yuan transaction was completed on the Shanghai Petroleum and Natural Gas Exchange (SHPGX), according to a statement from the trading platform.

The statement added that under the yuan-denominated agreement an LNG cargo of about 65,000 tonnes would be delivered in November.

China has recently emphasized its need where possible to settle oil and gas trades in yuan in an attempt to establish its currency internationally and to weaken the dollar's dominance in energy trading.

CNOOC had previously conducted China's first yuan-settled trade with French major TotalEnergies in March 2023 and Singapore's Pavilion Energy also settled such a deal in August.

Das Island cargo

The first 2023 yuan-settled LNG trade involved TotalEnergies and Abu Dhabi National Oil Company’s trading unit as well as CNOOC.

The cargo from that transaction arrived in May 2023 and was unloaded at the main terminal in southern Guangdong province.

The shipment from Das Island in Abu Dhabi in the United Arab Emirates was delivered by the “Mraweh” LNG carrier, a mid-sized vessel with 135,000 cubic metres of capacity.

CNOOC said at the time that the cargo delivery to the Dapeng terminal marked progress by China towards more yuan settlement of cross-border energy trade

CNOOC had purchased the Das Island cargo from TotalEnergies at the Shanghai Exchange.

China has raised the issue over the past several years of seeking more use of the Chinese currency with nations like Saudi Arabia and other energy exporters.

Analysts note that the Chinese economy would benefit hugely even if China only partly paid for its oil and gas in yuan.

China imported more than 500 million tonnes of crude oil last year and more than 100 million tonnes of natural gas by pipeline and as LNG and with the LNG portion amounting to 63.44 million tonnes.

Coro Energy Plc, the London-listed South East Asian energy company with a natural gas portfolio, said a term sheet had been signed with Sembcorp Gas of Singapore for a long-term gas sales agreement for the Mako gas field in Indonesia to supply the Asian city state.

The operator of the Duyung production sharing contract, West Natuna Exploration, a subsidiary of Conrad Asia Energy with a 76.5 percent interest in the Duyung resources, had signed the term sheet with Sembcorp Gas. Coro and another UK-listed company, Empyrean plc, hold 15 percent and 8.5 percent respectively of the Duyung PSC.

“Critically, the term sheet has been endorsed by the Indonesian petroleum upstream regulator (SKK Migas),” said Coro in a statement to the London Stock Exchange.

Analysts noted that gas would supply Singapore through an existing pipeline in competition to the LNG cargoes delivered to the Jurong Island LNG import terminal.

Indonesian plans

The development of the Mako gas project has been in line with Indonesia's stated objective of doubling gas production by 2030.

The Mako gas field was discovered in 2016, and since that time the resource has been delineated through successful appraisal drilling.

It received formal approval from the Government of Indonesia for the revised Plan of Development in late 2022.

Coro noted that it has a 15 percent participating interest in the Duyung PSC.

“The term sheet relates to the sale of Mako gas from start of production until 2037 for a total sales gas volume (100 percent) of 293 billion cubic feet with the potential to increase to 392 Bcf. Gas sales will be priced against Brent oil,” explained Coro.

“Further details of the gas sales agreement will be released to the market once the agreement is executed,” explained Coro.

Endorsed

The company added that the parties were now focused on finalising a definitive gas sales agreement.

“I am delighted to have now secured the GSA Heads at the Duyung PSC, approved by the buyer and, critically, endorsed by the Indonesian authorities,” stated James Parsons, Chairman of Coro.

“This is a critical step in the commercial de-risking of our project, positioning us perfectly for bids from the operator's farm-out process, which we expect to play out shortly,” Parsons added.

Empyrean Energy, the London Stock Exchange-listed oil and gas development company with interests in China, Indonesia and the US, said the plan of development for an Indonesian project has been approved and will supply pipeline gas to Singapore in competition to LNG.

The Indonesian Ministry of Energy and Mineral Resources has approved the updated plan of development for the Mako gas project within the Duyung production sharing contract (PSC).

The Mako development is based on contingent Duyung PSC resources of 384 billion cubic feet gross and with 297 Bcf net attributable to the Duyung joint venture.

“The Indonesian government also approved the export of up to 100 percent of the gas production to Singapore,” said the Empyrean statement.

The operator is targeting production from the Mako gas project to commence in 2025 with up to 120 million cubic feet of gas per day.

The gas will supply Singapore through an existing pipeline in competition to the LNG cargoes delivered to the Jurong Island LNG import terminal in the Asian city state.

Empyrean holds an 8.5 percent interest in the Duyung PSC in which the Mako gas project is part.

Production plan

“Development of the Mako gas project will be in line with Indonesia's stated objective of doubling domestic gas production by 2030,” said Empyrean.

“The award of the revised plan represents a material event in progressing the Mako gas project which is currently the largest undeveloped gas field in South Natuna Sea,” added Empyrean, whose regional headquarters are in Australia,

The operator of the Duyung PSC is West Natuna Exploration Ltd, a subsidiary of Conrad Asia Energy with a 76.5 percent interest in the Duyung resources. Another 15 percent interest is held by Coro Energy Plc and the balance by Empyrean.

The company explained that at present, there was no infrastructure to transmit gas from the Mako field to domestic markets in Indonesia, and hence the plan for exports of production to Singapore, which is already connected to the West Natuna Gas Transportation System.

“The existing under-utilised gas pipeline to Singapore expedites the development of the Mako gas field from which gas is expected to be produced from 2025,” explained  Empyrean.

Empyrean Chief Executive Tom Kelly said he was pleased with the approval of the updated development plan.

“It now allows the operator to re-focus resources on its stated objective of working with the Government of Indonesia to complete Gas Sales Agreement negotiations at the earliest opportunity,” added Kelly.