LNG

Chevron Corp., the US major oil and gas company with LNG operations in Australia and Africa, has received a vote of confidence from US investor Warren Buffett whose Berkshire Hathaway has taken its stake to almost 7 percent.

Buffett’s Berkshire Hathaway has increased its stake in San Ramon, California-based Chevron by over 15.84 million shares.

This transaction has brought Berkshire Hathaway's total share count in Chevron to 126.09M shares, representing about 5.96 percent of Buffett’s investment portfolio and 6.81 percent of Chevron's outstanding shares.

Lower price

According to Berkshire Hathaway data, the Chevron shares were acquired at an average price of $149.16 each and were valued at $18.80 billion.

Buffett is a celebrity figure among America’s small retail investors and is known to his fans as “The Oracle of Omaha”.

Buffett’s other main energy investment is in Houston, Texas-based Occidental Petroleum which forms 4.19 percent of the Berkshire Hathaway portfolio. The Buffett firm also has a huge 50 percent represented by shares in Apple Inc.

Chevron’s shares have recently risen to $154.63 per share, backed by positive earnings and the company’s acquisition agreement signed in October 2023 with US oil and gas company Hess Corp.

The value of the Buffett stake has already risen and at current prices on February 19, 2024, is now worth just short of $20Bln at $19.49Bln.

Chevron recently reported annual net profits of $21.41Bln, down from $35.60Bln in the previous year, though apart from 2022 the Chevron performance was the strongest since 2013.

LNG projects advance

Chevron listed among its highlights as achieving first natural gas production from the Gorgon Stage 2 development in Western Australia where its operates both the Gorgon LNG and Wheatstone LNG export plants.

Chevron also reached a final investment decision with partners to construct a third gathering pipeline that is expected to increase natural gas production capacity at the Leviathan gas field and a future LNG hub in the East Mediterranean offshore Israel.

The company additionally expanded the Bayou Bend carbon-capture and sequestration project on the US Gulf Coast through an acquisition of nearly 100,000 acres.

However, Chevron assets in the Permian Basin in Texas and New Mexico also helped to underpin the earnings.

Chevron posted an increase in its Permian production by 10 percent in 2023 with US quarterly output coming to 1.16 million barrels per day compared with 895,000 barrels per day, helped by the 2023 acquisition of US independent oil and gas company PDC Energy.

Chevron is also paying $53Bln for New York-based Hess, giving it access to major oil discoveries in the South American nation of Guyana as well as more US shale assets in the Bakken Shale Basin of North Dakota.

TotalEnergies, the French major and a leading global LNG project developer and investor, has awarded engineering, procurement and construction contracts to five companies for the $11 billion Amiral complex project, a world-scale petrochemicals facility expansion at the Satorp refinery in Saudi Arabia as part of a joint venture with Saudi Aramco.

The facility will house the largest mixed-load steam cracker in the Gulf with capacity to produce 1.65 million tons of ethylene and other industrial gases per annum.

Aramco and TotalEnergies have teamed up for this project as the French energy developer also prepares multi-billion dollar investments in LNG joint ventures in the Gulf state of Qatar as well as in Mozambique and the US.

Gulf presence

QatarEnergy selected TotalEnergies as a key international partner in both the North Field South (NFS) liquefaction venture and the North Field East (NFE) project that will take Qatar’s production to 126 million tonnes per annum of LNG.

In addition, the French major is also the operator of the large-scale onshore LNG project in Mozambique that is also moving forward and was recently chosen to partner NextDecade Corp. of the US for the Rio Grande LNG export venture in Texas.

For the Saudi refinery project, the EPC contracts signing ceremony took place in Dhahran in Saudi Arabia attended by Aramco President and Chief Executive Amin H. Nasser and his TotalEnergies counterpart Patrick Pouyanné.

“The award of EPC contracts for the main process units and associated utilities marks the start of construction work on this joint project, following the final investment decision in December 2022,” said TotalEnergies.

Aramco ‘s Nasser said the company was taking a major step forward in further strengthening the partnership between TotalEnergies and Aramco.

“As part of Aramco’s growth strategy, the project is anticipated to contribute to value-addition opportunities in the Kingdom’s downstream ecosystem, and we thank the Ministry of Energy and the Ministry of Investment for their tremendous support via the Shareek program to make this multi-billion-dollar project a reality,” Nasser stated.

The Kingdom's Shareek program aims to unlock 5 trillion Saudi riyals (US$1.35 trillion) of private-sector investments by 2030, raising private-sector GDP contributions to 65 percent and to increase non-oil exports over time from 16 percent to 50 percent

Integrated

The Saudi Amiral project will be integrated with the existing Satorp refinery in Jubail and the new petrochemical complex is expected to attract more than $4 billion in additional investment in a variety of industrial sectors and create thousands of jobs.

“This expansion reinforces the exemplary relationship that our two companies have enjoyed for several decades,” Pouyanné said.

The EPC contracts list includes South Korea’s Hyundai Engineering & Construction Co. to work on a mixed feed cracker and utilities project for related industrial gases and flaring and interconnecting systems that support the main packages.

The Rome, Italy-based company Maire Tecnimont won the contract for two polyethylene units using Advanced Dual Loop technology and the derivative units.

Sinopec Engineering Group Saudi Co. was put in charge of the tank farm and Satorp integration.

Among regional companies, Gulf Consolidated Contractors Co. will work on the transfer pipelines, Mohammed Ali Al-Suwailem Trading & Contracting will build industrial support facilities and Mofarreh Marzouq Al Harbi & Partners is in charge of site preparations.

NextDecade Corp., the developer of the Rio Grande LNG export project in Texas, has teamed up with a New York investment fund and TotalEnergies to enable a final investment decision for the first three liquefaction Trains and with the French major buying 5.4 million tonnes per annum of cargoes and taking a large stake in NextDecade.

Cheniere Energy, the largest US liquefied natural gas exporter with its two plants at Corpus Christi in Texas and Sabine Pass in Louisiana, said that it had signed long-term contracts for 180 million tonnes of LNG and issued an upbeat message on markets, expansions and delivery.

Cheniere Energy, the largest US LNG exporter, posted 2022 revenues of $33.4 billion as it shipped 638 cargoes worldwide because of soaring demand, 13 percent more than last year, and outlined its plans for adding 20 million tonnes per annum more to the Sabine Pass plant in Louisiana and further expanding the Corpus Christi plant in Texas.

NextDecade Corp., the developer of the Rio Grande LNG export project on the Brownsville Ship Channel in Texas, has signed a 20-year sale and purchase agreement with ExxonMobil LNG Asia Pacific.

Under the SPA, the US major’s Asia unit will purchase 1 million metric tonnes per annum of LNG supplied from the first two Trains of the Rio Grande facility. The first Train expected to start commercial operations as early as 2026.

NextDecade mostly recently also signed a third supply agreement with a Chinese company since the start of 2022.

The Houston, Texas-based company signed a 20-year SPA with China Gas Hongda Energy Trading Co., a wholly-owned subsidiary of China Gas Holdings. This deal was also for 1 MTPA of LNG indexed to Henry Hub and delivered on a free-on-board (FOB) basis.

NextDecade in April 2022 signed a 20-year SPA with the Singapore trading arm of ENN Group of China and another with China’s Guangdong Energy Group Natural Gas.

“The signing of this long-term SPA with ExxonMobil, a global leader in the energy industry, represents another significant milestone for RGLNG and signifies the beginning of a mutually beneficial relationship,” said Matt Schatzman, NextDecade’s Chairman and Chief Executive.

Strategy

“This agreement highlights the success of NextDecade’s strategy to provide customers with low carbon-intensive LNG to help them meet their carbon reduction goals, while providing them access to secure energy supply,” added Schatzman.

The US company has ultimate plans and permits to produce up to 27 MTPA of LNG from five liquefaction Trains at the Rio Grande facility.

“LNG will play an increasingly important role in helping society reduce emissions during the energy transition,” said Peter Clarke, Senior Vice President of LNG for the ExxonMobil Upstream Company.

“We look forward to working with NextDecade to continue growing ExxonMobil’s LNG portfolio and delivering the lower-emissions energy the world needs,” added Clarke.

NextDecade has said that based on current expected demand for LNG and assuming the achievement of further LNG contracting and financing, the company anticipated making a positive final investment decision on up to three Trains in the second half of 2022, with FIDs of its remaining Trains to follow thereafter.

Russia’s invasion of Ukraine has upended the fuel investment landscape and intensified a commodity price shock with record earnings likely to be invested in new projects worldwide, including LNG export and imports projects over the next 10 years.

Venture Global has applied to regulators to increase activities at the Plaquemines liquefied natural gas export project on the west bank of the Mississippi, about 30 miles south of New Orleans.

Höegh LNG Partners, the US affiliate of Höegh LNG Holdings now partnered with the infrastructure unit of US investment bank Morgan Stanley, has reorganized part of its finances on a floating storage and regasification unit deployed in Indonesia and the subject of a dispute with the former charterer.

Higher global prices indicate improving netbacks for buyers of US LNG in European and Asian winter season markets with shipments rising as the industry fulfils its role as an outlet for domestic natural gas amid falling consumption and production.

The increased prices come amid expectations of natural gas demand recovery and potential LNG supply reductions because of maintenance at overseas plants, according to the short-term energy outlook of the US Energy Information Administration.

The EIA forecasts that US LNG exports will average more than 9.0 billion cubic feet per day from December 2020 through February 2021.

The report said that the cargo shipments, mostly from the Gulf Coast, averaged 4.9 Bcf per day in September, an increase of 1.2 Bcf per day from August.

Consumption of domestic natural gas is expected to decline slightly and will average 83.7 Bcf per day in 2020, down 1.8 percent from 2019.

“The decline in total US consumption reflects less heating demand in early 2020, contributing to residential and commercial demand in 2020 averaging 13.1 Bcf per day (down 0.7 Bcf per day from 2019) and 8.7 Bcf per day (down 0.9 Bcf per day from 2019), respectively,” said the report.

It forecasts industrial consumption will average 22.3 Bcf per day in 2020, down 0.8 Bcf per day from 2019 as a result of reduced manufacturing activity.

“EIA expects total US natural gas consumption will average 78.7 Bcf per day in 2021, a 5.9 percent decline from 2020,” said the report.

“The expected decline in 2021 is the result of rising natural gas prices that will reduce demand for natural gas in the electric power sectors,” it added.

Dry natural gas production will average 90.6 Bcf percent in 2020, down from an average of 93.1 Bcf per day in 2019.

In the forecast, monthly average production falls from a record 97.0 Bcf per day in December 2019 to 85.9 Bcf per day in May 2021, before increasing slightly.

“Natural gas production declines the most in the Permian region, where EIA expects low crude oil prices will reduce associated natural gas output from oil-directed rigs,” said the report.

Dry natural gas production in the US is expected to average 86.8 Bcf per day in 2021.

On the storage front, the EIA estimated that total working natural gas in storage at the end of September was at more than 3.8 trillion cubic feet, 12 percent more than the five-year (2015-2019) average.

In the forecast, EIA expects inventories to be more than 4.0 Tcf on October 31, which would be a record high.

“However, because expected natural gas production will be lower this winter than last winter, EIA forecasts inventory draws will outpace the five-year average during the heating season and end March 2021 at 1.7 Tcf, which would be 6 percent lower than the 2016-2020 average,” it added.

As regards energy-related carbon dioxide (CO2) emissions, after falling by 2.6 percent in 2019 from the previous year’s level, the emissions will decrease by 10 percent (536 million metric tons) in 2020 as a result of reduced consumption of all fossil fuels.