LNG

Kinder Morgan Inc., the US pipeline giant transporting natural gas to LNG plants and to customers around America, said it now provided 50 percent of the feed-gas used by US LNG export plants and was planning more pipeline expansions to serve liquefaction facilities.

Tellurian Inc., the developer of the Driftwood LNG export project in Louisiana, reported a rise in revenue from natural gas production because of increased prices and volumes from its Haynesville Shale assets as progress continued on construction preparations and LNG volume agreements.

The company generated $26M in revenues from natural gas sales, compared to $8.7M in the first quarter of 2021. 

Tellurian said it ended the quarter with about $296M of cash and cash equivalents and $732M in total assets.

The Houston-based company also confirmed it had completed its site preparation and issued a limited notice to proceed to US LNG plant engineer Bechtel to begin construction of the Driftwood export facility.

“Tellurian’s own natural gas production and sales provide valuable operating cash and a unique advantage to us as a liquefied natural gas supplier,” said President and CEO Octávio Simões in the first-quarter 2022 earnings statement.

The Driftwood plant has permits to produce 27.6 million tonnes per annum of LNG and has 10-year offtake agreements with Shell North America and global commodities firms Vitol and Gunvor.

The Tellurian project involves constructing 20 mid-scale processing Trains, each with 1.38 MTPA of capacity, and built as five blocks of four Trains.

The Phase One development would include the first two of these blocks with 11 MTPA of output and two of three planned 235,000 cubic metres storage tanks and the first of three planned loading berths for LNG carriers.

Output

“We are nearing net production of 100 million cubic feet equivalent per day and plan to reach 200 mmcfe per day by year-end,” added Simões.

“Tellurian production is now generating free cash flow after capex and we intend to maintain capex at approximately $150M a year,” explained the CEO.

“With Bechtel now onsite beginning construction of Driftwood, we are on schedule to begin LNG production in 2026,” he stated.

Tellurian produced 6.1 billion cubic feet of natural gas for the quarter to the end of March compared with 4.9 Bcf for the previous
quarter.

Tellurian’s upstream assets include 13,521 net acres and interests in 82 producing wells as of March 2022.

Baker Hughes, the LNG equipment-maker and energy services company, reported an increase in first-quarter revenues to $4.83 billion and a 70 percent jump in operating income to $279 million while forecasting LNG final investment decisions on up to 150 million tonnes per annum of projects in the next two years.

The company, which has main offices in Houston and London, reported net income of $72M in the quarter to the end of March 2022 versus a loss of $452M in the same three months of 2021.

“Our first quarter results reflect operating in a very volatile market environment during the first few months of 2022,” said Lorenzo Simonelli, Baker Hughes Chairman and Chief Executive.

“On the positive side, we recorded strong orders from Turbomachinery and Process Solutions (TPS) as the LNG order cycle continues to unfold,” stated the CEO.

The company said TPS orders totalled $3Bln for the second consecutive quarter, driven again by strong orders in LNG.

“We believe that we are at the beginning of another constructive LNG cycle, which is being expedited by the current geopolitical situation, particularly for US LNG projects,” stated Simonelli.

“As these market dynamics play out, a number of projects should accelerate, and we now believe that 100 to 150 MTPA of LNG FIDs will be authorized over the next two years with additional FIDs becoming more likely in 2024 and 2025,” declared the CEO.

Record orders

Orders in the quarter were $3.0Bln, up $1.6Bln year-over-year and a new quarterly record for TPS.

Simonelli said that equipment orders were up $1.5Bln year-over-year, driven by a significant award to provide an LNG system for the first phase of US company Venture Global’s Plaquemines LNG project, located south of New Orleans on the Mississippi River in Louisiana.

Service orders in the quarter were up 8 percent year-over-year, primarily driven by growth in contractual and transactional services, partially offset by lower order volumes in upgrades.

Overall orders in the quarter were $6.8Bln, up 3 percent versus the three months to the end of 2021, driven by Oil Field Equipment and TPS, partially offset by a decrease in Digital Solutions and OFS.

Year-over-year, revenue was up 1 percent compared with $4.78Bln in the prior-year quarter, driven by increases in OFS and Digital Solutions, partially offset by decreases in OFE and TPS.

Adjusted operating income was $348M, which excluded $70M of restructuring, separation and other charges.

Russia issue

As regards the conflict in Ukraine, Baker Hughes said Russia represented roughly 4 percent of total company revenue in the first quarter.

“We recently announced that we have halted all new investment in the country,” said the company.

Oilfield Services revenues in the quarter amounted to $2.5Bln, down 3 percent from the previous three months.

“International revenue was down 7 percent sequentially led by declines in the North Sea, Russia Caspian, the Middle East, and Latin America,” said Baker Hughes.

Moving to the Oilfield Equipment division, the company said that orders for the quarter were $739M, double the $394M achieved in the same three months of 2021.

It added that the strong orders performance was driven by subsea production systems (SPS), supported by a large subsea tree contract in Asia, along with growth in flexibles, surface pressure control and services.

“As a reminder, we removed Subsea Drilling Systems from consolidated OFE operations when we completed the merger with MHWirth in the fourth quarter of 2021,” Baker Hughes explained.

The company concluded that revenue in the division was $528M, down 16 percent year-over-year, primarily driven by SPS, SPC and the removal of SDS, partially offset by growth in services and flexibles.

The US Potential Gas Committee (PGC) has released its two-yearly report showing that the LNG exporting nation has record natural gas resources in the prime basins in terms of recoverable gas and reserves.

The Atlantic Area has the largest reserves following by the Mid-Continent, the Rocky Mountains and the Gulf Coast, where most liquefaction and export plants are located, including the offshore Gulf of Mexico.

“Technically recoverable resources, those in the ground but not yet recovered, total 3,368 trillion cubic feet, “ said the PCC report.

“When you add in the recovered gas, the total gas (resources plus reserves) rises to a record 3,863 Tcf, up slightly from the comparable year-end 2018 assessment,” it stated.

The PCC year-end assessment of the nation’s estimated natural gas resource base was released at a virtual event hosted by the American Gas Association.

“This report affirms that Americans will have the clean natural gas that they need now and well into the future,” said Richard Meyer, Vice President, Energy Markets, Analysis and Standards for the AGA.

“The Covid-19 pandemic has temporarily slowed drilling activity, but the US continues robust natural gas production relative to history,” explained Meyer.

“Our total gas account as a measure of future supplies is as high as ever and, with supportive policies in place to ensure reliable supply, this vast energy resource is available to meet our energy needs and to support US and global commitments to lowering emissions,” he added.

The PGC’s year-end 2020 resource-specific assessment of 3,368 Tcf includes 3,212 Tcf of gas potentially recoverable from “traditional” reservoirs (conventional, tight sands, carbonates, and shales) and 157 Tcf in coalbed gas reservoirs.

The PGC consists of approximately 80 knowledgeable and highly experienced volunteer members who work in the natural gas exploration, production, transportation, and distribution industries and the technical services and consulting sectors.

The PGC biennial assessment is regarded as the most comprehensive report of the potential for future natural gas supplies in the US.

Since its founding in the early 1960s, the sole purpose of the PGC has been to organize and train geoscientists, engineers and others for the timely preparation and dissemination of the two-yearly assessments of the natural gas resource base.

According to the report, the Atlantic Area contains 39 percent of total US gas resources, followed by the Mid-Continent with 18 percent.

The Rocky Mountains has 17 percent of the potential future supply, while the Gulf Coast (including the Gulf of Mexico) contains 16 percent.

“Changes in the total assessment from year-end 2018 to year-end 2020 arose primarily from the evaluation of recent drilling, well tests, and subsequent production data from these four areas.” said the report.

The PGC pointed out that it also benefits from the input of respected technical advisors (most of whom are former active members), together with representatives of the gas pipeline and gas distribution industries and a professionally diverse group of observers representing federal and state government agencies, academia, industry and research organizations, and commercial firms in both the US and Canada.

In 1984 the PGC was incorporated as a non-profit, tax-exempt entity in the State of Colorado.

The PGC reports its assessments of potential resources in three categories of decreasing geological certainty:

1)Probable resources (discovered but unconfirmed resources associated with known fields and field extensions; also undiscovered resources in new pools in both productive and non-productive areas of known fields);

2) Possible resources (undiscovered resources associated with new field/pool discoveries in known productive formations in known productive areas); and

3) Speculative resources (undiscovered resources associated with new field/pool discoveries in as-yet non-productive areas). 

The amount of feed-gas flowing to US liquefied natural gas export plants is expected to decline over the next two months as scheduled maintenance programmes begin at export facilities in Louisiana and Texas.

The US Government expects LNG exports will average 8.5 billion cubic feet per day for all of 2021compared with 9.8 Bcf per day during January when around 18 to 22 cargoes were lifted each week from the six plants in operation amid high spot prices in North Asia.

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. 

The US Federal Energy Regulatory Commission has issued the draft environmental impact statement on the Alaska LNG project proposed by the Alaska Gasline Development Corp. and concluded that it would have significant impacts on the state offset by many economic benefits.

The project was launched nine years ago and LNG would be produced and exported by 2025 after engineering, construction and production costs estimated at around $43 billion.

The FERC conclusions were that the venture's significant environmental impacts would also bring an economic boost from export revenues in commercializing the natural gas resources of Alaska’s North Slope.

Alaska’s project would comprise several pipelines, including a 807-mile main line of 42-inches in diameter and with associated above-ground facilities.

These include eight compressor stations and a liquefaction facility with output of 20 million tonnes per annum at Nikiski on the eastern shore of Cook Inlet on the Kenai Peninsula.

The main pipeline would deliver peak capacity of 3.9 billion standard cubic feet per day of natural gas from companies such as US major ExxonMobil and BP of the UK.

The publication of the three-volume FERC report marks a key step in the state’s efforts to secure a permit leading to construction.

A public comment period has now started as part of the permit process and would last until October 3.

The FERC draft report said that the project would have significant environmental impacts if it goes ahead, though most impacts could be minimized with mitigation measures.

“However, some of the adverse impacts would be significant even after the implementation of mitigation measures,” stated the regulator.

The President of the state-owned AGDC, Joe Dubler, said the FERC report represented substantial progress for the Alaska LNG project.

“Alaska LNG holds the potential for significant energy, economic and employment benefits for Alaskans,” said Dubler.

“We will now begin to thoroughly examine this comprehensive document to understand the Commission’s recommendations,” he added.

“The ongoing permitting process incorporates 150,000 pages of data and should give Alaskans confidence that the project’s merits and impacts are being rigorously scrutinized,” he explained.

The gas treatment facilities comprising a main plant at Prudhoe Bay and the Point Thomson gas transmission line would be on state land designated for oil and natural gas development within the North Slope Borough.

“We conclude that project construction and operation would result in temporary, long-term, and permanent impacts on the environment,” said the FERC report.

“Most impacts would not be significant or would be reduced to less than significant levels with the implementation of proposed or recommended avoidance, minimization and mitigation measures, but some impacts would be adverse and significant,” explained the regulator.

“We conclude that constructing the project would have significant impacts on permafrost due to granular fill placement, particularly for the Mainline Pipeline facilities,” it said.

“The project would have significant adverse impacts on wetlands from granular fill placement resulting in substantial conversions of wetlands to uplands,” added the report.

“Significant adverse impacts on forest would result from permanent losses or conversions from installation of above-ground facilities, granular fill placement and vegetation maintenance in the Mainline Pipeline right-of-way,” it stated.

The FERC also gave details of impacts on wildlife in the state.

“For caribou, the impacts on the Central Arctic Herds would likely be significant due to the timing of impacts during sensitive periods, permanent impacts on sensitive habitats, and the project location at the center of the herds’ range,” said the FERC.

“During the years of simultaneous construction, start-up, and operational activities at the liquefaction facilities, as well as during flaring events, impacts on air quality could be significant,” said the FERC.

“Operational noise associated with the liquefaction facilities at the two nearest noise sensitive areas would likely double due to facility operation, which would be considered a significant increase,” the report added.

However, it also stated that the project would result in positive impacts on the state and local economies, though adverse impacts on housing, population, and public services could occur in some areas.

Chart Industries, the US LNG and industrial gases equipment provider, has agreed to acquire Harsco Corp.’s Industrial Air-X-Changers business for $592 million in cash as it makes its fourth acquisition in two years to broaden its sector offerings.

Chart Industries, the manufacturer of engineered equipment for the industrial gas and energy industries, announced the release of the updated version of its liquefied natural gas processing technology.