LNG

Kinder Morgan Inc. (KMI), the leading US pipeline feed-gas company for liquefied natural gas plants and a key energy infrastructure operator and developer, posted solid first-quarter earnings and forecast a surge through 2030 of LNG exports and pipeline gas deliveries to Mexico.

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.

Egypt, the nation with oil and gas reserves and which imports and exports LNG, is now planning to secure large quantities of US ethane made from shale gas to avoid shortages of fertilisers and a food crisis because of an acute shortage of natural gas in the domestic market.

Tellurian Inc., the developer of the Driftwood LNG export project in Louisiana, has signed an agreement to sell its Haynesville gas production business in East Texas and Louisiana to Dallas, Texas-based Aethon Energy Management, a private investment firm.

Tellurian said Aethon had agreed to pay $260 million for the shale gas business and additionally signed an accord to purchase 2 million tonnes per annum of LNG from the Driftwood liquefaction plant.

“The assets will expand Aethon’s footprint in the Louisiana Haynesville and Bossier shale basins with approximately 31,000 net acres, including gathering and treating systems that have capacity for up to 100 million cubic feet per day that will bring Aethon’s pro forma gathering and treating capacity to over 3 Bcf per day across its assets,” said a statement.

Lazards role

Tellurian earlier in 2024 hired the investment bank Lazards to explore a sale of its Haynesville gas production business as part of efforts to raise new capital to continue the Driftwood project with full permits to produce 27.6 million tonnes per annum.

The Driftwood project as it currently stands involves constructing 20 mid-scale processing Trains, each with 1.38 MTPA of capacity and built as five blocks of Trains.

According to the regulatory permits and building schedules the Phase One development would include the first two of these blocks for 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.

Tellurian’s natural gas assets include 31,149 net acres, interests in 159 producing wells and over 400 drilling locations in the Haynesville Shale.

The Tellurian-Aethon Heads of Agreement contemplates the parties negotiating a 20-year offtake agreement which would be indexed to Henry Hub plus a liquefaction fee, with appropriate credit support, to provide the basis for project financing of Driftwood LNG.

The Tellurian-Aethon transaction is expected to close during the second quarter of 2024 and Tellurian will use the proceeds to reduce borrowings and for general corporate purposes.

Project boost

“Agreements with Aethon take us several steps closer to developing the Driftwood LNG project, for which Aethon is a vital partner,” said Tellurian Executive Chairman Martin Houston.

“The offtake agreement for 2 MTPA provides the foundation to accelerate Driftwood and demonstrates that we have successfully aligned our commercial offerings to meet the needs of potential customers,” Houston explained.

“For Tellurian, the proceeds from the sale of our upstream assets allow us to retire senior secured notes and strengthen our balance sheet for the long term,” stated Houston.

The Aethon firm’s Chief Executive for energy funds, Albert Huddleston, said that the expanding scale of its integrated business continues to deliver capital efficiency and industry-leading margins as the firm work to accelerate the role of natural gas in the broader energy transition.

“This Fund II and Fund III acquisition provides complementary growth opportunities alongside our extensive upstream and midstream footprint in the Haynesville with more than 20 years of existing inventory life,” added Huddleston.

Lazard served as financial advisor to Tellurian in this transaction, and Akin Gump served as legal counsel. Gibson Dunn provided legal counsel for Aethon. 

EQT Corp., the leading US natural gas producer in the Appalachian shale basins and an emerging LNG player, reported a dropped in net income in the first quarter of 2024 as prices were lower, sales increased and a merger was agreed with Equitrans Midstream Corp.

US Natural gas production is forecast to decline during the coming year and will only increase in 2025, driven by expected higher associated gas output in the Permian Basin of West Texas due to growth in LNG export demand.

EQT Corp., the leading US natural gas producer in the Appalachian shale basins and an emerging LNG player, has made a “strategic decision” to curtail approximately 1 billion cubic feet per day of gross production beginning immediately.

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.

The US Supreme Court has removed all obstacles to completing the long-delayed $6-billion Mountain Valley Pipeline to send natural gas from West Virginia to the state of Virginia and onwards to consumers further South and being developed by energy company Equitrans Midstream.

The Court granted Mountain Valley Pipeline LLC's request to lift legal blockages imposed by a lower court that had halted construction of a final short section of the 303-mile (488km) natural gas pipeline.

That final section to be completed is a 3.5-mile (5.6km) corridor through the federally owned Jefferson National Forest.

The gas pipeline being developed by Canonsburg, Pennsylvania-based Equitrans has been delayed by numerous court decisions since construction began in 2018.

Investors

Equitrans is the lead partner building the pipeline with several other companies including NextEra Energy, Consolidated Edison, AltaGas and RGC Resources.

The Court’s ruling was in response to a request from Equitrans to overturn an appeals court orders in early July 2023 to stop building in the Jefferson National Forest while that court considered legal complaints from environmental groups against the project.

Legal challenges to the pipeline continued even after West Virginia Democratic Senator Joe Manchin and other politicians wrote to encourage a positive decision on the Mountain Valle Pipeline into the Debt Ceiling Bill in Congress.

“The Supreme Court has spoken and this decision to let construction of the Mountain Valley Pipeline move forward again is the correct one,” Manchin said in a statement issued by his office.

“I am relieved that the highest court in the land has upheld the law Congress passed and the President signed,” added Manchin.

Final stage

Equitrans had argued that if it did not resume construction soon, it would have been unable to complete before winter weather arrives in November and halts work until the Spring.

The pipeline is designed to transport natural gas from the prolific Marcellus and Utica Shale Basins to the growing demand markets of the mid-Atlantic and southeast regions of the US where LNG export projects are expanding.

The 42-inch diameter pipeline that will link an existing transmission and storage system in Wetzel County, West Virginia, to the Transco Station 165 in Virginia.

The pipeline has capacity of 2 billion cubic feet per day and is fully subscribed under long-term contracts with a diverse group of shippers.

Pioneer Natural Resources, the biggest Texas oil producer and the largest acreage holder in the oil and gas-rich Permian Basin of the southwest US, reported fourth-quarter profits that were better than expected and said it would push ahead with drilling, completions, facilities and water infrastructure spending of up to $4.75 billion in 2023.