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.

Australia’s largest liquefied natural gas companies Woodside Energy and Santos have ended their merger discussions after failing to agree terms for creating a A$88 billion (US$58Bln) LNG mega-company in the Southern Hemisphere.

Chevron Corp., the operator of liquefied natural gas projects in Western Australia and Africa, said it expected a capital expenditure range of $15.5 billion to $16.5 billion and an affiliate spending budget of around $3Bln for 2024.

The Australian Fair Work Commission (FWC), a government-sponsored mediation service in disputes between labor unions and management, has begun talks to avoid the shutdown of the Gorgon and Wheatstone liquefied natural gas export plants in Western Australia with a combined 25 million tonnes per annum of output.

The leading Western Australia liquefied natural gas plant operator Woodside Energy reported a 13 percent drop in second-quarter revenues from a year ago as realised LNG prices dropped along with oil and natural gas production volumes.

The Australian Government said that given the inherent seasonal variability in European natural gas consumption driven by heating demand, there remains a risk of further price volatility in 2023 as seasonal conditions change.

The European Union currently lacks the firm liquefied natural gas contracts needed to fully offset lost Russian pipeline gas volumes, which will force the bloc to source its marginal LNG supplies from global spot markets when needed, according to the latest Australian “Resources and Energy Quarterly” from the Office of the Chief Economist.

“As such, LNG markets are expected to remain in moderate shortfall over 2024 and early 2025, as Europe continues to replace lost Russian pipeline gas with LNG imports,” stated the report.

“Our base case is for Asian spot prices to average US$14/MMBtu over the outlook period, with risks skewed to the upside for the reasons mentioned above,” added the report.

“While this price is well below levels averaged over 2022 (US$33/MMBtu), it is still double the five year, pre-2020 average of US$7/MMBtu,” stated the report.

Export plants

Australia itself has 10 LNG export plant and in 2022 shipped 82 million tonnes of LNG valued at A$91 billion (US$60.55Bln).

The report forecasts that national LNG income will fall through fiscal 2024-2025 to A$60Bln (US$40Bln), with volumes also easing to 79MT over the same period.

“While volatility in LNG markets could re-emerge over the Northern Hemisphere winter and boost spot sale earnings, the base case is that lower energy prices will cause the value of Australian LNG exports to fall,” said the report.

The cargoes last year were mainly delivered to Asia and with 80 percent of volumes being unloaded in Japan, China and South Korea.

Around 75 percent of the cargoes were sold under long-term contracts.

The Australians believe that global LNG trade is expected to grow by 13 percent, or 51MT, over the two-year outlook relative to 2022.

Almost half of the growth (24MT) will come from newly commissioned US LNG plants, while facilities in Nigeria will also contribute 7MT.

Forecasts indicate that most of the new production should be sold to Europe, which is expected to increase its LNG imports from 121MT to 147MT between 2023 and 2025, respectively.

ASEAN volumes

“But ASEAN, Australia’s closest export market, will likely be the second-largest source of demand growth as Vietnam and the Philippines start importing LNG, with total ASEAN demand rising by 11MT over the outlook (two-year) period,” added the report.

The report explained that despite the favourable environment for LNG producers, the outlook for Australia was mixed.

“Australian LNG exports are forecast to fall marginally, as existing facilities face difficulties back-filling their operations with gas from new reserves,” said the report.

“At the same time, investment in offshore exploration remains low despite high commodity prices, which could impact Australian gas production beyond the outlook period,” it declared.

The Australian Government’s quarterly energy review said that the nation’s 2023 liquefied natural gas production was expected to “stabilise” at around 80 million tonnes from about 83MT last year as output from the Pluto LNG Train II expansion offsets falling production from the Northwest Shelf facility.

Both of the liquefaction and export plants are operated in Western Australia by Woodside Energy.

Australia’s previous strong result was driven by record-high utilisation rates at Australia’s West coast plants amidst high international LNG prices.

For example, Wheatstone, Gorgon, and Pluto LNG (one-third of Australia’s total LNG capacity) are estimated to have operated at a combined utilisation rate of 110 percent in 2022.

“The impressive result was enough to offset lost production at Darwin LNG due to field depletion in the Bayu-Undan basin and at Prelude LNG, which experienced unplanned outages throughout the year,” explained the report from the Office of the Chief Economist in Australia

It added that Australian LNG export revenues were forecast to reach A$91 billion (US$60.67Bln) in 2022-2023, on higher global energy prices and a lower Australian dollar.

“As global energy markets reorganise, earnings are forecast to fall steadily (in real terms) - to A$45 billion by 2027-2028,” said the report.

The report noted that global LNG trade increased by 5.5 percent last year to an estimated 395MT.

Europe's role

“Europe has now emerged as the key driver of import growth and is forecast to maintain this position across the outlook period. Rising European demand will likely come at the expense of Asian consumption, which is typically more price sensitive,” said the report.

“Throughout 2022, many Asian buyers were priced out of the market by European importers. Other buyers, mainly in China, appear to have resold their contracted US cargoes to European markets to arbitrage the higher European prices,” it explained.

“Remarkably, record-warm winter temperatures and a steady flow of LNG imports from the US, has seen European storage reach its highest levels in recent history, alleviating the risk of an immediate gas shortfall and easing pressure on LNG prices,” said the report.

However, the view from Canberra is that global gas markets are forecast to remain “tight and volatile” until the end of 2024 as Europe continues using LNG to compensate for lost Russian pipeline gas.

The tight supply conditions are then forecast to ease in 2025 and 2026, as new US and Qatari liquefaction facilities come on stream.

East Europe

“The steady flow of US LNG and record-high winter temperatures reduced the drawdown of European storage inventories over the 2022-23 winter,” said the report.

“These two conditions eliminated the risk of an immediate shortage and have improved the likelihood of healthy storage injections over the 2023 refilling period,” it added.

Europe is now forecast to capture most of the world’s growing LNG supply over the outlook period.

European LNG imports are forecast to reach 142MT in 2023, double the figure in 2021 as Germany, Belgium, Italy and Greece commission new LNG import facilities to offset lost Russian pipeline gas.

Imports are also projected to rise to 178MT by 2028, as new pipeline interconnectors in the Czech Republic, Bulgaria and Slovakia allow LNG importing countries to export gas to Eastern and Central European markets.

Feb 14 (LNGJ) - Australian LNG operator Santos has won environmental approval for an offshore project relating to the Dorado oil and gas development in the Bedout basin offshore Western Australia and with LNG potential. The field is located about 160 kilometres (100 miles) north of Port Hedland near the Pilbara region of Australia.

  “Dorado is a proposed phased liquids and gas development, with an initial phase of liquids development with gas re-injection and the potential for a second phase development to recover and pipe the gas to the Western Australian domestic and LNG markets,” Santos said. “Dorado is an exciting development opportunity which is further enhanced by the recent discovery at the adjacent Pavo field,” the company added.

Beach Energy increased sales in the fiscal first half and was on scheduled to have first natural gas from an LNG feed-gas project in Western Australia and first gas from an East Coast venture while the company painted a gloomy picture of the energy business in New Zealand.

Beach Energy of Australia said an agreement had been reached with Webuild SpA, the Italian industrial group, for the completion of the Waitsia Stage 2 project for LNG feed gas from the onshore Perth Basin subject to finalisation of the bankruptcy administration of previous engineers Clough Limited.