LNG

Gazprom’s biggest ever project is on the global scale as an investment, but also on the global scale in terms of risk

The Russian company will be disappointed with what Chevron, Total, ConocoPhillps, Statoil and Hydro have put on the table

John McKay, London

Russian natural gas monopoly Gazprom, whose announcement of partners for the Shtokman LNG project has repeatedly been delayed, is continuing to create doubts in the minds of investors about its determination to push the project forward and about the likely final costs.

The cost of the venture was initially put at $10 billion. Gazprom’s latest estimate is around $14Bln, but that is just for Phase I. Analysts now say that the whole project could cost between $35Bln and $40Bln, while the planned start-up of 2010 has already slipped to 2012.

The number of prospective projects is going to stop growing and the commercial window of opportunity for 2010-2012 will begin to close

Competition brings together large firms with equity LNG supply, large firms without equity stakes in liquefaction and independent developers

The number of prospective LNG terminal projects in North America has exceeded by a great margin the actual needs of the market.

It has become more than clear that of the sixty-odd approved, proposed and potential terminal projects tracked by the FERC, only some will see their way through to construction and eventual commissioning.

A round-up of latest events, company statements, industry reports and people in the news

A purpose-mined and lined rock cavern has been designed, constructed and operated at Daejon, about 200km south of the capital Seoul

The rockmass was mainly of fissured granite, which was initially water saturated and the water table level was 10m above the ceiling

Emmanuel Chanfreau, Eric Amantini and Dae-Hyuck Lee

Environmental concerns, more stringent safety rules and security constraints regarding sabotage or acts of terrorism have rendered underground storage increasingly attractive to store large volumes of hydrocarbon.

However, up to now, no satisfactory concept for underground LNG storage in hard rock has been presented.

Processes help turn mean LNG into lean gas

LNG receiving terminals in some areas require less C2 and C3 and most LNG produced cannot meet gas specifications required in the US

This complicates operations and marketing of liquefaction facilities because Asian-Pacific markets favor higher heating value LNG

CC Yang, Zupeng Huang and Mike Barclay

Peter Rigby, New York

When Peter the Great traveled through Western Europe in the late 17th century, he relied upon his tremendous personal charm and near 7-foot-tall stature to secure the technical know-how to help him build what would become Russia's first navy.

Some 300 years later, Russia, anxious to join the lucrative global liquefied natural gas trade, hopes to launch a fleet of tankers to deliver Russian LNG to energy-hungry countries in the West and Asia.

It will take more than charisma and compelling economics to initiate this 21st century venture, however. Political risk, opaque legal and business systems, and Russia's short history of contract law and enforcement will distinguish its LNG projects from recent LNG project financings in Qatar, Oman, and Trinidad and Tobago.

Joint venture partners, including Hunt Oil, Repsol and SK Corp. of South Korea, are making progress in development financing

Pampa Melchorita liquefaction plant on the Pacific coast will deliver into the North American market by way of Mexico in 2009

Peru LNG, whose major shareholders are Hunt Oil of the US and Spanish major Repsol, is on the brink of making more progress in financing and development of what is the second phase of one of the world’s most controversial energy projects.

The LNG joint venture is in talks with multilateral financial institutions, including the World Bank and the US Export-Import Bank, for $800 million in loans and guarantees that would encourage commercial banks also to lend to the $2.7 billion liquefaction project.

The majority of problems encountered specific to the carriage of LNG have been during the loading or discharging process
One complication is where a vessel is programmed to load different grades of LNG on consecutive voyages and maintains a heel

Nick Barber

The recent expansion of the LNG market as well as innovation in production and storage is also changing the way LNG carriers are used.

The usual practice has been to transport LNG to shore-based terminals in ships on long-term charters, specifically built for a particular route.The stability of the LNG transport industry has been based on a limited number of producers and users carrying out their trade along well travelled routes.

For any LNG project, the key danger seen by the insurance market is one of the worst case scenarios - a vapor cloud explosion

Bailey J. Siegfried, Cran Fraser and Eddie Edwards

A good starting point when considering risk management in the LNG business is to analyse the provision of insurance cover for the world’s largest construction risk.

While the insurance market has had a positive experience working with the LNG industry and its history of proven safety, the issue facing insurance underwriters is the capacity of the market to continue to provide cover for projects that grow ever larger in scale and value.

A round-up of latest events, company statements, industry reports and people in the news