LNG

Australian-based independent oil and gas producer Santos has agreed to acquire ConocoPhillips’ northern Australia business for $1.39 bill. 

This will give Santos operating interests in Darwin LNG, Bayu-Undan, Barossa and Poseidon. A further contingent payment of $75 mill is subject to FID being taken on Barossa.

The company said it was targeting pre-tax synergies of $50-75 mill per annum (excluding integration and other one-off costs) driven by Santos operational efficiency.

Barossa partner SK E&S was said to be highly supportive of the deal and has signed a Letter of Intent to acquire a 25% interest in Bayu-Undan and Darwin LNG.

Advanced talks

Santos also said it was in discussions with existing Darwin LNG joint-venture partners to take equity in Barossa and in advanced discussions with LNG buyers for Barossa offtake volumes, including with an existing partner in Darwin LNG.

Santos Managing Director and CEO, Kevin Gallagher, said; “Santos was a founding partner with ConocoPhillips in Darwin LNG, which has been operating since 2006. The acquisition of these assets fully aligns with Santos’ growth strategy to build on existing infrastructure positions while advancing our aim to be a leading regional LNG supplier.

“This acquisition delivers operatorship and control of strategic LNG infrastructure at Darwin, with approvals in place supporting expansion to 10 mill tonnes per annum, and the low cost, long life Barossa gas project.

“Santos intends to manage gearing within our stated operating range and is targeting to sell-down equity in Darwin LNG and Barossa to 40-50% in order to create alignment between joint venture participants as well as by optimising equity levels in our Western Australia assets.

“We are also in discussions with existing Darwin LNG joint-venture partners to sell equity in Barossa and further equity in Darwin LNG and also with LNG buyers for offtake volumes. Santos will target the contracting of around 60-80% of LNG volumes for 10+ years prior to taking FID on Barossa, which is expected by early 2020.

“As we have demonstrated following the acquisition and integration of Quadrant Energy into our offshore business, Santos’ low-cost operating model is creating opportunities for disciplined growth across Australia,” he said.

ConocoPhillips is the majority owner and operator of the Darwin LNG facility, which has a capacity of 3.7 mill tonnes per annum of LNG and significant expansion potential.

Barossa is to be developed using subsea wells tied back to an FPSO for gas processing and condensate export. A 260 km gas export pipeline will transport gas to the existing Bayu-Undan pipeline for onwards transport to Darwin LNG.

The new development is expected to extend the operating life of Darwin LNG by more than 20 years. Life extension capex at Darwin LNG of around $600 mill (2019 real) is expected to be incurred between Bayu-Undan end of field life and the commencement of production at Barossa.

Credit Suisse (Australia) Limited and JB North & Co are acting as financial advisers to Santos and Allens is acting as legal adviser to Santos.

Equinor has shipped the 1,000th gas cargo from its Hammerfest LNG plant in Norway.

Total has signed an agreement with the Adani Group to jointly develop multi energy services for the Indian energy market.

Wholly-owned subsidiaries of MISC Berhad (MISC), have secured agreements with ExxonMobil Corp’s subsidiary, SeaRiver Maritime to timecharter two LNGCs. 

Each of the LNGCs will serve ExxonMobil’s worldwide LNG portfolio under a 15-year charter contract.

Prior to this, the same MISC subsidiaries, signed a contract with Samsung Heavy Industries to build the LNGCs.

The vessels will each have a capacity of 174,000 cu m and will feature X-DF propulsion, Mark III Flex Plus containment systems and full re-liquefaction facilities for higher efficiencies and to meet the demand for worldwide trading and long-haul voyages.

They are due for delivery in the first quarter of 2023.

MISC’s President/Group CEO, Yee Yang Chien, said “This is certainly a landmark moment for MISC, and we are proud to expand this strategic partnership with ExxonMobil through SeaRiver in providing best-in-class shipping solutions, beginning with Petroleum and now LNG.

“With our broad spectrum of energy related maritime solutions and services, MISC is confident of our ability to serve the various needs of the global oil and gas industry. Ultimately this partnership is a testament to our capabilities of fulfilling the world’s growing demands for this energy source.”

“Our co-operation with MISC is an integral part of ExxonMobil’s commitment to provide flexible solutions in the open and dynamic LNG marketplace,” said Alex Volkov, Vice President of Global LNG Marketing at ExxonMobil. “The addition of these two vessels will help us build a competitive LNG value chain as ExxonMobil continues to grow its global gas portfolio and expand supply positions to meet evolving needs of our customers.”

Novatek was believed to be in talks to tranship its Yamal cargoes in Norway or at Murmansk.

Nakilat has acquired the full ownership of four Q-Flex LNGCs from its joint-venture partner, International Seaways (INSW).

Commercial services have started on the first of 10 liquefaction units of the Elba Liquefaction Co (ELC), a joint venture between Kinder Morgan and EIG Global Energy Partners (EIG). 

Previously an LNG import terminal, Elba Island’s facility is now also able to produce LNG for export. With the first unit in service, the company is now earning about 70% of the expected total daily revenue of the liquefaction units.

“This is a great milestone that was achieved with an exemplary safety record,” said Kinder Morgan Natural Gas South Region President, Norman Holmes. “It is also an important step for the US as the country becomes a key energy exporter.”

Progress is also being made on the remaining nine units. Startup activities are underway on the second and third units, the commissioning of units four through six is ongoing, and construction on the remaining units is largely complete, Kinder Morgan said.

Once in full development, Elba Island is expected to have a total capacity of around 2.5 mill tonnes per year of LNG for export.

The project is supported by a 20-year contract with Shell, which will take the whole of its liquefaction capacity.

Shell's chartered LNGC ‘Gemmata’ has been anchored off the coast of the US state of Georgia since 12th October in ballast, indicating that it is likely to pick up the first cargo from Elba, cFlow, S&P Global Platts trade flow software, showed on Monday.

A Kinder Morgan spokeswoman told Platts on Monday that ‘Gemmata’ was berthed at Elba.

According to reports from Russia, in late September the federal government approved the establishment of three new reloading points located in a bay south of the Kildin island in the Murmansk Oblast.

This facility will be able to handle two laden LNGCs from Yamal simultaneously.

Rosmorport reportedly said that two of the moorings will handle LNGCs, while the third will handle a service ship.

Each of the mooring areas will include eight buoys attached to the sea bottom by steel and concrete anchors.

The federal port authority will be responsible for LNGC escorts. It was also believed that a number of the gas ships will use nearby Kola Bay.

The lion’s share of Yamal’s 15 new Arc7s will use the reloading facility in Kildin to transfer cargo to conventional LNGCs for onward shipment.

Neither the previously anticipated activity levels nor the freight rate highs seen last year occurred in the LNG sector last month.

Gas is the only fossil fuel expected to continuously rise in demand through to 2035, according to a new report.   

McKinsey Energy Insights’ ‘Global Gas and LNG Outlook to 2035’ report revealed that, in 2018, China emerged as the world’s biggest importer of gas and LNG, overtaking Japan, and second biggest importer of LNG, overtaking South Korea.

The consultancy said that it expected demand to continue rising in the region, with China, ASEAN, and South Asia to account for 95% of global LNG demand growth until at least 2035. Total gas demand is set to rise by 0.9% per annum, while Asian gas demand is set to rise by 2.1% per annum during the same period, driven primarily by power and gas-intensive industries.

On the supply side, more than half of the global growth of 635 bill cu m by 2035 will be driven by the US - adding 380 bill cu m - followed by Russia (+110 bill), and Africa (+110 bill cu m). Elsewhere, Europe and the Rest of Asia’s gas supply is forecast to decline rapidly.

 “We’ll look back at this as a milestone year, when China became the world’s biggest LNG importer and we saw the highest volume of liquefaction projects taking FID. In many ways, that sets the tone through to 2035: Asian economies in the ascendancy—led by China—with growing energy demand; the US continuing to rank highly for both supply and demand; but on the supply side Europe and Asia’s second-tier economies falling away. Overall though, this is a growth story for gas and LNG,” said Rahul Gupta, McKinsey Energy Insights’ associate partner.

“In the last 12 months, a record volume of LNG projects took FID (over 60 mill tonnes per annum, or 20% of today’s market), pushing the LNG supply/demand balance into the late 2020s. Looking ahead, only one in 10 proposed LNG projects will take FID, with over 100 LNG projects totaling 1,100 mill tonnes per annum of capacity competing to fill the 125 mill tonnes supply gap by 2035,” added Dumitru Dediu, McKinsey Energy Insights’ Partner.

‘ Global Gas and LNG Outlook to 2035’ covers the global gas demand outlook, supply outlook and changes in cross-border capacity 

Delta Offshore Energy (DeltaOE) and Liquefied Natural Gas Limited (LNGL) have partnered with Vietnam’s Bac Lieu Provincial Government to deliver an LNG-to-power project.