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2017-06-21 20:35:00

NO NEED NEW LNG

NO NEED NEW LNG

PLATTS - The great LNG glut predicted for 2016, as new Australian and US LNG projects came on stream, didn't quite materialize -- with disruptions to existing LNG output in Yemen, Libya, Egypt and Angola, combined with underperformance from some of the new producers meaning less LNG on the market than expected -- but it has just been delayed, according to Anne-Sophie Corbeau, research fellow at the King Abdullah Petroleum Studies and Research Center.

Corbeau was speaking Tuesday at the International Association for Energy Economics international conference in Singapore. Corbeau said LNG trade expanded by only 27 million mt/year between 2014-16, despite 65 million mt/year of new capacity nominally coming into operation.

However, Corbeau sees 100 million mt/year of new capacity starting up between 2017-2020, 85 million mt/year of that by 2019.

Ken Koyama, chief economist at the Institute of Energy Economics, Japan, said the LNG supply/demand balance did shift into oversupply in 2016, but not by as much as anticipated, with supply at 304 million mt and demand at 286 million mt, compared with 266 million mt and 267 million mt respectively in 2015.

INFLECTION POINT

How long the glut will last is a matter of conjecture, but perspectives on the issue are important because they will determine when developers sanction new, multi-billion dollar, LNG projects.

According to Tatiana Mitrova, head of the oil and gas research department at the Energy Research Institute of the Russian Academy of Sciences, there will be no need for new Russian LNG or pipeline gas to Asia until 2025.

US company Anadarko, which is developing the greenfield onshore Mozambique LNG project, is more optimistic, citing 2023 as the supply/demand inflection point.

Given a five-year construction timeline for what would be the first onshore LNG plant in East Africa, that would suggest the company could be planning a final investment decision (FID) some time in 2018.

New LNG plant construction has all but dried up. Corbeau noted that only three LNG projects had been sanctioned since 2016 and all are small, single-train developments, mostly incremental brownfield projects.

The prognosis is that steadily growing demand for LNG, particularly in Asia, will steadily soak up the excess supply, and the current dearth of new projects will see the market eventually move back into deficit.

The question is when? Forecasts for LNG demand remain highly uncertain. Mitrova said demand for Russian gas in Asia could fall anywhere between 25 Bcm to 115 Bcm a year by 2025. Explaining the plethora of proposed Russian gas projects designed to supply Asia, both pipeline and LNG, she said that "in a turbulent environment, opportunistic behavior is a rational choice."

In effect, both buyers and sellers are willing to keep all options open but make few firm commitments, she said.

LIBERALIZED MARKETS CREATE RISK

Andrew Seck, vice president for LNG marketing and shipping at Anadarko, said FIDs are never easy, but particularly so in the current environment in which there is no common view about the future. He said that the supply overhang made it a buyers' market with buyers asking for smaller, shorter contracts with greater flexibility on pricing and delivery destinations.

That in itself does not present a problem for developers, he said, but it does for the bankers expected to provide finance.

So too does power and gas market liberalization in core markets, he noted. Lenders have been used to underwriting finance on the back of oil-indexed, take-or-pay contracts with North Asian utilities that had the security of selling on into protected regional monopolies.

This is no longer the case, with Japanese utilities, for example, now having to fight for market share in their newly-liberalized domestic gas and power sectors, a competition which makes them increasingly price sensitive when it comes to signing new LNG offtake agreements.

They also face uncertainty from the impact of nuclear restarts on oil and LNG import demand. Koyama said Japan has five reactors in operation currently, but that he expects another four to start up this year. Beyond that, he said, "it is very hard to predict."

Seck is confident of the strategic advantages of LNG in Mozambique, in terms of its access to both the Atlantic and Pacific basins, the multi-Tcf size of the reserves, and of its importance to the domestic economy.

The company has signed an agreement with the government of Mozambique to provide 100 MMcf/d of gas to the small domestic market, as the first two trains are developed, later rising to 400 MMcf/d as more trains are added, he said.

Seck said his challenge is to turn Heads of Agreements into bankable purchase contracts that could support an FID. To do this in the current environment, he said it would be necessary to build a much wider coalition of buyers than in the past that includes established and new buyers in both Europe and Asia.

-----

Earlier: 

QATAR - JAPAN LNG TALKS 

WORSE FOR LNG 

U.S. LNG TO CHINA 

LNG OVERSUPPLY 

U.S. LNG EXPORTS UP 

JAPAN'S LNG UP 

INDIA'S LNG DOWN 3%

 

 

Tags: LNG, GAS,

Chronicle:

NO NEED NEW LNG
September, 22, 08:50:00

RUSSIA - KURDISTAN INVESTMENT

Instead, with the planned referendum just days away, Russian state oil giant Rosneft announced its latest investment last week, to help Iraqi Kurdistan develop its natural gas industry, for domestic supplies and eventual export.

NO NEED NEW LNG
September, 22, 08:45:00

IRAN'S GAS EXPORT: ABOVE 5 BCM

Iran exported over 5 billion cubic meters (bcm) of natural gas during the first five months of the current Iranian calendar year (March 21-August 22), Dispatching director of National Iranian Gas Company (NIGC) announced.

NO NEED NEW LNG
September, 22, 08:40:00

IRAQI OIL TO U.S.

Gazprom Neft has shipped its second and largest cargo of Iraqi crude to the US since the Badra field, its flagship overseas oil project, came on stream in 2014, the Russian oil company said Tuesday.

NO NEED NEW LNG
September, 22, 08:35:00

QATAR - TURKEY LNG

Qatargas has agreed to sell 1.5 million tpy of LNG to Turkey’s BOTAŞ Petroleum Pipeline Corporation (BOTAŞ) over a period of three years

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