Jadestone Energy Share Discussion Threads

[mount teide] 06/1/2020 16:12

S&P Global Platts - 'Thanks to IMO 2020, the cost of marine fuel has now doubled year-on-year, based on bunker prices in Singapore.

On Jan 3, 2019, the price of 3.5% heavy fuel oil (HFO) was $363 per ton; the price of VLSFO on Jan. 3, 2020 was $724 per ton.'


LLoyds List - 'A South Korean flagged dry bulk carrier was the first ship caught violating the IMO’s 2020 sulphur mandate at the port of Qingdao, China since the roll-out of the rules last week, the local maritime authority has confirmed.'

[mr. t] 06/1/2020 12:59

I like figure 1 in this article showing the growth in VLSFO:HTTps://www.petroleum-economist.com/articles/midstream-downstream/refining-marketing/2020/refiners-over-a-barrel

[purple11] 06/1/2020 11:34

time to take profits

[zzxqry] 06/1/2020 08:46

very helpful MT - thank you

[mount teide] 06/1/2020 08:34

L2: 2 v 2 / 93p v 94p - WINS and BERENBERG saw no action on the bid at 92.5p and so have both moved up to 93p.

[mount teide] 06/1/2020 08:03

L2: 1 v 2 / 92.5p v 94.0p ( rest spread between 95p and 97p)

Brent @ $70.10

[mount teide] 05/1/2020 21:43

Demand for electricity in Vietnam is growing by about 9% a year, faster than the economy, which is growing at more than 7%.

The Nation is facing a power crunch over the next 3 years so severe the Minister of Industry and Trade Tran Tuan Anh recently said “The situation is desperate,”

It's simply not possible to export LNG on the cheap - Constructing an LNG plant costs at least $1.5 billion per 1 MTPA capacity, a receiving terminal costs $1 billion per 1 bcf/day throughput capacity and LNG vessels cost $250 million – $300 million each.

A FT report last autumn said:

"Vietnam’s government is scrambling to head off an impending energy crunch that threatens to bring blackouts within two years and hamper the near-term future of one of Asia’s fastest growing economies. 

Prime Minister Nguyen Xuan Phuc has warned that power shortages could come as soon as 2021, and ordered other officials to speed up stalled plant projects. At stake is the future of an economy that relies on energy-intensive manufacturing, and which is drawing a surge of new international interest because it is seen as a refuge from, and beneficiary of, the US-China trade war.

Vietnam faces a potential energy crisis on two fronts at the same time: in addition to the shortfall of generating capacity government officials are warning about, China has been putting intense pressure on its oil and gas drilling operations at sea. 

For a country trying to strike a delicate balance between the US and China in diplomacy and the economy alike, Vietnam faces short-term energy choices that will have geopolitical implications for years to come. 

“The potential sources of supply from Vietnam’s own domestic oil and gas reserves have met with challenges and delays, whether it’s the financial capacity of the national oil company to develop those resources, or maritime disputes and political tensions,” said Andrew Harwood, research director of the upstream oil and gas team at Wood Mackenzie in Singapore. “There is concern over how Vietnam is going to meet its future energy needs.” 

Vietnam has until now relied heavily on coal, fuel oil, and hydropower for its electricity. However, several such projects have been delayed in recent years by bureaucratic constraints or foreign investors’ inability to secure government loan guarantees for their projects. Hanoi in 2016 abandoned a long-mooted nuclear energy programme. 

The country is now fast-tracking solar power, studying the large-scale import of liquefied natural gas and looking into importing power from neighbouring countries, according to government officials and industry analysts. 

In one sign of the sensitivity of the issue, no government representative would speak to the FT on record for this story.

Hanoi is pursuing technical fixes to bridge the power gap including increased electricity imports from Laos. Officials have also discussed the possibility of importing power from China, though this would be politically sensitive in a country where anti-Chinese sentiment is widespread, flaring recently because of the tensions at sea. 

American companies and officials are promoting LNG as one solution to Vietnam’s power needs, selling it in part as a way of reducing the country’s record trade surplus with the US, a point of tension with the Trump administration. ;

However, liquefied gas would not be a quick enough fix to head off the impending energy crunch because Vietnam needs to build onshore facilities for the resource. 

Vietnam’s ability to exploit its own offshore gas is now in question. Since early July a Chinese survey vessel, the Haiyang Dizhi 8, has been carrying out a survey off Vietnam’s southern coast near Lan Tay-Lan Do, a field under development by PetroVietnam and Russia’s Rosneft — a move described by the US as “coercion̶1;. '

Considering, the alarming scale of the fast approaching energy supply crisis in the country, and the very limited options available, it would surprising if Jadestone were not offered close to the circa $9.0/MMBtu previously mentioned in a company presentation - described as the benchmark figure currently being used by the Vietnamese in HOA for new gas supply projects.

[mr. t] 05/1/2020 19:26

One of the risks I was considering MT is whether Petrovietnam tries to renegotiate pricing given competition from LNG. Especially as US natural gas is so cheap, lng infrastructure is being built on both sides, and the US government is putting pressure on Vietnam to buy US goods to better balance their trade deficit.I'd hope home developed natural gas via Jadestone would still be preferred as it creates jobs, has less risk and must be more cost effective. Plus, given the economic growth in Vietnam, inevitable transition from coal, general energy shortage, and aggression from China - I'd think the Vietnan government would want to take every energy option they can.

[mount teide] 05/1/2020 16:25

MrT - well spotted and thanks.


This is an interesting development and a change of view by the Vietnam Government to that suggested in an industry article on the Nation's looming energy crisis about a year ago.

It's probably in response to China's highly controversial decision to build military facilities on a number of small uninhabited islands within Vietnam's and the Philippines 200 mile territorial waters - that has lead to a recent move by China to claim that all O&G discoveries between Vietnam's 200 mile limit and 12 mile Coastal Waters on its Eastern coast, flanking the South China Sea, should be considered as in dispute.

Vietnam's 200 mile South China Sea territorial waters contains a number of huge recent Nat Gas and Oil discoveries made by Exxon and Repsol among others - they announced in H2/2019 that all operations for the fast track appraisal and development of these assets would cease with immediate effect as a result of political pressure.

That Vietnam has bitten the bullet of high cost LNG imports suggests the South China Sea dispute and access to those huge gas discoveries is unlikely to be resolved quickly, and if at all in their favour.

[mr. t] 05/1/2020 15:43

MT, what makes you say Vietnam won't have LNG import terminals for decades when there are announcements like this:HTTp://www.globalconstructionreview.com/news/vietnam-begin-work-6bn-lng-import-terminal-plan-ne/

[mount teide] 05/1/2020 15:29

A major contributory factor behind why piped natural gas attracts such high sales pricing across SE Asia(aside from the relative scarcity of the resource), is that, unlike LNG it does not require the building of a large Coastal Receiving Terminal and Onshore LNG Storage and Regasification plant, at a capital cost of $1 billion per 1 bcf/day throughput capacity, with annual OPEX of circa $25m, and an average 3.5 year construction time.

Vietnam in common with the overwhelming majority of SE Asian Nations has no LNG import facilities and is unlikely to have any, if at all, for decades.

[mount teide] 05/1/2020 11:14

Vietnam: The CPR identified the Nam Du Southern Channel as prospective resources, but did not include any volumes estimates or further comments on this prospect. Jadestone management’s estimate for the Southern channel gives an unrisked prospective resources of 31.1Bscf and with an estimated NPV10 of US$76 million.

'Jadestone management considers this to be a low risk prospect based on the seismic response being similar to what is seen at the discovery well.

The already planned development for Nam Du includes all the capacity needed to also produce at the Nam Du southern channel. The optimal plan would be to drill the appraisal/exploration well directly from the well head riser platform which, if successful, can then be completed as a development well.

With success for the southern channel, the Company’s plan would then be to drill only one further development well for Nam Du. To maintain safety of supply, two development wells for Nam Du were already assumed in the cost assumptions so there would be no incremental costs for a southern channel success case.'

[ilostthelot] 05/1/2020 10:41

Mount teide-
Thanks for sharing your research. Very interesting.
I've got lucky investing here!

[mount teide] 05/1/2020 10:37

The management has long experience of developing and operating nat gas production projects in the Gulf of Thailand with Talisman - and therefore the fact that the Vietnam nat gas discoveries were immediately targeted for acquisition following their move to Mitra/Jadestone, should not be underestimated.

Jadestone management used the statement of contingent resources in the CPR, together with estimates for capex and opex, to calculate an aggregate NPV10 of US$246 million for the U Minh and Nam Du fields.

With previous deep experience of these "High Margin" Gulf of Thailand Nat Gas Projects, i suspect it offered the scope for the management to be very conservative with sales revenue, capex and opex projections, since they knew it will still generate a highly satisfactory result.

With the final budget costings now complete, it would not be surprising if the Sales Revenue(the HOA indication of $9 mmcf would certainly indicate this), and updated capex and opex projections suggested some material upside to the previous estimates and NPV10 of US$246m, particularly since importantly, the small, relatively low spec field FPSO would be chartered under long term contract to avoid the high upfront build cost of a new vessel.

Another point worth bearing in mind is that the sea and weather conditions in the Gulf of Thailand are similar to the Timor Sea - very benign mostly all year round - enabling rapid development of O&G Projects in its shallow waters.

[mount teide] 05/1/2020 09:09

Effectively generating a potential $1.2bn of operating revenue for the daily contract quantity of 80 mmcf/d during the targeted initial minimum plateau period of 55 months.

[mount teide] 04/1/2020 23:37

Update to a post made in late 2018.

Jadestone Energy - Vietnam Natural Gas Assets

The long term growth potential for Natural Gas in SE Asia is huge and growing much faster than any other region in the world - the result of a move to clean energy sources to deal with appalling regional pollution issues, very high and fast growing populations, a rapid move towards urbanisation, and modernisation of its major cities.

As a result, the energy hungry but resource lite SE Asian region pays a very significant premium for its Natural Gas imports much of which is in form of highly expensive LNG by sea.

Average Natural Gas pricing over the last 5 years in the various major consuming markets:

US$ per MMBtu
$2.9 - US
$5.8 - UK/Europe
$8.5 - Vietnam - Ave Sales Price of current supply deals (piped gas)
$9.0 - Vietnam - Ave HOA pricing for new long term supply deals (piped gas)
$9.1 - China - LNG
$9.3 - South Korea - LNG
$10.1 - Japan - LNG

Most SE Asian Nations have substantially raised their consumption forecasts for natural gas for the decade ahead as a result of a planned shift from coal and Nuclear - this will help keep the region's huge "Nat Gas Price Premium" well underpinned.

The region has the World's three largest LNG importing Nations - Japan, China and South Korea - they currently import the majority of their Nat Gas as LNG in ships. This trend is not only set to continue but rapidly accelerate with all three committed to very large capital expenditure increases to massively expand their gas supply infrastructure, storage facilities and pipelines. Japan's new $40bn Ichthys LNG terminal is the latest major project to recently commence operations in the region.

However its viewed - the SE Asian region is planning to have a much greater reliance on Natural Gas imports for their energy needs in the future, with the region forecast to consume 75% of global nat gas production by 2030, and since most will increasingly be in the form of expensive LNG, this will effectively maintain a long term price premium for natural gas supplied by pipeline in the region.

Having a rising tide - commodity cycle, high price energy market and fast growing energy demand - flooding behind an industry significantly helps to minimise investment downside risk. Similar to the LNG suppliers into the region, Jadestone is negotiating a long term fixed price, take or pay, gas supply contract for its Vietnam nat gas production with the Vietnam Government and fertiliser industry, with annual fixed price uplifts.

The HOA in this connection covers all discovered resources from the Nam Du and U Minh fields, and establishes a mutually agreeable framework for gas sales, priced at the wellhead, and delivered to a tie-in point at a nearby existing pipeline. The agreed daily contract quantity (“DCQ”) is established as 80 mmcf/d(13,791 bboe/d) targeting a minimum plateau period of 55 months. In addition to the DCQ, the HOA specifies certain take-or-pay provisions, in addition to a pricing formula in principle, all of which will be finalised in the ultimate gas sales and purchase agreement (“GSPA”).

1 bboe = 5.8 MMBtu (which at $9/MMBTU would be equal to $52.2/bboe).
So, 13,791 bboe/d at $52.2/bboe would be equivalent to 10,540 bopd at $68 Brent).

The more two friends and I - all shipping and ports industry professionals - research Jadestone Energy the stronger our impression grows of a company being: "In the right place, at the right time, with the right product and management".

AIOHO/DYOR

[mount teide] 04/1/2020 10:21

The global average price for LSFO surged through $100/bbl for the first time this week reaching a record $102 at end of trading yesterday.

Spot Prices w/e 3/1/2020 - variance from previous day in brackets.
(All Prices rounded up/down to nearest whole number)

$122(+1) - MGO / Fujairah
$111(+4) - MGO / Singapore
$110(+0) - MGO / Global Average

$118(+2) - LSFO / Fujairah
$111(+4) - LSFO / Singapore
$102(+1) - LSFO / Global Average

$61 (+4) - HSFO / Global Average
$56 (+4) - HSFO / Singapore
$46 (+1) - HSFO / Fujairah

LSFO - HSFO Spread
$72 - Fujairah
$55 - Singapore
$41 - Global Average

$80 - Stag / with IMO 2020 Sales Premium
$77 - Montara / with IMO 2020 Sales Premium and adjusted for Oil Hedge
$76 - Jadestone Estimated Overall Realised Average
$71 - Maari
$69 - Brent
$63 - WTI
$20 - Jadestone current overall OPEX/bbl

$56 - Jadestone / estimated operating cash flow/bbl
$31 - Current spread between Stag(+ IMO Sales Premium) and LSFO price Singapore (suggesting the potential for further IMO 2020 Sales Premium Upside to Brent on future liftings)

[lauders] 04/1/2020 05:38

Nothing that hasn't been covered here already by MT and others. Just more evidence of what we and the shipping industry know:

“Prices are surging because shipowners will now start running vessels on low sulphur fuels, given we are in 2020, versus just buying and storing fuels on board pre-2020,” Argus Media noted.



This is also an interesting interview (albeit quite "robotic"):

[mount teide] 03/1/2020 11:40

By contrast, current weather at a met buoy West of the Shetlands

Average Wind speed: 40 knots (Gale Force 8) / Gusts to 60 knots (Severe Storm 11)
Sea Height(Swell + Wind Waves): 9.3 metres / 31 feet (moving at 25 metres a second!)
Swell period: 15 seconds
Swell/Sea Wave Length: 373 meters / 1,250ft
Air Temp: 5 centigrade (wind chill: minus 4 centigrade)

One of the reasons I don't invest in O&G companies that operate West of the Shetlands.

[mount teide] 03/1/2020 11:07

S93 - I can live with Darwin's/Timor Sea average of 3 cyclones every 100 years!

If that's what you have to put up with for having near year round flat calm seas, force 2-3 winds and average 30 centigrade temps its a small price to pay! :-)

Current Weather at a Meteorological Buoy situated in the central Timor Sea:
Friday 4th Jan
Morning : Light and variable winds with smooth seas. Very small mid period waves.
Winds: South 5 to 7 knots.
Seas: WSW 1 foot
Temp: 30c
Afternoon : Light SSW winds with a slight chop. Very small mid period waves.
Winds: SSW 6 to 8 knots.
Seas: WSW 1 foot.
Temp: 30c

Timor Sea - 14 day Weather Forecast

[spangle93] 03/1/2020 10:49

MT ... except Montara has cyclones..

[simplemilltownboy] 03/1/2020 10:32

Was expecting to see a rise in relation to the Iran situation. Can imagine that shipping insurance will sky rocket again thus leading to greater demand for oil outside the Hormuz area. GLA

[mr. t] 03/1/2020 10:11

Spangle, MT, thanks for your comments.

[mount teide] 03/1/2020 09:47

Croas - what is also a fact is Hurricane Energy's producing assets are located in the North Atlantic West of the Shetlands - an area routinely affected by massive winter ocean swells and huge breaking seas whipped up by the constant stream of Atlantic depressions/storms that pass over the area from September to May.

West of Shetland is a very high capex and challenging location to operate, and where project development cost and timetable over-runs are a fact of life.

Using a scale of 0 to 10 to measure the execution risk/challenge/cost of developing and operating a FSPO serviced Oil Field - if the North Sea were 6, West of Shetland would be 10, Montara and Stag 1-2, and Maari 6.

Anyone who works on a small FPSO on a oil field West of the Shetlands should be admired, because for most of the year life on board will be total purgatory such is the sea/weather conditions these vessels routinely operate in.

[mount teide] 03/1/2020 09:23

The global average price for LSFO has surged through $100/bbl for the first time reaching $101 in trading today.

$116 - LSFO / Fujairah
$110 - MGO / Global Average
$107 - LSFO / Singapore
$101 - LSFO / Global Average
$80 - Stag / with IMO 2020 Sales Premium
$77 - Montara / with IMO 2020 Sales Premium and adjusted for Oil Hedge
$75.75 / Jadestone Overall Realised Average
$71 - Maari
$69 - Brent
$62 - WTI
$52 - HSFO / Singapore
$45 - HSFO / Fujairah
$20 - Jadestone Current overall OPEX/bbl