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Posted at 10/6/2022 13:00 by la forge ABB and Wison Offshore & Marine to develop floating LNG facilitiesThe companies will look to enhance the efficiency of LNG at sea by optimising and standardising the design of the FLNG unit. Swiss automation company ABB has partnered with Wison Offshore & Marine (WOM) for the development of floating liquefied natural gas (FLNG) facilities across the world. FLNG facilities simplify the production, liquefaction, and storage of natural gas at sea, from where it can be dispatched directly to clients across the globe. Through this partnership, the companies intend to enhance the production efficiency of LNG at sea by optimising and standardising the design of the FLNG unit. As per the agreement, the Swiss technology company will be responsible for delivering standardised electrification, control, and safety systems to ensure production efficiency. The partnership will combine WOM’s expertise in offering turnkey engineering, procurement, construction, installation, and commissioning (EPCIC) with ABB’s expertise in integrating electrical, control, and safety systems. Commenting on the partnership, WOM assistant president Wei Huaqing said: “The FLNG market continues to grow. We are pleased to be working with ABB and look forward to leveraging our complementary expertise to deliver more value for FLNG customers around the world. “By combining our bespoke offerings, we believe we can increase productivity in greenfield developments and, in doing so, improve overall CAPEX efficiency.” The alliance will also leverage ABB’s project methodology, Adaptive Execution, which is designed to give clients comprehensive visibility of their project. ABB Energy Industries China head Cruise-Feng Li commented: “Adaptive Execution can help unlock significant project value for FLNG customers. By designing in a modular and standardised way, and testing everything in a virtual environment, we can tackle design challenges early on, boost performance, and ensure reliability of the infrastructure. “This enables all the parties involved in the project to achieve more in shorter timeframes, optimising the overall delivery schedule and saving on cost.” In August last year, ABB secured a $120m contract to supply an overall electrical power system (EPS) for the Jansz-Io compression (J-IC) project, offshore Australia. In April 2021, Equinor awarded ABB and Siemens Energy contracts to provide electrical equipment services on all of its assets located on the Norwegian continental shelf (NCS). The agreements have a combined value of Nkr4.5bn ($530.6m) and include electrical equipment services for Equinor’s onshore plants in Norway. offshore technology |
Posted at 03/5/2022 10:27 by waldron ENERGYVOICEFrench ban on US LNG reverses with Engie deal Engie has signed a 15-year sale and purchase agreement for buy US LNG, reversing France’s implicit ban on shale gas supplies. By Ed Reed 03/05/2022, 7:52 am Engie has signed a 15-year sale and purchase agreement for buy US LNG, reversing France’s implicit ban on shale gas supplies. The company signed up to buy the 1.75 million tonnes per year from NextDecade’s Rio Grande LNG project. The plant will be in Brownville, in Texas. Engie will buy the LNG on a free on board (FOB) basis, from the first two trains of the Rio Grande LNG project. NextDecade expects first production in 2026. In 2020, the French government was said to be obstructing the deal, citing concerns around emissions. Engie had been in the process of striking a deal for supplies from the Rio Grande LNG plant. “The signing of this SPA is an important step in showing our commitment in the areas of environmental stewardship, social responsibility, and governance best practices, while upholding the LNG industry’s highest standards,” said NextDecade’s chairman and CEO Matt Schatzman. “It also shows how we can help meet our buyers’ climate change initiatives, while providing them access to secure energy supply.” The US LNG project intends to capture more than 90% of emissions via a carbon capture and storage (CCS) plan. NextDecade expects to reach a final investment decision (FID) in the second half of 2022 on at least two trains. It would then approve the next three at a later date. The five-train plant would have up to 27mn tpy of capacity. Long-term leap There have been a flurry of recent deals for long-term supplies from US LNG projects. Europe has historically lagged in this regard but there are signs that countries are reconsidering the importance of LNG as bulwark of energy security. In addition to the Engie-NextDecade deal, Energy Transfer also announced the signing of an agreement to supply LNG to Gunvor. Energy Transfer said it would provide 2mn tpy of LNG to the trader, on an FOB basis, from the Lake Charles LNG export facility. Exports are expected to start in 2026. # While European buyers have been slow, China has taken a commanding position in securing long-term LNG deals. In March, ENN signed two SPAs with Energy transfer for a total of 2.7mn tpy. ENN also signed up another 1.5mn tpy with NextDecade, from the Rio Grande LNG project, in April. Shell had been participating in the Lake Charles plan until 2020, when it pulled out. At that time, Energy Transfer said it would reduce the scale of the plan to two trains, with a total of 11mn tpy of capacity. |
Posted at 18/4/2022 11:45 by waldron TotalEnergies signs Cameron LNG expansion agreementPublished by Sarah Smith, Assistant Editor LNG Industry, Monday, 18 April 2022 10:05 TotalEnergies has signed a heads of agreement (HOA) with Sempra Infrastructure, Mitsui & Co. Ltd, and Japan LNG Investment – a company jointly owned by Mitsubishi Corporation and Nippon Yusen Kabushiki Kaisha (NYK) – for the expansion of Cameron LNG, an LNG production and export facility located in Louisiana, US. This expansion project includes the development of a fourth train with a production capacity of 6.75 million tpy, and a 5% increase of the current 13.5 million tpy first three trains through debottlenecking. It will also include design enhancements aiming at reducing the emissions of the facility, including electric drive technology. Under the terms of the HOA, TotalEnergies will offtake 16.6% of the projected fourth train’s production capacity, and 25% of the projected debottlenecked capacity. Additionally, Cameron LNG advances the development of this project with the selection of two contractors to conduct a competitive front-end engineering design (FEED) in view of the selection of the engineering, procurement and construction (EPC) contractor. “We are pleased to take this new step with our partners to increase liquefaction capacity at Cameron LNG, a facility ideally located on the Atlantic basin for export to Europe. In recent years, TotalEnergies has become a leading exporter of US LNG, most of which has been exported to Europe in recent times, contributing to the continent’s security of energy supply. TotalEnergies is committed to further expanding its presence in the US, thus meeting growing need for LNG, a key transition fuel” said Patrick Pouyanné, Chairman & CEO of TotalEnergies. “The expansion of Cameron LNG will contribute to our LNG growth strategy by investing in low-cost, long-term competitive LNG projects with lower GHG emissions.” Development of the Cameron LNG expansion project remains subject to definitive agreements, obtaining the necessary permits, and all partners reaching a final investment decision planned for 2023. Cameron LNG is jointly owned by Sempra Infrastructure (50.2%), TotalEnergies (16.6%), Mitsui & Co. Ltd (16.6%), and Japan LNG Investment (16.6%). |
Posted at 01/4/2022 16:09 by waldron offshoretechnologyApril 1, 2022 TotalEnergies collaborates with Sempra on LNG Export project The firms have signed an agreement for Sempra's proposed Vista Pacífico LNG project, in Mexico. French firm TotalEnergies has agreed to collaborate with a unit of US-based Sempra Energy on liquefied natural gas (LNG) exports to help reduce Europe’s reliance on Russian energy. The firms have signed two memorandums of understanding (MoU), including one for the Vista Pacífico LNG export project in Mexico, and the other for the joint development of renewables projects. Planned to be built on Mexico’s west coast, the Vista Pacífico LNG project will be well-situated for exporting to markets such as Asia and South America. A non-binding agreement has also been signed by Sempra with Mexico’s state-owned electric company, Comisión Federal de Electricidad, for the potential joint development of the proposed LNG project. The MoU proposes that TotalEnergies offtake one-third of Sempra’s future LNG production from the project and to become a shareholder, with a minimum stake of 16.6%. Under the second MoU, the two firms will co-develop several renewable energy projects in North America It outlines the potential acquisition of a 30% stake by Sempra in an offshore wind project, off the coast of California, from TotalEnergie. The project is being prepared for an upcoming auction. The MoU also outlines the potential acquisition of a 30% stake by TotalEnergies in certain onshore renewable projects, along the Mexico-US border, from Sempra. These projects are under the development phase. TotalEnergies chairman and CEO Patrick Pouyanné said: “We are pleased to further strengthen our partnership with Sempra in North America in LNG, and to extend it to renewables. “Over the past years, TotalEnergies has become the leading exporter of US LNG and has built up a pipeline of 4GW of solar projects, and 3GW of offshore wind projects, currently under development in the US. “This new step in our collaboration allows us to go further in our ambition to offer our customers sustainable, affordable, and reliable energy, in line with our transformation into a global multi-energy company.” TotalEnergies and Sempra are currently partners in the Cameron LNG export facility in Hackberry, Louisiana, and the ECA LNG liquefaction facility, which is under construction in Baja California, Mexico. |
Posted at 20/9/2021 11:47 by waldron Arctic LNG 2: an ambitious gas project in Russia09/17/2021 Road of Sabetta in Russia Artic LNG 2 Card The Arctic LNG 2 project will consist of three liquefaction trains capable of producing 19.8 Mtpa of liquefied natural gas (LNG) and 1.6 Mtpa of initial condensate. The project has been set up in the Gyda Peninsula in the western Siberia region of Russia. Its location on the banks of the Ob river positions it opposite the Yamal LNG site. The limited liability company (LLC) Arctic LNG 2 operates and owns all the assets. It is a joint venture including TotalEnergies (10%), Novatek (60%), Chinese corporations : CNPC (10%) and CNOOC (10%), and Japan Arctic LNG (a consortium formed by Japanese companies Mitsui and JOGMEC) (10%). The Arctic LNG 2 project taps the potential of the giant Utrenneye onshore field, providing volumes in excess of 7 billion barrels of oil equivalent (boe). In 2018, the front-end engineering design (FEED) was completed and work began on site preparation with the construction of early-phase power supply facilities, the drilling of production, and the construction of the quayside. The participants in the Arctic LNG 2 project approved the final investment decision (FID) for the project in September 2019. Construction is ongoing, and the first train of the project is scheduled to start up in 2023, with the second train in 2024 and the third train in 2025. An Innovative Project at the Core of Our European and Asian Strategies In order to reduce our environmental footprint but also the exposure of construction staff to Arctic conditions and optimize costs through industrialization, the Arctic LNG 2 project has taken an innovative approach with the installation of liquefaction facilities on board concrete gravity-based structures (GBS). Three GBS for Arctic LNG 2 are to be constructed in a purpose-built new yard in the Murmansk area, the Novatek Murmansk Plant (NMP), and transported to the Gyda shore for anchoring. Each GBS will be equipped with LNG storage tanks and condensate and offloading facilities. The unique location of the Gyda Peninsula is conducive to flexible and competitive logistics: it offers year-round LNG shipping to transshipment facilities in the Murmansk area and in Kamchatka. From there, LNG will be delivered to the European and Asia-Pacific markets. Twenty-one new Arc7 LNG carriers are being built for the Arctic LNG 2 project and were designed for year-round navigation along the Northern Sea Route. Preservation of the Environment: a Key Priority Preservation of the unique Arctic environment is one of the cornerstones of the project’s activities, a consideration factored into all stages of project development, from concept selection to execution and operations. The Arctic LNG 2 project boasts the following qualities, ensuring that impacts on the environment and biodiversity are kept to a minimum: Minimized environmental footprint thanks to the use of GBS to accommodate process facilities. Zero-discharge of industrial wastewater into the Gulf of bay and re-injection of treated wastewater deep into subsoil in compliance with regulatory requirements. Minimized energy consumption for gas liquefaction thanks to the project’s location in a cold environment, use of mixed refrigerants for adaptation to ambient conditions and heat and cold recovery. High fuel energy efficiency thanks to the use of next-generation aeroderivative gas turbines for power generation. LNG production more than 30% below the sector average in terms of GHG emission intensity thanks to minimized energy consumption and high fuel efficiency. Low methane emission intensity thanks to the recycling of boil-off gas either for reliquefication or power generation, as well as no routine gas flaring. Use of state-of-the-art LNG carriers which will be run on LNG, the cleanest maritime fuel. Use of cutting-edge process technology and monitoring for carbon emissions across the entire LNG value chain. The Arctic LNG 2 project also carried out a comprehensive Environmental, Safety and Health Impact Assessment (ESHIA). In accordance with the ESHIA and the most stringent international performance standards for environmental and social protection, the Arctic LNG 2 project has defined a set of measures to be implemented before start-up of the project, seeking to minimize the environmental and social footprint and to deliver a positive impact for biodiversity and the surrounding communities. These measures will be monitored by third-party organizations. The project’s biodiversity protection strategy includes the following plans and programs, currently under development: A Biodiversity Conservation Management Program (BCMP) in accordance with the recommendations of the Ministry of Natural Resources and the Environment of the Russian Federation. A Biodiversity Management Plan (BMP) setting out the commitments and measures identified in the ESHIA in order to avoid, minimize and compensate the impacts on biodiversity and ecosystems. A Biodiversity Action Plan (BAP) setting out the specific commitments and actions taken by the project in accordance with International Finance Corporation (IFC) Performance Standard 6 requirements for No Net Loss in Natural Habitats and a Net Gain in Critical Habitats. A Biodiversity Monitoring and Evaluation Program (BMEP) to measure the outcomes of the biodiversity plans implemented. |
Posted at 15/7/2021 09:29 by la forge 15 Jul 2021 | 08:03 UTCFrance's TotalEnergies Q2 equity LNG sales price hits two-year high Author Stuart Elliott Editor Debiprasad Nayak Highlights Average realized price up to $6.59/MMBtu in last quarter Price lower than average spot JKM price of $10.04/MMBtu Global gas price realization up to $4.43/MMBtu France's TotalEnergies said July 15 its average realized sales price for equity LNG in the second quarter of 2021 was at $6.59/MMBtu, its highest realized price since Q1 2019. The Q2 average sales price was up by 8% quarter on quarter and by 50% year on year. The Q2 average was, however, below that of the JKM front-month LNG price in the period, as assessed by S&P Global Platts, of $10.04/MMBtu. The JKM benchmark price reached an all-time high of $32.50/MMBtu in mid-January, driven by a combination of incremental weather-related gas demand in Northeast Asia, limited storage capacity and regional liquefaction outages. It remained at relatively high levels through the second quarter, and on July 14 was assessed at $13.34/MMBtu. A large amount of long-term LNG supply globally remains contracted on an oil-indexed basis, however, meaning the spot price increase would only have a limited impact on the portfolio of big players such as TotalEnergies. TotalEnergies has said previously that the LNG price indicator reflected the combined effect of sales volumes and prices of long-term contracts and spot sales. It is the sixth consecutive quarter TotalEnergies has published an average sales price for its LNG, with the major saying it introduced the price to allow for a "better understanding" of the company's integrated gas business unit performance. In 2020, TotalEnergies' equity LNG sales amounted to 17.6 million mt, up 8% from the previous year. Overall, LNG sales were up 12% on the year in 2020 at 38.3 million mt. TotalEnergies also published July 15 its average global gas sales price of $4.43/MMBtu for Q2 2021, which was up from $4.06/MMBtu in Q1 2021. 'Core' LNG ambition In September last year, TotalEnergies outlined its new corporate strategy with a focus on LNG and renewable energy growth. LNG growth, CEO Patrick Pouyanne said, would be at the "core of our ambition." Total LNG sales will reach 50 million mt/year by 2025, up from around 35 million mt/year now, Pouyanne said. TotalEnergies has interests in three major new LNG projects coming online in 2023-25: the Novatek-operated Arctic LNG 2; Mozambique LNG; and Nigeria LNG's seventh train. Mozambique LNG had been due online in 2024, but the project is currently under force majeure and delayed by at least a year due to the militant insurgency in the southeast African country. |
Posted at 03/6/2021 14:19 by ariane NATURALGASWORLD.COMNatural Gas News Total takes 10% stake in Novatek's LNG transshipment terminals Jun 3, 2021 1:55:pm Summary Total and Novatek will also look at ways of decarbonising LNG supply and producing and using hydrogen as a fuel. by: Joseph Murphy France's TotalEnergies (TE) has agreed to take a 10% stake in Novatek's wholly-owned Arctic Transshipment, the company operating two LNG transshipment terminals that the Russian gas supplier is building in Kamchatka and Murmansk, they said June 3. The pair signed the share purchase deal at the St Petersburg International Economic Forum, along with a memorandum of understanding (MoU) on decarbonisation, hydrogen and renewables. The two transshipment terminals, each equipped with 360,000-m3 floating LNG storage units, are designed to facilitate LNG supplies from the nameplate three-train 16.5mn metric ton/year Yamal LNG and the other LNG export terminals Novatek is developing in the Arctic to markets in Asia and Europe. Specialised ice-breaking LNG carriers will offload their cargoes at the terminals, which will be then be collected by conventional tankers, saving time and cost. Novatek expects the facilities to be up and running in 2023, coinciding with the launch of Novatek's 19.8mn mt/yr Arctic LNG-2 project. CEO Leonid Mikhelson said the facilities would "ensure the optimal utilisation of our ice tanker fleet and reduce the cost of transport to consuming markets for the company's existing and future LNG projects.” He said TE would "enhance the competitiveness of our joint projects and contribute to the successful development of our LNG logistics chain in accordance with best industry practices in environmental protection and climate change mitigation.” Decarbonising with hydrogen Under the MoU, the two companies will look at producing and using hydrogen as a fuel, and marketing carbon-neutral products including LNG, Novatek said. They will also co-operate in making power generation at LNG facilities more efficient, including by using waste heat utilisation technologies. They will consider converting gas turbine equipment to run on hydrogen and constructing wind turbines and other renewable facilities to reduce the carbon footprint of LNG supply. "Our long-term goal is to provide the global markets with affordable, secure and low-carbon natural gas, and the cooperation with TE our partners is one way for us to contribute to the decarbonisation of the global energy industry," Mikhelson said. Novatek announced earlier in the day it would potentially buy renewable power from Finland's Fortum in Russia in order to reduce the Scope 2 emissions from its Cryogas-Vysotsk LNG plant in the country's northwest. TE, which changed its name late May, is a 19.4% shareholder in Novatek and holds a 20% stake in Yamal LNG, which started up in December 2017 and produced more than 18.8mn mt of LNG in 2020. The company also holds a 10% stake in Arctic LNG 2, now under construction and on track to deliver its first LNG cargo in 2023. |
Posted at 04/5/2021 07:39 by grupo offshore bizTotal wraps up France’s 1st ship-to-containershi Operations & Maintenance May 4, 2021, by Adnan Bajic French major Total has completed what is called the first ship-to-containershi Total wrap's up France's 1st ship-to-containershi Courtesy of Total The company said that the world’s largest LNG bunker vessel in operation currently, Gas Agility, completed the bunkering of the CMA CGM Jacques Saade at the port of Dunkirk. The bunker vessel delivered 16,400 cubic meters of the chilled fuel to the containership giant, at the end of last week. Since commencing operations in November 2020, the LNG bunker vessel has delivered more than 160,000 cubic meters of LNG bunker in Rotterdam where she is based. She is designed to serve a broad range of vessels from various segments, including CMA CGM’s 23 000 TEUs LNG-fueled containerships. This inaugural operation also marks Dunkerque LNG terminal’s first loading of a small-scale LNG vessel and the Terminal des Flandres’ first LNG bunkering operation with simultaneous cargo operations. Total further noted that the operation underscores the close cooperation across all partners of the Green Loop project consortium, which comprises Total, the Dunkerque LNG terminal, Mitsui O.S.K. Lines (MOL) and CMA CGM. Co-financed by the European Union under the Connecting Europe Facility (CEF) – Transport Sector, the overall project objective is to promote the decarbonization of maritime transport by deploying a scale-up LNG bunkering solution in North Europe. Key investments, critical to enable this operation, were made within the framework of this project to boost the Dunkerque LNG terminal’s capabilities in offering small-scale LNG services. Amongst various developments, an existing terminal jetty was adapted to allow the provision of LNG loading to LNG bunkering vessels. Additionally, leveraging the expertise and experience of the consortium partners and the involvement of the Port of Dunkirk, all relevant LNG loading and bunkering procedures were developed in compliance with safety regulations. By 2022, the Gas Agility’s sistership, another 18,600 cubic meters newbuild LNG bunker vessel, will join Total’s LNG bunker fleet to serve the Mediterranean region. Simultaneously, Total will share the use of a third bunker vessel in Singapore. |
Posted at 03/9/2020 09:52 by adrian j boris Can Mini-LNG Plants Solve The Gas Flaring Problem?By Irina Slav - Sep 01, 2020, 1:00 PM CDT According to the World Bank, energy companies around the world flared 250 billion cubic meters of natural gas last year. That is the highest gas flaring rate since 2009, representing billions in lost profits from wasted gas. But there may be a clever solution to this problem: turn the gas into LNG and sell it abroad. LNG is a hot commodity despite a glut that has driven prices to historic lows, making some large-scale LNG projects economically unviable. Yet not all LNG facilities are large and cost billions to build. Nowadays, there are also mini-LNG plants that produce gallons instead of tons of the superchilled liquid gas. And, according to some, they can solve the flaring problem, at least in the Permian. This is what the Houston Chronicle’s Jim Magill wrote in a recent article on flaring and LNG production. Small LNG plants churn out up to 100,000 gallons of LNG daily, which can then be transported to power plants and ports to fuel ships. It is already being done in some parts of the United States, but not the shale plays where the gad flaring actually occurs. Globally, gas flaring costs oil producers some $17 billion in lost sales, according to UK-based flaring solutions providers Capterio. It also costs a lot in emissions, which is the reason flaring has been drawing increasing attention from regulators. Even the Texas Railroad Commission, which has been generous with flaring permits, recently approved changes to the regulatory framework around flaring that aims to reduce the amount of gas burned at oil fields. In truth, flaring in the Permian fell sharply as oil production fell. New gas pipelines in the Permian have also helped the situation. But they have not solved the problem once and for all. “Since the downturn, the rate of flaring has gone down with more than 99.5 percent of the gas produced in the month of May sold and beneficially used to generate electricity, cook dinner, or make hundreds of consumer products,” said the chairman of the Texas Railroad Commission in comments on the new rules. “Now is the opportune time to implement meaningful recommendations to reduce flaring before oil and gas production climbs back to previous highs.” Production is already coming back on stream, and the flares will follow. Setting a mini-LNG train on-site could be the perfect solution, at least for those who have money to spare. Small-scale LNG trains may not cost billions to build, but they are not cheap either. One southern Texas small-scale LNG plant, operated by Stabilis Energy, cost between $40 and $45 million to build, according to its CEO Jim Reddinger, who spoke to Chron’s Magill. The plant has a capacity of 100,000 gallons of LNG daily. It distributes its liquefied gas to various businesses across North America. But can the market support a dozen more LNG suppliers of this size? This is the million-dollar question. The global LNG market is oversupplied, and this is already hurting U.S. LNG producers. Things are beginning to improve, with fewer U.S. cargos being canceled for delivery in September and October, but the situation on the LNG market is pretty similar to that on the oil market. There is way more supply than there is demand. In this context, which also features depressed investment appetite among energy companies, the chances are that few would be willing to consider solving their flaring problem by building small-scale LNG plants. According to some in the industry, mini-LNG trains could help drillers save money. Chron’s Magill quotes the head of a former owner of a small-scale LNG plant, Kelley GTM Manufacturing, as saying LNG could be regasified and used to power drilling equipment in the field, replacing costlier diesel. The question here is, why liquefy and regasify when you have the gas as is at the field. Yet liquefied gas can also be used as fuel for machinery, and it could be a cheaper and cleaner alternative to diesel. Be that as it may, the challenges for mini-LNG plants seem to be identical to those that large-scale plants have: securing long-term customers. In a low-price environment, many buyers prefer to tap the spot market than to commit to long-term contracts that are the bread and butter of LNG producers. For all the benefits that small-scale LNG plants can deliver in the gas flaring department, finding enough consumers for the fuel remains the major challenge. This is because demand for LNG as fuel for oil production equipment depends on oil demand. Mini-LNG plants at the oil field only make sense if there are enough rigs and hydraulic pumps to be fuelled with gas. An alternative use is as fuel for ships—demand for LNG-powered smaller vessels is on the rise. But given the amounts of LNG that are used as fuel, small-scale producers would have to face the stiff competition of larger LNG companies. Replacing flaring with LNG production certainly sounds like a good idea. It could be a particularly good idea for bigger flarers than the United States, such as Iraq. But whether it is a good idea for the Permian right now remains to be seen. By Irina Slav for Oilprice.com |
Posted at 15/7/2020 20:13 by waldron Shell’s Big Bet On Floating LNG May Be A FlopBy Irina Slav - Jul 15, 2020, 3:00 PM CDT Join Our Community It was the last of the large LNG projects that put Australia in the lead for global LNG exports. It was the biggest jewel in Shell's LNG crown. But this jewel hasn't produced any LNG since February, and its future is unclear. The Prelude floating liquefied natural gas project, with an annual capacity of 3.6 million tons, began shipping LNG last June. The first cargo shipped more than eight years after the final investment decision was made, and two years after the FLNG vessel arrived at the site, one Wood Mac analyst pointed out at the time. In February this year, production was stopped following a technical problem. Production at the world's largest FLNG installation still hasn't been restored, and it remains unclear when this will happen. Building it and putting it into operation cost between $12 and $17 billion, according to external estimates. Now, there are concerns that it may flop. The gas market situation is difficult enough. Just like in oil, there is a substantial glut in natural gas, and demand is lagging far behind. According to Rystad Energy, global natural gas output is set for a 2.6-percent decline this year because of the coronavirus pandemic. Next year, demand should begin to improve, driven by the low prices currently plaguing the sector. But that's only if the pandemic goes away for good and without a fight, which at the moment is not happening. In this situation, it may not be that bad that Prelude is not operating at the moment. There is an oversupply of LNG, prices are low, and Shell said in a recent update that it will take a hit because its 2019 term sales contracts for LNG were tied to oil prices. Related: The Race To Complete The World’s Most Controversial Pipeline That hit may be nothing compared to what Prelude may need to break even, at least according to analysts from Goldman Sachs quoted by Tim Treadgold in an article for Forbes. According to them, the commercial breakeven price for gas produced at Prelude is as much as $20 per thousand cubic feet. This compares with prices between $2 and $3 per thousand cubic feet in April in the United States. The difference is impressive, and it certainly would explain why, as Treadgold notes, Shell is in no hurry to restart operations at Prelude. The question is whether it would become profitable at all, it seems. The current glut will clear in the not too distant future. This is what most LNG market watchers agree on. Gas—and LNG—has enjoyed growing demand as a replacement for coal in power generation, and after the current crisis passes, demand will likely once again start to increase. But supply is increasing, too. Last year, according to Shell's LNG Outlook 2020, saw a record number of new LNG capacity additions as the industry raced to secure a spot in the long-term LNG market. And more capacity is coming, too, despite the current challenges. Just last month, French Total secured $15 billion in financing for a new LNG project in Mozambique. Exxon delayed its final investment decision on the $30-billion Rovuma LNG project, also in Mozambique, until next year, but it has not canceled it. Shell itself recently said it was interested in more LNG projects, this time in Russia. In other words, the long-term outlook for LNG remains positive. The outlook for Prelude, perhaps, not so much. With so much supply already on stream and more coming, competition in the space will only continue to intensify, meaning prices will remain low for longer. And if they do, Prelude may never reach its commercial breakeven level. "With Prelude now producing LNG for more than a week and the first shipment of LNG being imminent, we are further de-risking the delivery of our $8-10 billion organic free cash flow target in 2020," Shell's Integrated Gas & New Energies Director, Maarten Wetselaar, told analysts in June 2019. Hopes were justifiably high and plans were ambitious. But nobody could have foreseen the coronavirus pandemic then. Now, with 2020 demand forecasts in the trash and new ones pointing towards declines in everything energy-related, things are different. New plans will need to be made, although perhaps not as ambitious as previous ones. LNG will certainly have a lead part to play in the energy mix of the future. But what part costly floating LNG projects will play in LNG remains an open question. Prelude is an impressive achievement, regardless of its problems. As the largest floating LNG facility in the world, it has a total capacity of 5.3 million tons of hydrocarbon liquids annually, including, besides the LNG, 1.3 million tons of gas condensate and 400,000 tons of liquefied petroleum gas. Floating LNG was to be a game-changer: boosting the efficiency of gas production by adding the processing to the place of extraction. But now it has to prove it is cost-competitive with other, more traditional approaches to LNG production. By Irina Slav for Oilprice.com |
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