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[waldron] 08/3/2018 07:58

Transportation & Storage News
ABB to automate and electrify NextDecade’s Rio Grande LNG project
Published 08 March 2018

NextDecade has given an order to ABB to provide an integrated automation and electrical solution for its Rio Grande LNG project in South Texas.

The automation of plant control systems will optimize plant performance and efficiency, representing a logical extension of NextDecade's low cost, lower risk development strategy in combination with Rio Grande LNG's optimal South Texas location.

NextDecade president & CEO Matt Schatzman said: "This agreement enables NextDecade to drive higher capital efficiencies through a unique, integrated approach among ABB, CB&I – NextDecade's EPC contractor – and the NextDecade team via automation and electrical systems.

"NextDecade expects ABB's solutions to reduce the schedule, equipment footprint, and cost of our Rio Grande LNG facility, while providing greater operational flexibility."

ABB Americas region president Greg Scheu said: "Partnering with ABB not only provides a fully integrated automation and electrical solution, but also ABB Ability, our integrated digital solutions offering. ABB Ability gives customers access to best-practice benchmarking, and transparency into operations, to improve operational performance, efficiency and productivity.

"Our deep domain expertise, coupled with our history of innovation and collaboration with industry, will deliver a step change in operating efficiencies and improved throughput for NextDecade. Together, ABB, CB&I and NextDecade are helping to transform the growing LNG market in the U.S."

ABB's major projects execution center in Houston leads the industry in combined automation and electrical projects designed to deliver higher value for its customers globally. This world-class project delivery model will be fully deployed on NextDecade's Rio Grande LNG project.

Rio Grande LNG is a proposed 27 mtpa LNG export facility to be located on a 984-acre site on the Brownsville Ship Channel in South Texas and will be constructed in phases timed to meet market demand.

The approximately 137-mile proposed Rio Bravo Pipeline will supply the facility with its feedgas, connecting it to the Agua Dulce natural gas supply area. Rio Grande LNG is currently in the advanced stages of the U.S. Federal Energy Regulatory Commission (FERC) review and permitting process.


Source: Company Press Release

[sarkasm] 07/3/2018 18:37

GTT: end of testing phase for LNG Brick

Jean-Noël Legalland, published on the 07/03/2018 at 18h33
GTT: end of testing phase for LNG Brick
Photo credit © GTT

(Boursier.com) - Given the growth in the use of LNG as a fuel, the maritime industry needs compact cryogenic storage solutions that are easy to implement, says GTT, which, to meet this requirement, has developed the LNG Brick technology which it announces the end of the test campaign.

This system is in the form of a block ready to be installed in the structure of the ship, including a membrane system type Mark III.

LNG Brick provides LNG fuel tank solutions for capacities between 1,000 and 3,000 m3. This technology will eventually allow the construction of the LNG Brick tank in a different location from the shipyard that will integrate it into an LNG-powered vessel. LNG Brick will also allow easier management of evaporations for small volumes thanks to an ability to hold a higher pressure than conventional diaphragm reservoirs.

GTT has awarded a prototype to Dongsung FineTec, a Korean company specializing in the production of insulation boards, used for GTT technologies. The tests, carried out in cryogenic conditions, made it possible to demonstrate "the satisfactory performances of this new system", ensures GTT.

[sarkasm] 04/3/2018 07:06

Royal Dutch Shell to Investors: The World Needs (Lots) More LNG
The company's second annual LNG outlook reaches conclusions that oppose accepted thinking in the energy industry.
Maxx Chatsko
(TMFBlacknGold)
Mar 3, 2018 at 6:06PM

In an incredibly rapid yet somewhat overlooked shift, global trade volumes of liquefied natural gas (LNG) have doubled since 2005 -- and they're not done growing yet. Demand will continue to rise, and the countries lucky enough to be flush with natural gas reserves are racing to keep up with it.

The United States will boast 9.5 billion cubic feet per day (Bcf/d) of LNG export capacity by the end of 2019. That will make it the third-largest LNG exporter on the planet, right behind Australia and Qatar. While that alone is amazing, the U.S.'s overnight ascension up the global rankings is even more incredible: America had just 0.8 Bcf/d of export capacity at the start of 2016.

Judging by the supply growth in the U.S. and elsewhere, it seems the market will have plenty of LNG to go around. But an astonishing industry outlook published by Royal Dutch Shell (NYSE:RDS-A)(NYSE:RDS-B) sounded the alarm bells, concluding that the world soon won't have enough LNG production to meet demand. That flies in the face of what investors have been told over the years.

Is the world really headed for an LNG crunch?
Two ships sitting idle at port.

Image source: Getty Images.
Why Shell thinks an LNG shortage is possible

Countries around the globe have turned to LNG imports for various reasons -- sometimes to displace dirtier coal-fired power generation, sometimes to replace falling domestic production of natural gas, sometimes to lower geopolitical risk, and sometimes for all those reasons. Cheap and abundant natural gas reserves in Australia and the U.S. have made the global LNG boom possible, as have billions in investments planned years ago.

Royal Dutch Shell is a majority owner in a floating LNG (FLNG) facility hovering over the massive Prelude field in Australia, which is nearly 300 miles offshore. Meanwhile, Cheniere Energy (NYSEMKT:LNG), America's top LNG exporter, employs more traditional land-based liquefaction facilities along the Gulf Coast. The company actually embodies the national and global trends in the industry quite well.

Cheniere made huge bets a decade ago on the potential opportunity in LNG exports. It will see most of its production capacity (nearly half of America's total) come online between 2017 and 2019, and then it plans to kick back and let cash flows accumulate. According to Shell, that last part is the problem facing the global industry.

The awesome growth in global LNG trade, which reached 293 million metric tons in 2017, has been made possible by hundreds of billions of dollars invested in supply expansion. From 2015 to 2019, the world will add roughly 150 million tons per year of production capacity, including over 40 million tons of annual capacity expansion both this year and next. But a strange thing happens after that: Planned capacity expansions fall to virtually zero in 2020 and beyond.
A Chinese city in the background with energy infrastructure in the foreground.

Image source: Getty Images.

What's the reason? Well, it's not because LNG consumption growth stops. To the contrary, Royal Dutch Shell expects global LNG demand to nearly double again by 2035. Instead, the global energy leader points to a stalemate between the needs of producers and buyers.

Buyers are increasingly seeking smaller and more flexible volumes in order to make LNG more competitive for an expanding list of downstream applications, ranging from industrial use to vehicle fuels. From 2011 to 2014, the average LNG supply contract had a length of over 12 years and volume of over 1.3 million tons per year. From 2015 to 2017, those metrics slipped to just seven years and 0.7 million metric tons per year.

The problem is that producers have come to rely on signing massive long-term contracts up front in order to secure the financing needed to construct export terminals. That's because export terminals are incredibly expensive to build, and financiers want revenue certainty before handing over money. Case in point: Cheniere Energy may be barreling its way toward 4.5 Bcf/d of export capacity, but it had $25.3 billion (and counting) in long-term debt at the end of 2017.

Luckily, the stalemate doesn't appear to be bad news for investors. In fact, investors stand to win almost no matter what.
An aerial view of an LNG tanker at port.

Image source: Getty Images.
A boon for business?

While investors have become accustomed to seeing Cheniere Energy announce supply agreements lasting 15 years or longer, that will become increasingly rare going forward. The good news: America's largest LNG exporter will be largely unaffected by the shifting market dynamics for the foreseeable future. That's because 85% of the company's capacity -- including most of the expansions coming online between now and the end of the decade -- is entered into long-term contracts.

Things could get interesting as existing contracts begin to expire closer to 2030, but that's a pretty long time away. The supply crunch Royal Dutch Shell is warning against is expected to become a problem in the early 2020s.

In fact, given the mismatch between supply and demand, it may make sense for Cheniere Energy to reserve a certain portion of its production capacity for spot markets, where prices have periodically tripled those in long-term contracts. And the company seems to have left that door open, as the liquefaction trains at its Corpus Christi expansion project are smaller than those at its flagship Sabine Pass facility. That would be a win for investors, perhaps providing lucrative incremental income under the right market conditions.

Royal Dutch Shell's Prelude FLNG project should be able to fly above market turbulence, too, as it's smaller and close to the world's fastest-growing LNG markets in Asia. There's almost no set of market conditions under which it couldn't thrive.

Long story short, the changing dynamics in global LNG trade appear to have caused a dramatic underinvestment in new liquefaction capacity. That could create problems for supply sold on the spot market -- especially if prices skyrocket as product becomes scarce -- and affect planning and investment in new production facilities. But Cheniere Energy and Royal Dutch Shell should avoid the worst of the fallout. In fact, it could even be a boon for business.

[ariane] 03/3/2018 17:00

A rapidly shifting energy landscape being reshaped by new technologies and a revival of U.S. fossil-fuel production will dominate the agenda as the world's leading energy executives, government ministers and financiers gather in Houston next week.

Thousands of energy leaders, including the heads of Royal Dutch Shell PLC, BP PLC and Saudi Arabian Oil Co., will descend on Texas starting Monday for CERAWeek, the annual conference put on by IHS Markit Ltd. that has become a bellwether for the health of the global energy industry.

They will be joined by many of the world's top energy policy makers, notably OPEC Secretary General Mohammad Barkindo and several Trump administration officials, Energy Secretary Rick Perry and Interior Secretary Ryan Zinke.

Leaders of many other energy-related industries are also set to speak, including the chief executives of General Motors Co. and Siemens AG.

This year's gathering takes place amid a continuing recovery for oil prices, which passed $70 a barrel earlier this year for the first time since 2014, and have been over $60 for most of the year.

But concerns linger about whether the oil market is truly overcoming a glut as U.S. production continues to surge, thanks to shale drilling. For the second year running, Mr. Barkindo and U.S. shale producers are set to meet privately for dinner as they seek to learn about one another.

"The exporters, OPEC and non-OPEC, are trying to understand how this different kind of U.S. oil industry works," said Daniel Yergin, vice chairman of energy research at IHS Markit. "They're there to learn, because it's changed the nature of the oil market."

If the U.S. surges past Saudi Arabia to become the world's second-biggest oil producer behind Russia, as some forecasters predict, it could signal a fundamental change in a global pecking order that has been a basis for international energy policy for decades.

"The role of the U.S. in global energy markets has changed more dramatically than the public realizes," said Mr. Yergin, who serves as the event's master of ceremonies, co-hosting dozens of sessions on oil, natural gas, electric power and geopolitics. "It's a new form of influence for the United States in the world."

The conference will be packed with ministers from large oil and gas producers, including Norway, Kuwait, Nigeria, Canada, Mexico and the United Arab Emirates, as well as executives from Gazprom, Russia's largest gas company, and Saudi Aramco, which is in the middle of planning for an initial public offering.

A likely topic of discussion: whether top U.S. shale companies will abide by investor demands that they instill capital discipline and emphasize returns, or succumb to the allure of even more drilling at current prices. The heads of many top U.S. producers are set to speak, including Occidental Petroleum Corp., XTO Energy Inc., Pioneer Natural Resources Co. and ConocoPhillips.

Another major topic: how huge reserves of U.S. natural gas are also upending energy markets. The U.S. became a net exporter of natural gas in 2017, according to the U.S. Energy Information Administration, a trend fueled by exports to South America and Asia. Top executives from the companies at the heart of the gas export boom -- Cheniere Energy Inc., Freeport LNG Development LP, Tellurian Inc. and Venture Global LNG -- will discuss their plans.

A host of electric-power executives are set to speak as the utility industry experiences rapid changes, with coal and nuclear generation losing ground to gas, solar and wind. They include the heads of Duke Energy Corp., PG&E Corp., Exelon Corp. and Edison International.

The conference will also examine longer-term questions looming over the industry, including how digital technologies are fast changing the way companies produce oil and gas, and the differing outlooks for when electric vehicles and renewable energy will start to take a serious bite out of demand for oil and gas.

--Bradley Olson contributed to this article.

Write to Christopher M. Matthews at [e-mail]



(END) Dow Jones Newswires

March 02, 2018 21:06 ET (02:06 GMT)

[waldron] 28/2/2018 16:51

Shell sees potential LNG supply shortage as global demand surges

WEBWIRE – Wednesday, February 28, 2018

The global liquefied natural gas (LNG) market has continued to defy expectations of many market observers, with demand growing by 29 million tonnes to 293 million tonnes in 2017, according to Shell’s annual LNG Outlook. Such strong growth in demand is consistent with Shell’s first LNG Outlook, published in 2017. Based on current demand projections, Shell sees potential for a supply shortage developing in mid-2020s, unless new LNG production project commitments are made soon.

Japan remained the world’s largest LNG importer in 2017, while China moved into second place as Chinese imports surged past South Korea’s. Total demand for LNG in China reached 38 million tonnes, a result of continued economic growth and policies to reduce local air pollution through coal-to-gas switching.

“We are still seeing significant demand from traditional importers in Asia and Europe, but we are also seeing LNG provide flexible, reliable and cleaner energy supply for other countries around the world,” said Maarten Wetselaar, Integrated Gas and New Energies Director at Shell. “In Asia alone, demand rose by 17 million tonnes. That’s nearly as much as Indonesia, the world’s fifth-largest LNG exporter, produced in 2017.”

LNG has played an increasing role in the global energy system over the last few decades. Since 2000, the number of countries importing LNG has quadrupled and the number of countries supplying it has almost doubled. LNG trade increased from 100 million tonnes in 2000 to nearly 300 million tonnes in 2017. That’s enough gas to generate power for around 575 million homes.

LNG buyers continued to sign shorter and smaller contracts. In 2017, the number of LNG spot cargoes sold reached 1,100 for the first time, equivalent to three cargoes delivered every day. This growth mostly came from new supply from Australia and the USA.

The mismatch in requirements between buyers and suppliers is growing. Most suppliers still seek long-term LNG sales to secure financing. But LNG buyers increasingly want shorter, smaller and more flexible contracts so they can better compete in their own downstream power and gas markets.

This mismatch needs to be resolved to enable LNG project developers to make final investment decisions that are needed to ensure there is enough future supply of this cleaner-burning fuel for the world economy.

See Shell’s full LNG Outlook for 2018 at www.shell.com/lngoutlook

[sarkasm] 27/2/2018 07:49

Return to frontpage

Shell sees potential for LNG supply shortage in mid 2020s
Our Bureau

Shell sees potential for a supply shortage developing in mid-2020s, unless new LNG production project commitments are made soon.
It says supply mismatch must be resolved to enable project developers to make final investment decisions

New Delhi, Feb 27

The growth in demand for liquefied natural gas (LNG) can lead to a global shortage if corrective measures are not undertaken, according to Shell’s annual LNG Outlook 2018.

The report said: “The global LNG market has continued to defy expectations of many market observers, with demand growing by 29 million tonnes to 293 mt in 2017.”

“Shell sees potential for a supply shortage developing in mid-2020s, unless new LNG production project commitments are made soon,” the report added.

Maarten Wetselaar, Integrated Gas and New Energies Director at Shell, said: “We are still seeing significant demand from traditional importers in Asia and Europe, but we are also seeing LNG provide flexible, reliable and cleaner energy supply for other countries around the world.”

Things are far worse for India and China’s air quality by 2035, going by Shell’s expectations . According to the report, there is an incremental energy demand of more than 600 thousand tonne of oil equivalent expected in both countries from 2017-2035. Due to high dependence on coal, for more than 75 per cent of the total incremental demand, the air quality index reports extremely poor conditions for the two countries.

According to Shell, LNG buyers continue to sign shorter and smaller contracts. In 2017, the number of LNG spot cargoes sold reached 1,100 for the first time, equivalent to three cargoes delivered every day. This growth mostly came from new supply from Australia and the USA.

This has led to the mismatch in requirements between buyers and suppliers growing. Most suppliers still seek long-term LNG sales to secure financing. But LNG buyers increasingly want shorter, smaller and more flexible contracts so they can better compete in their own downstream power and gas markets, the report said.

Shell said, “This mismatch needs to be resolved to enable LNG project developers to make final investment decisions that are needed to ensure there is enough future supply of this cleaner-burning fuel for the world economy.”

Japan remained the world’s largest LNG importer in 2017, while China moved into the second place as Chinese imports surged past South Korea’s. Total demand for LNG in China reached 38 million tonnes, a result of continued economic growth and policies to reduce local air pollution through coal-to-gas switching, the report added.
Published on February 27, 2018

[waldron] 26/2/2018 18:35

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Shell says LNG demand beat expectations in 2017
By Christopher Alessi

Published: Feb 26, 2018 12:03 p.m. ET






LONDON--Global demand for liquefied natural gas grew ahead of expectations in 2017, Royal Dutch Shell PLC RDSA said Monday.

The British-Dutch oil giant said in its second annual LNG outlook that the global LNG market grew by 29 million metric tons last year, to 293 million tons, boosted by strong demand in Asia.

"In Asia alone, demand rose by 17 million tons. That's nearly as much as Indonesia, the world's fifth-largest LNG exporter, produced in 2017," Maarten Wetselaar, Shell's director for integrated gas and new energies, said.

Japan continued to be the world's largest importer of LNG in 2017, while China surpassed South Korea to become the second biggest importer.

Shell said it predicts supply shortages for LNG by the mid-2020s if new production projects are not agreed in the near future.

Write to Christopher Alessi at [e-mail]

[grupo] 26/2/2018 13:23

Shell predicts LNG supply shortage by mid-2020s following surge in demand

Written by Allister Thomas - 26/02/2018 12:02 pm

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Energy giant Shell says there could be a supply shortage of liquefied natural gas (LNG) by the mid-2020s unless new investments are made soon.

Global demand saw a huge surge in 2017, according to Shell’s LNG outlook, growing by 29 million tonnes to 293 million tonnes.

Shell says policies in Asia to make more use of the cleaner-burning fuel have played a large role in the process.

Japan remains the world’s largest importer at over 80 million tonnes, while Chinese imports reached 38 million to overtake South Korea as it switches from coal to gas.
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Shell says the issue of supply and demand comes as a result of buyers signing shorter and smaller contracts, while suppliers want long-term sales.

Last year the number of LNG spot cargoes reached 1,100 for the first time – the equivalent of three being delivered per day.

The energy giant says the “mismatch̶1; needs to be resolved in order to help meet global demand.

Maarten Wetselaar, integrated gas and new energies director at Shell, said: “We are still seeing significant demand from traditional importers in Asia and Europe, but we are also seeing LNG provide flexible, reliable and cleaner energy supply for other countries around the world.

“In Asia alone, demand rose by 17 million tonnes. That’s nearly as much as Indonesia, the world’s fifth-largest LNG exporter, produced in 2017.”

[sarkasm] 23/2/2018 16:20

The rollercoaster that drags liquefied natural gas prices higher as demand jumps in the northern hemisphere winter is going into overdrive.

After a winter in which an unexpected boost in demand from China pushed prices to three-year highs, spot LNG in northeast Asia has plummeted about 30 percent from its mid-January peak. Summer plunges and winter spikes are the order of the day, at least over two years, said Pablo Galante Escobar, head of LNG at Vitol Group, a commodities trading house active in LNG.

“Seasonality will be much more accentuated,” Escobar said at the International Petroleum Week in London. “We’ll have weak summers and strong winters, with China playing such a big role in the market.”

China, which boosted LNG imports 46 percent last year as it turned to natural gas to combat pollution from coal, lacks the storage facilities that would help smoothen out the swings in prices between winter and summer. Rising global production paired with limited or falling demand in traditional summer markets might exacerbate those moves.
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During the next two summers, there will be “a lot of pressure” on prices as additional LNG arrives from Australia, the U.S. and Russia, said Escobar. Yamal LNG, a northern Siberian plant that started exporting in December, will also play a role in this, as tankers will be taking the shortest route to the Far East via the Northern Sea Route between June and November, setting prices in the biggest consuming region.

What LNG Traders Want to Know Most Is If China Surprises Again

On top of that, Egypt’s plans to stop LNG imports this year thanks to booming domestic production will push the market into a “structural oversupply, particularly in the summer months” for the next two to three years, he said.

The overhang in LNG is expected to remain until at least 2022, Tor Martin Anfinnsen, a senior vice president at Norway’s Statoil ASA, said in an interview. Seasonality will depend on the expansion of the fuel’s use in power generation rather than its more traditional, weather-dependent use in heating, he said.

Of course, cheaper prices in the northern hemisphere summer will be welcomed by buyers in South America, as well as in the Middle East and southern Europe where the fuel is used to meet power-generation demand for cooling. Others may also benefit, with nations such as Lithuania eyeing seasonally cheaper LNG.

“This is a seasonal business and clearly this hangs upon certain factors which are difficult to predict, notably demand in Far East,” said Franco Magnani, chief executive officer for trading and shipping at Italy’s Eni SpA. “We see it as quite an interesting market for trading purposes, there is optimization to be done.”

China’s impact on seasonality may not last long as the nation will quickly build storage, leaving weather as the dominant factor, said Melissa Stark, managing director, Energy and Utilities, at Accenture Plc.

“With the Chinese being very quick to do anything really I don’t think that the exaggerated seasonality would last,” she said. “But when you have extremely cold winters in the U.S. or in Europe, it makes a huge difference, or even extreme warm summers in the U.S. That is going to drive volatility.”

[waldron] 22/2/2018 07:50

Feb 22, 2018 11:04 AM IST | Source: Moneycontrol.com
Shell may acquire major stake in Hyderabad-based solar firm
Shell has been looking at the clean energy space in India for quite some time now.
Moneycontrol News @moneycontrolcom

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Royal Dutch Shell Plc is looking to acquire a major stake in Hyderabad-based rooftop solar firm Fourth Partner Energy, according to a report in Mint.

The firm is looking to buy a "significant stake" in the solar company. Shell's interest comes amid the Centre's plans to set up 175 gigawatt (GW) of clean energy capacity by 2022. Out of the 175 GW, 40GW is to come from rooftop solar projects.

Shell runs a liquefied natural gas (LNG) terminal at Hazira on the west coast of India. It is also the operator of the Panna-Mukta-Tapti field, which is a joint venture with state-run Oil and Natural Gas Corporation (ONGC) and Reliance Industries Ltd (RIL). Shell is also among the few foreign oil companies to have a fuel retail licence in India.

Shell has been looking at the clean energy space in India for quite some time now.

Fourth Partner Energy's Senior Manager Aditya Gupta denied the reports while Shell also didn't acknowledge the report.
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The Indian government is conducting an anti-dumping investigation on solar equipment imports from China, Taiwan and Malaysia and is planning to levy 70 percent provisional safeguard duty on imported solar panels and modules from China and Malaysia. However, a final decision on the matter is yet to be taken.

[waldron] 20/2/2018 11:07

Egypt's Potential Natural Gas Surplus Could Feed Global LNG Glut
By Salma El Wardany
20 février 2018 à 10:45 UTC+1

Egyptian Minister of Petroleum and Mineral Resources Tarek el-Molla.

Photographer: YASSER AL-ZAYYAT/AFP/Getty Images

Egypt faces a possible over-abundance of natural gas after two Israeli companies proposed a $15 billion supply deal, raising the prospect that the Arab nation may turn its surplus into liquefied natural gas and export it to a market currently glutted with LNG.

Egypt was already expecting to become self-sufficient in natural gas by the end of this year with the start of Eni SpA’s giant Zohr field, Oil Minister Tarek El-Molla said last month. Noble Energy Inc. and Delek Drilling-LP said Monday they plan to supply around 64 billion cubic meters of gas over 10 years to Egypt’s Dolphinus Holdings Ltd. from Israel’s Tamar and Leviathan reservoirs, in a $15 billion export arrangement.

The most populous Arab country has facilities to turn gas into super-chilled LNG, which can be exported by ship. The global LNG oversupply is unlikely to end before the mid-2020s, the International Energy Agency forecast in October.

“It is possible that gas imported under this agreement will be directed towards domestic consumption or to the LNG plants to be liquefied and re-exported,” El-Molla said on Egyptian CBC television. “‘We have LNG plants, we have capacity that is not being exploited, so why not have a third party bring good?”

Egypt’s gas demand in 2016 was 46.1 million tons of oil equivalent, while its production was 37.64 million tons, according to BP Plc.

— With assistance by Lin Noueihed

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[waldron] 20/2/2018 10:27

Anadarko Petroleum Corp. (APC) said Tuesday that it has signed a long-term sale-and-purchase agreement to supply liquefied natural gas to Electricite de France SA (EDF.FR) through its Mozambique LNG project.

The Houston-based oil-and-gas producer said the 15-year agreement calls for the supply of 1.2 million tonnes of liquefied natural gas a year.

"Mozambique LNG is unique in its ability to supply liquefied natural gas to a variety of geographic locations to serve its customers, and this agreement gives us flexible access to Europe, which is one of our key strategic markets," said Mitch Ingram, Anadarko's executive vice president for international and deepwater operations and project management.

The Anadarko-operated Mozambique LNG project will be Mozambique's first onshore liquefied-natural-gas development, the company said.



Write to Marc Navarro Gonzalez at [e-mail]



(END) Dow Jones Newswires

February 20, 2018 03:28 ET (08:28 GMT)

[sarkasm] 19/2/2018 17:30

The End Of The LNG Glut
By Alan Mammoser - Feb 19, 2018, 11:00 AM CST LNG vessel

Predicting Demand is Difficult

Many reputable forecasters, who've anticipated an LNG supply glut for years, now expect a brief period of surplus at most, and gradual market tightening after 2020. But global demand, which has surprised market watchers to the upside and kept physical markets tight during the past four years, could cut this looming mini-glut short. Numerous factors are at play but a few key indicators will shed light on likely supply and demand conditions through the mid-2020s.

Looking near term, the International Energy Agency (IEA) expects that available LNG export capacity will greatly exceed demand through 2022. The IEA’s recent medium term gas market outlook titled Gas 2017 says the surplus will reach its highest level in the year 2020, then gradually dissipate as tighter market conditions reappear in the early 2020s.

“It is relatively easy to see what’s coming on the supply side, given the long lead times for liquefaction projects,” says researcher Akos Losz of Columbia University’s Center on Global Energy Policy, “but predicting demand is much more difficult.”

“There is no question about the availability of supply,” Losz says, “there is plenty of gas in the world ready to be tapped.” Barring project delays, Losz believes that supply capacity is pretty much baked in for the next 2-3 years. The IEA report says that LNG export capacity will continue to grow rapidly, from 450 bcm (in 2016) to 650 bcm worldwide in 2022, with the most remarkable additions coming from the US and Australia. The latter will have the world’s largest LNG export capacity in 2022, estimated at 120 bcm per year, followed closely by the US and Qatar at about 105 bcm each per year.

As for demand, the IEA report foresees worldwide demand rising from 353 bcm (in 2016) to 460 bcm in 2022. It anticipates import volumes shrinking in Japan, Korea and Europe, but rising in China and India. More demand is also expected from a group of new, smaller importing countries which together will be greater than China in scale, accounting for about 20 percent of the global LNG trade in 2022. Yet demand from all of these countries and regions will depend on variables that are hard to predict.

“Demand is more uncertain, even in the near term,” says Losz. “This is partly because demand for gas – and LNG imports – is almost entirely driven by policy in many key importing countries.”
Related: Oil Rig Count Rises As Prices Recover

He anticipates a moderation of China’s gas demand growth rates compared to the “phenomenal221; increase last year, as the country completes its phase out of coal-fired boilers around major metropolitan areas. Whether China will continue the subsidies necessary to promote rapid switching from coal to gas in the residential sector is unclear. Japan’s future LNG needs depend in large part on that government’s nuclear policy. And the Dutch government’s decision to cut production at the Groningen field by more than three quarters in just a few years (to limit the risk of earthquakes) is among the many policies that will greatly affect Europe’s gas and LNG import requirements.

Meanwhile, predicting demand in smaller importing countries is challenging in its own right. “New entrants can now enter the market with little advance warning,” according to Losz, thanks to the proliferation of floating storage and regasification units (or FSRUs).

Key Supply-Side Indicators

Right now, it seems unlikely that the current tight market conditions will continue in the rest of this decade. Losz says it is difficult to see enough demand to absorb what is still scheduled to come to the market from the US, Australia and Russia over the next few years.

If and when a mini-glut comes to pass, Losz thinks there will be two good indicators to show that it arrived. One will be an increase of LNG inflows into the most liquid northwestern European markets at fairly depressed prices, indicating European coal-to-gas switching. Another could be a periodic underutilization of LNG export capacity in America, as the exportation of US gas may—in some cases—become unprofitable.

These, singly or together, will be the primary mechanisms to balance a market in oversupply. Market watchers might also look for a substantial rise in Russian pipeline gas deliveries to Europe, particularly via Ukraine, although Losz thinks that Russia would be unlikely to engage in a gas price war in the near future.

Whether tight markets will re-emerge again in the early 2020s depends—to some extent—on investment decisions being made now for new and expanded LNG export facilities, as a typical LNG export project takes 4-5 years to build. A lack of such investment could occur together with increasing demand from China, India and possibly new and emerging LNG buyers in other parts of the world.
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Losz sees this as a distinct possibility, with a continuing expansion of demand combined with a lack of final investment decisions (FIDs) on new export facilities leading to a tight global market by the early 2020s. Therefore, he suggests another important indicator: the number of FIDs during this year and next. A lack of them would indicate available supply could fall short of projected demand by the early 2020s.

The IEA seems to concur. According to another recent report, World Energy Outlook 2017, the agency says there is risk of a “hard landing” for gas markets in the 2020s if uncertainty over the pace or direction of LNG markets deters new investment.

From Cyclical to Balanced

But it’s possible that the future LNG market need no longer be so strongly impacted by supply waves. While a period of surplus looks more likely than not over the next 2-3 years, Losz thinks a more fundamental change may be going on that could smooth out the cycles of tightness and oversupply.


“You can argue that the LNG market is, by its very nature, bound to be cyclical, given the long time lag between investment and production,” he says. “But maybe we have reached a point where we have enough incremental growth opportunities in the system that the expansion of supply no longer has to be so sharply cyclical.”

“As there is so much gas waiting on the sidelines, I think there might be a chance to see something we haven’t seen for a while: a more or less balanced LNG market for some time in the 2020s, without too much capacity coming online at once (in the form of another supply wave), but always enough new supply available before the market would become too tight.”

A balanced market would see occasional widening of regional and seasonal spreads, as one region or another needs to attract more supply from time to time. But these spreads would not stay persistently compressed—as could be the case in a glutted market—nor would we see persistently wide regional spreads, as was the case during the supply shortages in Asia after the Fukushima disaster in 2011.

By Alan Mammoser for Oilprice.com