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[the grumpy old men] 08/6/2018 09:26

LNG giants teaming up

Shell, Petronas now lead partners in LNG Canada, nudging project closer to FID

Gary Park

for Petroleum News

One more building block has fallen into place to secure the future of LNG Canada, putting the C$40 billion project in sight for a final investment decision before year’s end.

Petronas, Malaysia’s state-owned energy giant, announced it is taking an equity position - without disclosing the investment amount - in the Shell Canada-led project, meaning the venture now has the backing of two LNG powerhouses.

As a result of the transaction, the ownership interests are now Shell at 40 percent (down from its earlier 50 percent), Petronas 25 percent, PetroChina 15 percent (previously 20 percent), Japan’s Mitsubishi 15 percent (unchanged) and South Korea’s Kogas 5 percent (previously 15 percent).

The partnership said the timing and outcome of the FID will be based on global energy markets and the overall competitiveness and affordability of the project.

Pacific NorthWest abandoned
Petronas, which abandoned its own C$36 billion Pacific NorthWest LNG project 10 months ago, blaming a weak global market outlook and the “extremely challenging environment” in Canada, said it is keen to join LNG Canada to take advantage of the export outlet for its vast natural gas reserves in northeast British Columbia’s North Montney resource which is operated by its subsidiary Progress Energy Canada.

Petronas said its role in LNG Canada includes the design, construction and operation of a gas liquefaction plant, facilities for the storage and export of LNG and marine facilities.

The estimated costs include TransCanada’s proposed C$4.7 billion Coastal GasLink pipeline from the Montney region to Kitimat on the northern B.C. coast.

Shell has argued that LNG Canada would help reduce greenhouse gas emissions by replacing more carbon-intensive commodities such as coal with LNG.

Federal tariffs unresolved
Still to be resolved is an issue for federal tariffs as Shell awaits a response from Canada’s Finance Department to exempt the project from anti-dumping duties of up to 45.8 percent on imports of fabricated industrial steel components, notably from China and South Korea.

LNG Canada Chief Executive Officer Andy Caditz said in early May he is confident the consortium will be ready to start construction this year. Initial shipments have been targeted for the 2022-24 period.

British Columbia’s New Democratic Party, at odds with its own resistance to Kinder Morgan’s Trans Mountain pipeline expansion, has offered significant tax relief to LNG Canada totaling C$6 billion over 40 years, although it still estimates revenues to the province will reach C$22 billion over the same period.

The project has considerable buy-in from aboriginal communities, led by the Haisla Nation Council, although the council has yet to sign a final commercial agreement.

[ariane] 07/6/2018 12:36

Dutch government eyes speedier Groningen natural gas output cut to below 12 Bcm/year

London (Platts)--7 Jun 2018 713 am EDT/1113 GMT

Natural gas production from the supergiant Groningen field in the Netherlands could be cut to less than 12 Bcm/year as early as October 2020, economy minister Eric Wiebes said Thursday in a letter to the Dutch parliament, earlier than originally expected.

* Economy minister sees quota reduction by October 2020

* Wiebes says work to reduce demand accelerated

* Output could fall to below 4 Bcm/year by 2022

The decline in production at Groningen -- which had a recent peak of 54 Bcm in 2013 -- is making the Netherlands and northwest Europe more dependent on imports, with output capped at 21.6 Bcm in the current gas year until the end of September.

Wiebes said Thursday that work was progressing well on several factors to reduce demand for low-calorific gas (L-gas) from Groningen, meaning the timetable for cutting the field's production quota could be accelerated.

These include the construction of a nitrogen plant at Zuidbroek for L-gas conversion, the conversion of 53 industrial consumers away from L-gas and a further reduction in German demand for L-gas.

"The combined effects on the level of gas extraction are still to be determined, but this could make it possible to lower the extraction level [to below 12 Bcm/year] even earlier than anticipated, possibly even by October 2020," Wiebes wrote.

Previously, Wiebes had said the most likely scenario was cutting production at Groningen to under 12 Bcm/year by October 2022, or possibly a year earlier.

The latest guidance could come as a shock to the European gas market, expecting to have higher production from Groningen for a few more years yet.

BELOW 4 BCM/YEAR

Wiebes also said Groningen output could be cut to below 4 Bcm/year as early as 2022.

"When the additional measures actually materialize, it is now possible to arrive in 2022 below 4 Bcm/year in an average year," he said, adding that in a cold year the level would be capped at 7.5 Bcm/year.

Wiebes said the Zuidbroek nitrogen plant would be operational in the first quarter of 2022, ahead of the previous timetable of 2023.

The realization of the plant will cut Groningen demand by 7 Bcm/year, Wiebes said.

The conversion of the 53 large-scale gas users in the Netherlands is expected to cut Groningen demand by a further 3.4 Bcm/year, he said.

He said many of them would come up with a plan of action for converting to H-gas "in the coming weeks."

--Stuart Elliott, [e-mail]

--Edited by James Leech, [e-mail]

[grupo guitarlumber] 06/6/2018 10:35

France's Total may not re-enter Mahakam oil, natural gas block: Indonesia regulator

Jakarta (Platts)--6 Jun 2018 521 am EDT/921 GMT

Total is unlikely to re-enter Indonesia's Mahakam oil and gas block as a project partner, as the French oil major has refused to pay state-run Pertamina for its new participating interest, oil and gas director general at Indonesia's Energy and Mines Ministry, Djoko Siswanto, said Tuesday.

However, Japanese oil explorer Inpex has expressed interest in continuing its participation in the block, Siswanto said Tuesday.

Total's apparent lack of interest is a major setback for Indonesia's exploration sector, and significantly reduces the chances of raising production levels at Mahakam. Its exit from Mahakam comes after oil majors like ConocoPhilips, Chevron and BP have already pulled out of Indonesia.

Total declined to comment, in response to emailed queries.

On January 1, joint operators Total and Inpex surrendered Mahakam, Indonesia's most productive offshore gas field, to Pertamina after the license expired in December 2017.

The 100% government takeover of Mahakam after nearly 50 years under Total and Inpex underscored growing state control over Indonesia's energy assets and natural resources.

Pertamina still needed project partners to share exploration risk and said it would restart discussions for a new partnership structure. At the time, Total had expressed interest in further developing Mahakam under new agreements.

Total and Inpex notified the government of their intention to take a combined 39% operating interest in the new production sharing contract for the Mahakam block. But Pertamina insisted that the company is only able to sell up to 30% stake in Mahakam, S&P Global Platts reported previously.

Siswanto said Pertamina allowed Total to return to the project for a fee that Total refused to pay, while the government was still in discussions with Inpex, which has not officially stated the size of the stake it plans to have in the new partnership.

Separately, Pertamina's upstream director Syamsu Alam told Platts Tuesday that the national oil company has not discussed the Mahakam issue with Total.

Industry experts say they believe the complexity and size of a lucrative asset like offshore Mahakam needs foreign partners that can bring in experience and technology to operate the asset, as well as share high capex costs and financial risks.

Mahakam's production averaged 951.8 million cu ft/d as of April compared with the target of 1.1 billion cu ft/d throughout this year. Its condensate output reached 46,060 b/d compared with a target of 48,271 b/d, according to data from upstream regulator SKK Migas.

As a mature E&P block, Mahakam's annual production decline rate could reach 50% if Pertamina does not do anything, but the company can arrest the decline rate at 20-25%. Pertamina plans to spend $75.3 million of investment over a three-year contract starting 2018.

Based on Pertamina's assessment, the Mahakam block's gas output may reach 1.207 Bcf/d in 2019, 1.268 Bcf/d in 2020, 1.267 Bcf/d in 2021 and 1.218 Bcf/d in 2022. In 2023, output may decline to 1.11 Bcf/d.

Mahakam's condensate production may reach 42,000 b/d in 2019, 43,184 b/d in 2020, 41,850 b/d in 2021 and 39,451 b/d in 2022. In 2023, condensate output may decline to 35,575 b/d.

Wood Mackenzie estimates that Mahakam will need $2.5 billion of investment over the next three years to maintain production levels.

--Anita Nugraha, [e-mail]

--Edited by Jonathan Fox, [e-mail]