Jun 27, 2008

LNG News Updates - June 27, 2008

Commerce Dept. overrides objection to LNG plant

The Commerce Department has overridden Maryland's objection to a proposed liquefied natural gas terminal at Sparrows Point near Baltimore.

The department determined that the national interest served by the facility outweighs what it described as "limited adverse coastal effects."

Governor Martin O'Malley sharply criticized the decision, saying the project presents a homeland security and environmental threat.

Senator Barbara Mikulski pledged to search for legislative options to stop the project.

AES Corporation wants to build the LNG terminal at the former Bethlehem Steel shipyard, along with an 88-mile pipeline that would pump the gas to Pennsylvania. The Federal Energy Regulatory Commission has recommended conditional approval of the project and could make a final decision by the end of November.


Peru natgas project signs financing deal with IFC

June 26 (Reuters) - The World Bank's International Finance Corp on Thursday signed a $300 million financing agreement with Peru LNG to develop Latin America's first liquefied natural gas export project.

The loan by IFC, the World Bank's private-sector lender, is part of $2.25 billion in financing by international banks that were part of the signing.

Other lenders for the $3.8 billion project include the Inter-American Development Bank, the Export-Import Bank of the United States, Export-Import Bank of Korea, and SACE of Italy.

The project, which is expected to start up operations in 2010, is being developed by a consortium headed by US-based Hunt Oil and includes Spain's Repsol-YPF, South Korea's SK Energy, and Japan's Marubeni Corp.

Brazil, Venezuela To Sign LNG Supply Deal

The presidents of Brazil and Venezuela will sign a protocol of intention for Brazil to buy liquid natural gas from its Latin American neighbor, the local Estado news agency reported late Thursday.

According to the report, Brazilian President Luiz Inacio Lula da Silva and Venezuelan President Hugo Chavez will sign the deal.

The pact will cover future purchases of liquid natural gas by Brazilian state- run energy giant Petroleo Brasileiro (PBR) from Venezuela's state-owned Petroleos de Venezuela SA, or PdVSA. Natural gas will be shipped from Venezuela to two regasification plants in Brazil.

Gasification plants at Pecem in Ceara state and Baia da Guanabara in Rio de Janeiro state will process 20 million cubic meters of gas a day. The plants are expected to enter operation in the third quarter.

Shell Asks for Bids to Help Build a Floating LNG Unit

Royal Dutch Shell Plc, Europe's largest oil company, invited three companies to bid for the engineering and design of a floating liquefied natural gas facility.

Bids for the facility with an annual capacity of 3.5 million tons will be submitted around the end of the year and the first award is possible next year, The Hague-based Shell said in an e-mailed statement today. Shell is looking at the Asia-Pacific region for potential development, it said.

Shell, the largest non-government producer of LNG, said April 7 its Prelude discovery in the Browse Basin, about 400 kilometers (249 miles) off the Australian coast, may be one of the first fields to be developed using floating LNG technology.

Floating LNG is ``possibly the leading candidate'' for developing Prelude, Linda Cook, executive director gas and power at Shell, said at the Australian Petroleum Production & Exploration Association conference in Perth in April.

While the Basin holds several gas finds, none has been developed and construction of plants on the Kimberley coast region faces opposition from environmental groups.

Jun 26, 2008

News Updates

GE Energy inks LNG deal with RasGas

June 25, 2008

GE Energy has made a deal to help the nation of Qatar in its quest to become the world's top supplier of liquefied natural gas (LNG).

Atlanta-based GE Energy said it has signed a multi-million, multi-year service agreement with RasGas Co. Ltd., covering two LNG trains and Al-Khaleej Gas Plant-2 at RasGas' LNG and gas production complex in Ras Laffan Industrial City, Qatar. An LNG train is a chain of equipment, including a gas turbine, which is used to convert natural gas to liquid form. The process reduces the volume of the gas, making it easier to ship large quantities of LNG to help meet growing energy demands in locations around the world.

The new agreement brings GE's total services commitment at the site to more than $1 billion.


Bangladesh to boost gas output by 20 pct by 2011

Bangladesh will raise its natural gas production by nearly 20 percent by 2011 with new investment of nearly $100 million, a senior official said on Wednesday.

"We will be able to produce 2.15 billion cubic feet of gas per day from the existing 1.8 billion cubic feet over the next more than three years," Jalal Ahmed, chairman of the Bangladesh oil, gas and mineral corporation or Petrobangla told Reuters.

"At least 15 new wells in different gas fields across the country will be explored and developed by the state-run gas firms to produce additional hydrocarbon," Jalal said.

Bangladesh faced a gas shortage of up to 150 million cubic feet daily (mmcfd) which was an obstacle to industrial and economic activities, Jalal said.

Eight gas-fired power plants are out of action and nearly 300 new manufacturing firms at Chittagong port city cannot start production due to lack of gas supply, officials said.

Three state-run gas firms - Bangladesh Gas Fields Company Limited, Sylhet Gas Fields Limited and Bangladesh Petroleum Exploration and Production Company Limited - produce about 900 mmcfd of gas, half of Bangladesh's total production, they said.

The remainder is produced by four international oil companies (IOCs) - the U.S. based Chevron Corp, British firm Cairn Energy, Irish company Tullow and Canadian company Niko Resources Ltd.

The authorities say they fear further gas shortages by 2011 when daily demand will rise to 2.4 billion cubic feet per day, nearly 34 percent more than now.


Gas Natural gets permit for Trieste LNG plant

Spain's Gas Natural said it had won approval from Italy's Environment Ministry to build a regassifaction plant for liquefied natural gas (LNG) imports at the northern Italian port Trieste.

Gas natural and its partners had spent four years seeking environmental approval for the plant, which has an estimated cost of 500 million euros and is due to come on stream in 2012.

The onshore plant will have two tanks each with the capapcity to hold 140,000 cubic metres of LNG and to process 8 billion cubic metres of gas per year.

Gas Natural said it had agreed with Snam Rete Gas to connect the new plant with the Italian gas pipeline network.

Last month, the Barcelona-based company said it was interested in buying local gas distributors in central and southern Italy.

Spain is a major importer of LNG and Gas Natural ran the country's six regasification plans, when it had part or entire control of distribution company Enagas between 1994 and 2002.

Gas natural manages a 115,000 cubic metre regasification plant in Puerto Rico.


Enel in talks with Hoegh LNG to develop LNG ship

Enel SpA is in talks with Norway's Hoegh LNG to jointly develop a floating liquefied natural gas (LNG) ship, a Hoegh spokesman said.

'I can confirm Enel is one of the parties we are talking to as regards the development of our FPSO (floating production storage and offloading) vessel,' the spokesman said.

He said a joint investment of around 1 billion euros could be a reasonable amount for the project.

Hoegh, which is developing its FPSO programme with a series of investors, expects first delivery of the vessel in 2012.

A source said Enel will use the LNG capacity from the ship, when ready, to supply the LNG terminal it is building at Porto Empedocle in Sicily.

The Porto Empedocle facility, which recently received crucial environmental clearance, will have a capacity of 8 billion cubic metres of gas per year.

The terminal is expected to receive around 4 billion cubic metres of LNG from Nigeria and 2 billion cubic metres from Egypt.


LNG could hit US$40

As the world thirsts for LNG Trinidad and Tobago stands to benefit as prices go up, according to Dr Ranato Bertani, the former president of Perobas America, a subsidiary of the Brazilian energy giant. Speaking at an energy luncheon hosted by First Citizens at the Hyatt Regency, Port-of-Spain, Bertani, now president of Thompson and Knight, Global Energy Services, a legal firm that has an appetite for energy deals, predicted that at the present rate of demand LNG prices could hit US$40.

He said this was possible given the fact that energy demand across the globe was rising.

“That is good business for Trinidad and Tobago,” he said of the LNG prices increase.

He pointed out that there could eventually be a convergence of oil and gas prices, if the global energy dynamics don’t change.

The theme of his address was, “The Risks and Opportunities in the Energy Sector.”

According to Bertani, the world will have to spend US$20 trillion by 2030 if it is going to meet the demand for energy.

LNG prices on Monday stood at US$13.23, according to Bloomberg, while oil was at US$137 a barrel. “Oil prices are not going to come down to gas prices but gas will get closer to oil,” he said.

Using a diagram to show the changes in LNG flow, he pointed out that in 2030 the US and Asia will see a significant increase in LNG usage.

He said although there are security concerns across the US regarding the use of LNG, he said they will soon have to re-examine this stance given that the price of oil is rising. He said for a gas economy like TT, this was good news because a market was going to be assured.

He said there could be converge of oil and gas prices and where gas would become a major player in the global energy scenario.

Noting that there could be more demand for LNG from developing countries in the next ten-20 years, Bertani said the supply of LNG will reach the consumer in different ways. His view is that in addition to oil, LNG will play a more significant role in the US energy portfolio, saying that the spot market for LNG will increase.

Such a market occurs when an LNG buyer takes the LNG at an agreed price from a supplier and sells it on the open market to the highest bidder.

He said with LNG prices increasing, this was a possibility and said that this could carry prices further up.

On oil and the world’s demand for it, Bertani said this was not going to change soon. He took the view that the world’s ceiling for oil can be sustained in the US$140- US$150 bracket, adding that after that it becomes unsustainable.

He said at such a price, companies are looking at going after oil that was once considered unattainable.

“There is now pressure to explore and extract,” he said, noting that for oil companies it was now possible to take the risk.

Giving a global overview on energy, he said developing countries like China and India and their increased energy demand is what is pushing up the price of oil. On ethanol, he said this was extremely lucrative and profitable and stressed that with massive tracts of land, the Caribbean could reap the benefits.

To back his case, he said the world consumes about 20 billion tonnes of gasolene a year with half of that being consumed in the US. Stressing that this was a huge opportunity for the Caribbean, Bertani said ethanol coming from the Caribbean into the US would face no tariff.

He said in the case of Brazil, the US has imposed a tariff on ethanol coming into the country.

Jun 24, 2008

Weekly Update

Prime Petroservices to build mini LNG plant worth $327m

Integrated oil and gas service provider PT Prime Petroservices (PPS) plans to build a small liquefied natural gas (LNG) plant in Bali this year with a total investment of US$327 million. PPS, through its subsidiary PT Indogas Kriya Dwiguna, will build the plant, with a capacity of 300,000 tons per year, on Pagerungan Island, north of Bali, the company's president director, Faiz Shahab, told. In comparison, an existing LNG plant in Bontang, East Kalimantan, has a capacity of 18.5 million tons per year, while another in Arun, Nangroe Aceh Darussalam, outputs 12.5 million tons annually.

UK's BG makes hostile $13.1 bln Origin bid


British gas producer BG Group launched a hostile $13.1 billion bid for Australia's Origin Energy, as it seeks to boost its position in Asia-Pacific's fast-growing gas market.
BG is taking its A$13.8 billion all-cash bid, valuing Origin at A$15.50 a share, direct to Origin shareholders after Origin's board rejected it last month. Origin claimed then that its coal seam gas reserves alone were worth over $15 billion after it doubled its resource estimate to 10,000 petajoules. BG, U.K.'s third-largest oil and natural gas producer, wants Origin's vast gas resources in Australia to feed a proposed liquefied natural gas (LNG) project on the east coast, which would help BG fill a hole in its LNG business in the region.

Five planned LNG terminals in Italy move forward

Italy's privately-held Anonima Petroli Italiana SPA, Rome, applied for approval from the country's Environment Ministry for an offshore regasification terminal with an capacity of about 4 billion cu m/year. The facility will be located in the Adriatic Sea in front of Anonima Petroli's Falconara refinery. After converting the LNG, the company will inject the gas into Snam Rete Gas SPA's grid. Construction will take just over 5 months. The news coincided with reports that Gas Natural could win environmental clearance for an 8 billion cu m regasification terminal it wants to develop at Trieste in northern Italy. An official at the environment ministry confirmed that Gas Natural's LNG facility had received positive opinions from a series of subcommittees at the ministry, and it said the project could be approved or a series of observations on the plans could be made. Earlier this month, Iride SPA and CIR SPA's unit Sorgenia SPA said their planned 12 billion cu m regasification terminal at Gioia Tauro, which won environmental approval in April, has been granted access to European Union funding. The Gioia Tauro terminal is due to go online in 2013. In early May, Royal Dutch Shell and Italy's ERG received local authorization to build their planned joint Ionio LNG import terminal in Sicily. The partners hope to begin construction of the import terminal in 2010 and to have it operational by 2013, according to ERG's power and gas division head Raffaele Tognacca. Later in May, following a feasibility study completed early this year on its Triton LNG project 30 km off Italy's Marches region in the Adriatic Sea, Gaz de France signed a joint development agreement with Oslo-based Hoegh LNG for the design, construction, and operation of a floating storage and regasification unit vessel.

Hearing set on offshore LNG terminal
After suffering a series of setbacks since receiving conditional federal approval three years ago to build a liquefied natural gas terminal in Fall River, Weaver’s Cove Energy came back this year with an alternative proposal. It would float an off-loading facility in the middle of Mount Hope Bay. Under the new plan, Weaver’s Cove would situate the 1,200-foot berth in Somerset waters, about a mile from the nearest shore. Tankers would dock at the facility and unload LNG, which would be piped to a re-gasification plant at the site in Fall River’s west end originally targeted for the company’s $250-million marine terminal. The 4-mile pipeline connecting to the re-gasification facility would be buried in a trench at the bottom of Mount Hope Bay and the Taunton River. Weaver’s Cove came up with the new plan after failing to win approval for key aspects of its initial proposal. In August 2007, the Rhode Island Department of Environmental Management denied an application to dredge a portion of Mount Hope Bay to clear the way for tanker ships that would travel north from Narragansett Bay.

CNOOC's parent inks 25-year LNG supply pact with Qatargas
China National Offshore Oil Corp (CNOOC Group), parent of Hong Kong-listed CNOOC Ltd, said it has signed a 25-year liquefied natural gas (LNG) supply agreement with Qatargas Operating Co. According to the agreement, the operator of the country's first liquefied natural gas terminal will buy two million metric tons of LNG a year from Qatargas, which will be transported to CNOOC's projected reception station in Ningbo, Zhejiang Province, according to sources familiar with the deal. The agreement is a continuation of the unbinding one signed by the two sides in April. In addition, the state-owned oil producer has formed an LNG supply agreement with Total SA, under which the French LNG producer will supply as much as one million metric tons of LNG per year to CNOOC Group from 2010.


BG to supply LNG volumes to Castle Peak's planned Hong Kong terminal

UK-based BG Group's wholly owned subsidiary BG LNG Trading has signed a liquefied natural gas heads of agreement with the Castle Peak Power Company, to supply one million tonnes per annum to the latter's planned import terminal in Hong Kong for a period of up to 20 years.

BG Group And CAPCO Sign Pact For LNG Supply

BG Group has announced that its wholly owned subsidiary BG LNG Trading has signed a Liquefied Natural Gas Heads of Agreement with Castle Peak Power Company, Hong Kong.

Under the proposed arrangement, BGLT have agreed to supply one million tonnes per annum to CAPCO's planned LNG import terminal in Hong Kong for a period of up to 20 years, it said.

Initial deliveries are expected to begin in 2013 to coincide with the completion of the LNG terminal on South Soko Island. The LNG will be sourced from BG Group's growing and flexible global portfolio.


LNG may turn more expensive than crude oil, says Bernstein

Liquefied natural gas may become more expensive than crude oil as demand from Asia and Europe rises faster than supply, Sanford C Bernstein & Co said.

“It’s clear that LNG prices overall are set to rise towards parity with the oil price,” Bernstein analysts led by Neil McMahon said in a report. Sellers of the fuel are renegotiating contracts to increase prices, it said.

Prices may decline in 2009 and early 2010. After this, limited new supplies of LNG between 2010 and 2015 will make market conditions “very tight,” raising the potential of “an LNG premium above the oil price,” the report added.

LNG cargoes have sold for as much as US$20 amn cubic feet this year, Sanford said. Crude oil futures at today’s price of US$136 a barrel are the equivalent of about US$22 amn cubic feet, based on the energy content of the fuels.

The growth of import terminals will outpace the rise in LNG supplies to a point where global regasificaton plant capacity is more than double LNG production by the end of 2010, Bernstein said. Some planned LNG production projects in Nigeria, Australia and Iran will get pushed back into the second half of the next decade, Bernstein added.

Limited growth in alternative energy sources and long lead times for new nuclear power stations will mean demand for LNG grows at more than 10% a year, the report said.

Qatar, already the world’s biggest LNG producer, will boost LNG supplies by 45 million tons a year with six new production trains due to start before the end of 2010.

BG Group, the UK’s third-largest oil and gas company, will benefit the most from rising LNG prices. Bernstein estimates BG is diverting as much as 60% of its cargoes to Asia and 25% to Europe, raising its forecast for BG to 'outperform'.

Orascom gets new construction contracts for Skikda LNG Project in Algeria

Orascom Construction Industries ("OCI") confirmed that it has been awarded two construction contracts by Kellogg, Brown & Root International Inc. (“KBR”) for the civil works and piling installation of the new LNG train in Skikda, Algeria being developed by Sonatrach. These contracts represent some of the first packages of the US$ 3 billion Skikda LNG program in Algeria.

Sonatrach is the national oil & gas company of Algeria, wholly owned by the government. It is one of the world’s largest exporters of natural gas in its various forms and is Africa’s largest oil & gas company.

The civil works construction contract for the LNG train is expected to be complete in approximately 14 months.

The OCI/Trevi SpA joint venture is responsible for the execution of the piling and installation works expected to be complete in approximately 10 months.
As part of the Q1 2008 results, OCI reported a record consolidated backlog of US$ 6.8 billion as at 31 March.

OCI Construction Group Managing Director, Osama Bishai commented “we are pleased to participate in the LNG expansion program in Algeria for KBR. The contracts are in continuation of the successful work performed by OCI for KBR on the EBIC Ammonia plant and the Damietta LNG facility in Egypt.

The receipt of these contracts further bolsters our successful repeat business with KBR and ensures future cooperation on the projects in the region. These awards are a result of OCI’s significant presence as a construction contractor in Algeria over the past several years and OCI shall continue to pursue opportunities in the oil & gas sector where it has developed significant core competencies.”