LNG Prices

[greengiraffe]

Gas sector buoys economy

Angela Macdonald-Smith
523 words
13 Nov 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.

The oil and gas sector's contribution to the economy will more than double to $67 billion by 2030, underlining the need to resist calls for policy measures such as gas reservation, according to new research.

The analysis by PwC for the peak industry body shows that for every dollar of production, the oil and gas sector adds 70¢ of value, higher than the 49¢ average of other sectors.

The release of the report on Thursday is included in the Australian Petroleum Production and Exploration Association's submission on the federal government's energy green paper, which highlighted the problems of potential shortages in the domestic gas market and rapidly rising prices.

The squeeze on domestic supply, exacerbated by the start-up of LNG exports from Queensland and slow development of coal seam gas in NSW, has led to calls from some manufacturers for a share of resources to be set aside for local use.

But APPEA chief executive David Byers said the PwC analysis was further evidence that gas reservation would just divert resources from one of the economy's most valuable sectors to less efficient ones. "It is crucial, therefore, that calls for policy interventions that seek to force non-commercial ­outcomes continue to be resisted," Mr Byers said.

PwC found the petroleum sector's direct annual contribution to economic output would grow from $32 billion in 2012-13 to $67 billion by 2029-30. By that time it would also be driving indirect value of a further $21 billion, representing a total contribution of 3.47 per cent to gross domestic product.

In terms of value added per unit of production, which measures a sector's efficiency in turning a unit of input into an output, oil and gas extraction sits third, behind only education and training, and financial and insurance services. Manufacturing sits last, adding less than 30¢ for every $1 of supply used.

"Manufacturing is generally associated with quite low value-added contributions, particularly in comparison to the gas industry," APPEA said.

In its submission on the green paper, the Energy Supply Association of Australia urged further reform in gas supply to increase competition and market efficiency. It highlighted surplus capacity in electricity generation and noted the green paper offered no solution.

It cautioned that oversupply is making financing in the sector difficult "which could affect reliability in the future". The association said the government "must carefully consider the rationale for encouraging additional supply of any type" and needed to focus on stable policy for an efficient market.

The ESAA also endorsed the emphasis in the green paper on the need for reforms in electricity tariffs to reflect real costs. But it said some consumers would face higher bills if they didn't shift demand away from peak periods, pointing to the need for information for households on how best to benefit from technologies such as smart meters.

Earlier this week the Business Council of Australia spoke out against gas reservation, saying it would deter the investment necessary to meet demand and would not address the problem of rising prices.


Fairfax Media Management Pty Limited

Document AFNR000020141112eabd0002y

[greengiraffe]

Slide fails to dent US LNG export drive
PUBLISHED: 25 NOV 2014 01:05:50 | UPDATED: 25 NOV 2014 08:27:20

LNG
JOHN KEHOE

The US could be shipping 60 to 70 million tonnes of liquefied natural gas by the end of the decade, cementing it as one of the industry’s top three players.

The build-out of liquefied natural gas export facilities in the United States is powering ahead despite the recent slump in oil and gas. The horizontal drilling and fracking revolution underpinning the shale gas industry has the US on the cusp of huge growth in LNG .

The US could become the world’s third largest exporter, nipping at the heels of Australia and Qatar.

The US government is gradually speeding up the export approval process and the win by Republicans in the November 4 congressional elections may accelerate LNG sales overseas, intensifying competition for Australia.

Wood Mackenzie believes there will be six US LNG export projects under construction by the middle of next year.

“This year has been a positive year for US LNG because there has been progress on new export projects,” Wood Mackenzie analyst Alex Munton says.

Qatar is the biggest LNG producer, with a capacity of 77 million tonnes, but Australia is on track to overtake Qatar with a capacity of 80 million tonnes by 2020.

RAPID ASCENDANCY
“The US will move very, very rapidly into third place,” Munton says.

Three facilities are under construction and a fourth, Freeport LNG in Texas, is due to begin by the end of November. Cheniere Energy’s Sabine Pass LNG terminal is the most advanced. Located on the border between Texas and Louisiana, Sabine Pass is on track to become the first US LNG exporter by early 2016.

The other projects are a couple of years behind and will not be ready to export until 2018 onwards.

Sempra Energy’s $US10 billion ($11 billion) Cameron LNG in September received final authorisation from the US Department of Energy (DOE) to export domestically produced LNG from its proposed plant in Hackberry, Louisiana, to countries that do not have a free-trade agreement with the US. Much of its LNG will be shipped to energy-deprived Japan, given that Mitsui & Co and Mitsubishi Corporation are two of the major financial sponsors.

Early work has begun on the $US3.8 billion Cove Point LNG export facility in Maryland, after it received US Federal Energy Regulatory Commission (FERC) backing in September. Preparations for worksite clearing have been made and a temporary pier is being built on the Pautuxent River to receive equipment.

Underlining the insatiable demand of Japan for gas, a joint venture of Sumitomo and Tokyo Gas has signed sales agreements.Spot LNG prices have fallen sharply this year, preceding the more recent 30 per cent plunge in oil prices. LNG pricing is typically linked to the oil price. Diesel and fuel oil are substitutes for LNG used to operate power plants.But most LNG is sold on ­long-term contracts and the aforementioned projects have already agreed to terms for most LNG to flow through their terminals.

NEXT WAVE MAY BE JEOPARDISED
Leslie Palti-Guzman, senior energy and natural resources analyst at Eurasia Group, says the price falls will not slow down the more serious projects. “However, the second wave of projects could be at risk,” Palti-Guzman says.

Foster Mellen, senior strategic analyst in oil and gas at Ernst & Young, says the drop in prices will not affect the six projects set to be under construction by late 2015. But other projects in the pre-feasibility phase may be deterred.

“The fall in prices has probably sent a shiver down the backs of some of the financial backers,” Mellen says. “Going forward, the real projects are going to be the ones that are able to get sales agreements in place beforehand.”

In June, regulators made a key change that will favour more advanced projects, backed by cashed up owners.

US ventures face a laborious process to export the fuel to countries that have no free trade agreement with the US. That includes key LNG markets Japan and China, while South Korea is an exception.

Palti-Guzman says Republicans may push for the DOE to have a maximum number of days to process an application before making a decision. Several legislators have introduced bills to fast-track gas exports to NATO allies and Japan. Projects will require environmental permits through FERC, before being considered for export licences by the DOE. FERC is more thorough , costing $US100 million to $US150 million, compared with DOE approvals which cost in the tens of thousands of dollars. Previously, there were more than 30 projects in the queue for export licences: now there are about 14.

REPUBLICANS STRIVE TO LOOSEN REINS
“It is the mantra of the Republicans that there are too many restrictions and the process has been too slow,” Palti-Guzman says.

Industry analysts believe the win by Republicans in the midterm elections may speed up exports. Republicans tend to be pro-extractive industries and more in favour of exports than Democrats.

Conservative legislators are clamouring to send exports of gas to troubled allied countries to reduce Russia’s influence in Europe.

“It looks like the political objections to exports have dialled back and with Republicans taking more control that is probably seen as good news to the industry,” EY’s Mellen says.

The Australian Financial Review

BY JOHN KEHOE
John Kehoe
John is The Australian Financial Review's Washington correspondent.

@Johnkehoe23

[greengiraffe]

S Korea and China slumps hurt LNG

Resources
674 words
10 Jan 2015
The Australian Financial Review
AFNR
English
Copyright 2015. Fairfax Media Management Pty Limited.

An unexpected slump in South Korean demand for imported natural gas and disappointing Chinese growth hit the Asian liquefied natural gas market in 2014, contributing to a halving in spot prices and placing doubt around some growth forecasts.

China's consumption growth rate slowed, with lower economic growth, environmental policies and infrastructure constraints all contributing, according to a report released Friday by consultancy Wood Mackenzie.

The firm found that LNG production climbed just 5 million tonnes in 2014 to 246 million tonnes a year, while trade was inflated by increased levels of re-exports.

"But the big surprise was that Asian LNG demand was much lower than expected," said Giles Farrer, principal analyst for global LNG at the Edinburgh-based consultancy.

"Demand in emerging markets, like China, failed to grow to the extent anti­cipated and demand in the established South Korean market fell considerably."

Wood Mackenzie is typically among the more bullish of consultants on LNG demand growth, whereas others such as FACTS Global Energy take a dimmer view of expansion in consumption, citing the several alternative fuels that buyers can turn to, particularly in periods of high prices.

In Asia, the biggest regional market for LNG, imports rose only slightly in Japan, the largest single buyer, while imports into India edged up just 2 per cent because of limitations in import capacity.

Demand in China rose by 14 per cent , a much more modest increase than the 23 per cent jump seen in 2013.

The lower growth helped drive a crash in LNG spot prices, from a peak of over $US20 per million British thermal units on February 14 to less than $US10/MMBTU at Thanksgiving. The tumbling oil price also contributed.PNG start-up adds to weakness

The start-up of ExxonMobil's $US19 billion ($23 billion) LNG plant in Papua New Guinea contributed to the price weakness by boosting supply, while output also increased in Nigeria and Algeria.

The PNG LNG venture, in which Oil Search and Santos are partners, had a "phenomenal" year, with the project reaching full capacity from both its production units within five months of its May start-up. But other new plants had problems, notably Chevron's Angola LNG project, which only started up in June 2013 but was shut again in May last year for extensive repairs.

In terms of final investment decisions for new LNG supply plants, Australia has passed the baton to the United States, where three new ventures were sanctioned in the second half of 2014.

Australia had a wave of investment decisions for new LNG plants starting in 2009 but has not had any go-aheads since Inpex Corporation's sanctioning of its $US34 billion Ichthys project in Darwin in January 2012.

Wood Mackenzie noted a change in the federal approvals process for US LNG export ventures last year, which it said benefited projects that were most advanced in their approvals, including the Magnolia terminal in Louisiana led by ASX-listed Liquefied Natural Gas Ltd.

In Asia, little new capacity was sanctioned and some was delayed, including Woodside Petroleum's Browse floating LNG venture, which had been targeting a decision by late 2014 to start engineering and design work.

Wood Mackenzie reported that a record number of new LNG tankers were ordered in 2015 – 67 ships, spurred by expectations of a surge in US LNG exports based on shale gas. But the uptick in ship orders has weighed on charter rates for tankers, reflecting the number of ships ordered in the previous record year, in 2011, that have yet to secure work. South Korea's DSME captured the bulk of the new ship orders in 2014. Meanwhile, ExxonMobil on Friday announced the naming of the first new LNG tanker custom-built for its PNG LNG venture. The ship, named Papua, was built by the Hudong-Zhongua Shipbuilding Group and is the largest LNG ship yet built in China. It is expected to be delivered to PNG early this year.


Fairfax Media Management Pty Limited

Document AFNR000020150109eb1a0000k

[DavidChoy]

oil prices drop liao

[greengiraffe]

Hope for PNG as Japan rethinks US, Russian gas supply: Credit Suisse
THE AUSTRALIAN JANUARY 12, 2015 12:00AM

Matt Chambers

Resources Reporter
Melbourne

PNG’s gas industry could benefit from Japan’s move for a more secure supply base. Source: Supplied
THERE could be a silver lining for Papua New Guinea LNG producers in recent oil price slides and geopolitical instability, with Japan becoming increasingly interested in security of supply.

This is the view of Credit ­Suisse analysts who released a report over the weekend that said Japan, the world’s biggest LNG buyer, was no longer as interested in fostering LNG development from the US, Russia and East Africa as it had been a year ago.

“We believe we are moving into a new phase where the world’s largest LNG off-taker will de-emphasise its recent focus on US-linked LNG pricing and refocus on energy security in light of the geopolitical risks concerning gas supply (US-Russia) and marine disruptions in the South China Sea, which 60 per cent of Japanese LNG currently passes through,” Credit Suisse said.

This could see Japan underpin development of further LNG projects in PNG, and buoy the fortunes of Oil Search and Santos, which are partners in the recently started PNG LNG plant, and InterOil, which operates PNG’s biggest undeveloped gasfield.

“As we started 2014, Japan appeared keen to support greenfield LNG capacity in Russia and was interested in the East African developing opportunities in Mozambique and Tanzania,” Credit Suisse said.

“However, developments in Ukraine reminded Asian buyers that gas can be a geopolitical tool — and we suspect planning in Japan may have de-prioritised Russia as a greenfield LNG supply source.”

Sliding oil prices have also taken the gloss off Japanese plans to foster US LNG development. Credit Suisse estimates that at recent averages US LNG was no cheaper than oil-linked LNG from Australia and PNG.

A recent visit to Australia and PNG from Japanese Prime Minister Shinzo Abe was probably driven to some extent by a desire to build LNG supply relationships, the analysts said.

Unfortunately, the benefits are unlikely to foster New Australian LNG projects. “For Australia, Japan probably already has contracted as much as it would like to see — hence new capacity would likely need to find buyer interest outside of Japan,” Credit Suisse said.

[greengiraffe]

Gas and coal giants at war over carbon

Angela Macdonald-Smith, James Chessell and Amanda Saunders
971 words
5 Jun 2015
The Australian Financial Review
AFNR
English
Copyright 2015. Fairfax Media Management Pty Limited.

Tensions build ahead of Paris climate conference

One of Australia's top energy executives has launched an extraordinary attack on the coal industry, ridiculing its "clean coal" moniker and arguing that natural gas can combat severe air pollution in Chinese and Indian cities.

Woodside Petroleum chief executive Peter Coleman chose a high-profile meeting of global gas leaders in Paris to attack the environmental impact of coal and said the gas industry had "historically been too timid to aggressively address the shortcomings of coal" and now needed to "stand up".

The head of one of the world's biggest coal producers, Glencore Coal's Peter Freyberg, called on governments to intervene to protect the coal industry from global attacks.

"There needs to be acknowledgement that coal is not going to be wished away," he said in a rare public speaking appearance in Melbourne.

Building coal-fired power stations is "still the cheapest way of bringing people out of poverty," he said. "We need global policy that acknowledges the global energy reality that fossil fuels including coal will continue to be used."

He said Japan is building more coal power stations "because gas has not been economic in terms of the problems they have had post-Fukushima".

The dispute is part of a global fight that erupted this week between the gas and coal industries, which are positioning themselves ahead of an international climate change conference in Paris in December.

Europe's largest oil companies, including Royal Dutch Shell, BP and France's Total, used a World Gas Conference in Paris to attack coal, call for a carbon price, and push cleaner-burning but more expensive gas as an alternative to coal to make electricity.

The UN summit could result in a binding accord to curb carbon dioxide emissions. Such a deal could penalise Australia, which is facing a large increase in greenhouse gas emissions because of the surge of investment in LNG production.

Evidence is growing that gas is losing ground in power generation in Asia to cheap coal and increasingly competitive renewable energy, while the collapse in oil prices has left Australia's new wave of LNG plants struggling for profitability.

In an analysis released on Thursday, the IEA calculated that the $US50 a barrel drop in crude prices since last June will wipe $US20 billion ($25 billion) from targeted annual revenues from Australia's new wave of LNG projects, about 10 per cent of their combined build cost. Origin Energy managing director Grant King argued Australia's LNG boom should be seen as helping fix climate change and called on critics of Australia's greenhouse-intensive industry to "look outside the bubble" at the role the industry plays in replacing coal in power plants in Asia.

"One of things that's going to happen is Australia is going to produce a lot of LNG so it's carbon emissions are going to go up," Mr King told The Australian Financial Review.

"There is a good argument that Australia should be mindful that some of those resources are part of the solution globally by bring lower carbon intensity fuels to countries like China that might otherwise burn coal."

Gas, once seen as becoming a fuel of choice for cleaner power generation in Asia, has been losing out to coal in some countries, with demand growth unexpectedly slumping last year, according to the International Energy Agency.

IEA executive director, Maria van der Hoeven said cost escalation in the gas industry had dented the viability of gas, with consumption growth fading amid "tough" competition from coal and renewables.

Whitehaven Coal managing director, Paul Flynn called on the Australian government "to be a strident advocate for the rightful place" of responsible coal mining and said gas and coal would be complementary in providing "energy for the masses".

"The reality is coal is necessary - it is good for all world economies and will continue to be," Mr Flynn said, rejecting any suggestion gas poses a threat to the coal industry.

The position taken by the European majors also widens the rift that has opened up with US oil companies, with the heads of Chevron and ExxonMobil rejecting the appeals of their European peers for a global price on carbon.

"The Europeans are taking a step forward on climate change and carbon trading; they are really on board that tram," Philip Graham, head of Asia-Pacific utilities and energy for Citigroup, said from Paris.

The US shale gas boom has helped reduce carbon dioxide emissions in the US to levels "not seen since the 1990s" by replacing domestic coal-fired power stations, ExxonMobil chief Rex Tillerson said in Paris on Tuesday.

However, the US Lower 48 region is yet to export LNG, with its first exports due next year.

Mr Coleman said that every tonne of greenhouse gas emitted in Australian LNG production resulted in a reduction of at least four tonnes of greenhouse gas emissions in customer countries when LNG was used to displace coal-fired power generation.

He said the scale of the smog problem in countries such as China and India was "staggering", with the World Health Organisation reporting seven million premature deaths worldwide from air pollution in 2012.

The heated debate over the role of gas also comes as Australia's newer gas exporters struggle with the profitability of $200 billion of LNG export plants set to come into production in the next two years, after last year's slump in oil prices.

Woodside is studying a US LNG export terminal as it expands options for its emerging gas trading business that is intended to capitalise on a forecast 40 per cent expansion in internationally traded gas volumes over the rest of the decade.


Fairfax Media Management Pty Limited

Document AFNR000020150604eb6500006

[greengiraffe]

http://www.smh.com.au/business/mining-an...hliw7.html

Cracks appear in LNG story
Date
June 11, 2015 - 6:45PM

Perry Williams
Senior Reporter

The timing of Australia's $160 billion push to secure the mantle of the world's biggest liquefied natural gas exporter by 2018 is growing murkier by the day.

For years the thesis underpinning Australia's rapid ascent to become a global LNG powerhouse has centred on an accepted piece of wisdom within the industry: that Asian utilities will continue to buy massive quantities of gas at a premium to other markets around the world.

Yet in the space of just a few months, cracks have appeared in the Asia demand "story", which has helped to bankroll Australia's big capital-intensive LNG projects.

The repercussions for LNG projects yet to deliver supplies to customers could yet derail Australia's massive punt on unseating Qatar as the global superpower of gas.

Two warnings arrived on Wednesday night and both held potentially severe repercussions for Australian LNG.

BP, in its closely watched annual review, sparked the first note of gloom.

It calculates that Chinese growth in consumption of primary energy last year slowed to just 2.6 per cent, its lowest level since 1998, sparked by the country's shift towards a service-led economy rather than one based on heavy industry.

Growing fears of gas glut
Given LNG has been the fastest-growing fuel source in China, the slowing rate of consumption is leading to growing fears of a gas glut at just the wrong time for Australian producers, bringing a mass of new supply onto the market.

The fall in demand is a concern because LNG producers had assumed that a China government-sanctioned move toward cleaner energy – more gas-fired power stations and a greater use of renewables in the energy mix – would put LNG imports in the box seat.

But while there's been a big shift to renewables in China, coal is proving much more difficult to dislodge from the energy mix.

LNG is trading at about $US7.50 per million British thermal units on the spot market, about half the level of a year ago.

Despite that fall, coal remains cheaper, with JP Morgan estimating the switch point for utilities to think about moving to LNG remains below $US6 per million BTU.

The cheap price of coal means it remains the fuel of choice for Chinese customers, with about 70 per cent of the country's energy needs fuelled by the black stuff.

Several hours after the BP missive, consultancy Wood Mackenzie weighed in with a similarly bearish narrative, slashing its forecasts of growth in Chinese consumption of gas and predicting a surplus of 18 billion cubic metres (bcm) of Chinese contracted LNG from 2015 to 2017.

Other problems for producers
"Short-term drivers [for the reduction] include low oil prices and high domestic gas prices, reversal of environmental policies, competition from coal and hydro and warmer winter weather," Woodmac principal gas consultant Gavin Thompson said. "Structural factors include the switch from industrial production to the service sector as a driver of economic growth."

Falling demand is not the only problem for Australian producers.

The International Energy Agency warned earlier in June that LNG prices may remain lower for longer, raising questions about the business case for long-dated Australian projects.

"The belief that Asia will take whatever quantity of gas, at whatever price, is no longer a given," Maria van der Hoeven, the IEA's executive director, said in a statement. "The experience of the past two years has opened the gas industry's eyes to a harsh reality: in a world of very cheap coal and falling costs for renewables, it was difficult for gas to compete."

Australian LNG producers can quite fairly shrug their shoulders over some of the China numbers.

Because they pre-sell about 80 to 90 per cent of their production to utilities around Asia, they are less exposed to fluctuations in the spot market for now ,with their price terms often agreed over a 20-year term.

Many also have limited exposure to customers in China, although this will increase as new projects come online in the next few years.

Excess capacity a broader problem
But market watchers argue that excess capacity in China represents a broader problem for Asia's overall LNG market.

Reports that China is looking to sell out of long-term deals and instead look for buyers to take its contracted LNG on the international market could keep prices depressed for the next few years.

The danger is that some of the buyers of Australian LNG may simply recycle the gas back into the market until the supply situation turns back in their favour.

Others point out the problem is not limited to China.

South Korea, one of the largest consumers of LNG, is importing nearly 20 per cent less LNG compared with a year ago and is looking to adopt more short-term, cheaper deals to reflect the changing dynamic in the sector.

If the slump becomes a regional trend within Asia, Australian producers will have to scrap to maintain lucrative deals struck several years ago when oil was trading above $US100 a barrel.

The slump comes at a particularly sensitive time for Australia's LNG industry.

Three Qld plants to come
Whichever way you look, a new LNG project is slated to come online.

The UK's BG Group is Australia's latest LNG debutant with its $US20.4 billion ($26.4 billion) Queensland Curtis project starting supplies in May. The BG project, which has a long-term sales deal with China National Offshore Oil Corporation, is the first of the three big coal seam gas sourced plants being built in Queensland.

Chevron is the next cab off the rank. Its spent a whopping $80 billion of investment in two LNG projects in Western Australia – Gorgon and Wheatstone – with the $US54 billion Gorgon project scheduled to supply its first gas later this year and Wheatstone due to begin production next year.

From there, attention turns to Inpex Corporation's Ichthys project and Shell's Prelude floating LNG facility.

All up, by 2018, these projects – worth a combined $250 billion in investment – will propel Australia to 80 million tonnes a year of production – beyond Qatar's 77 million tonnes a year – to become the world's largest producer.

The change in profile of Asian demand will also inevitably have consequences for onshore greenfield LNG projects yet to reach final investment decision, along with a raft of expansions slated for later this decade.

It's hard to see how Woodside's $40 billion Browse development can receive board approval given the underlying concerns about Asian demand.

Somewhat muddled approach
All of which raises the question of whether Australia's somewhat muddled approach to becoming a global LNG power may yet come back to bite.

It's a little disingenuous to compare Australia's efforts with Qatar, given the MIddle East producer had the luxury of having one owner – Qatar Petroleum – which directed an orderly flow of LNG projects over the space of a decade.

But in retrospect, Qatar's push to start feeding LNG supplies to Asia over five years ago was a remarkably prescient move.

JP Morgan estimates the magnitude of global LNG capacity growth over the three-year period from 2014 to 2017 is a massive three times the capacity growth seen from 2011 to 2014.

Put another way, it's the biggest increase in production growth since the global LNG industry started in the 1970s.

Australia may well manage to squeeze its next pipeline of projects through, and indeed usurp Qatar at the top of the table in just a few years.

But JP Morgan warns the shift in the market is likely to usher in a new era of low returns, asset impairments and an LNG glut in Australia's main export market.

That's a legacy few are likely to trumpet come 2018.

[greengiraffe]

Jun 11 2015 at 10:32 AM Updated Jun 11 2015 at 5:59 PM

Slump in Chinese gas demand growth adds to gloom for Australian exporters

Energy consultancy Wood Mackenzie is forecasting a surplus of 18 billion cubic metres of Chinese-contracted LNG from 2015 to 2017. James Davies
by Angela Macdonald-Smith

A slump in Chinese demand growth for natural gas looks set to worsen a supply glut for LNG in Asia, amid a broader slowdown in consumption in the world's largest growth market for energy, which could pose a worry for Australia's energy exporters.

Energy consultancy Wood Mackenzie has been forced to slash its predictions for growth in Chinese consumption of gas, and is now forecasting a surplus of 18 billion cubic metres (bcm) of Chinese-contracted LNG from 2015 to 2017.

Meanwhile, BP's closely watched annual statistical review of energy reported that Chinese growth in consumption of primary energy last year slowed to just 2.6 per cent, its lowest level since 1998, as its economy shifted away from energy-intensive sectors.

BP pointed to a stalling in growth in China's coal use and "weak" global gas growth, with global trade in gas registering a rare contraction in 2014, falling by 3.4 per cent.

China is currently only a relatively small consumer of Australian LNG, mostly through a low-priced contract to buy gas from the North West Shelf venture.

However, it is set to become a much larger consumer over the next two years, having just started taking deliveries from BG Group's Queensland Curtis LNG venture in Queensland, while some LNG from the other two projects in Queensland and from Chevron's enormous Gorgon project in Western Australia is also earmarked for China.

The rapid ramp-up of supply of LNG from Australia as a $200 billion wave of new projects comes into production over 2015-17 is already weighing the Asian market for imported gas and depressing spot prices, while soft Chinese demand is adding to the market impact.

SHORT-TERM, STRUCTURAL FACTORS BLAMED

Wood Mackenzie said gas demand in China is now only expected to reach about 360 bcm in 2020, rising to 560 bcm in 2030, forecasts that are up to 14 per cent lower than its earlier predictions. It said unwanted cargoes of LNG could be sold back into the market.

Gavin Thompson, principal gas consultant at Wood Mackenzie blamed short-term and structural factors for the cut in forecast growth.

"Short-term drivers include low oil prices and high domestic gas prices, reversal of environmental policies, competition from coal and hydro and warmer winter weather," Mr Thompson said.

"Structural factors include the switch from industrial production to the service sector as a driver of economic growth."

Wood Mackenzie is typically one of the most bullish forecasters on LNG demand growth. Others such as FACTS Global Energy have been predicting lower growth, pointing to alternative fuels buyers can turn to.

BP's review of energy, released late on Wednesday Australian time, described 2014 as a year of "tectonic shifts" in global energy production and consumption. It said the US overtook Saudi Arabia as the world's biggest oil producer and surpassed Russia as the largest producer of oil and gas thanks to the US shale revolution.

But primary energy consumption globally slowed markedly, growing just 0.9 per cent last year.

"EERIE CALM OVER

BP chief executive Bob Dudley noted the "eerie calm" that had characterised energy markets in the lead-up to 2014 came to an abrupt end last year, when oil prices fell sharply.

"However, we should not be surprised or alarmed," he said.

"These events may well come to be viewed as symptomatic of a broader shifting of the tectonic plates that make up the energy landscape, with significant developments in both the supply of energy and its demand.

"Our task as an industry is to meet today's challenges while continuing to invest to meet tomorrow's demand, safely and sustainably."

BP found that renewables were the fastest-growing form of energy, accounting for one-third of the increase in total primary energy use.

But they still only account for 3 per cent of global energy consumption, up from 0.9 per cent a decade ago, it said.

China recorded the fastest growth in renewables in power generation, up 15.1 per cent, but that was one-third of its 10-year average.

[CityFarmer]

The proposal will make a difference on LNG market in this region?

Japan pushes LNG for transport to help climate, energy security

TOKYO (June 18): Japan, the world's biggest importer of liquefied natural gas (LNG), is drawing up plans to get trucks and ships to use the fuel, partly to help cut carbon emissions but also to diversify energy sources in the freight sector for security reasons.

A draft report on energy policy discussed at the trade ministry on Thursday stressed the need for a greater variety of fuels to transport cargo and noted the growing international use of LNG and compressed natural gas (CNG) in the sector.

Ryo Minami, the ministry's director of oil and gas, wants 10 percent of the 300,000 trucks used for long-distance transport to be fuelled by LNG soon and a "substantial" part of the fleet to use gas eventually.

"By diversifying fuel in the distribution sector, we aim to improve our ability to respond in the event of an energy crisis," he said. "If oil supplies are halted, distribution will come to a stop."

Gas has taken on added importance since the 2011 Fukushima disaster led to the shutdown of Japan's nuclear power sector. It now accounts for more than 40 percent of electricity generation and LNG imports hit a record high of 89 million tonnes in the year to March.

But gas has less than 1 percent of the mix in transport against an OECD average of about 2 percent.
...
http://www.theedgemarkets.com/sg/node/210133

[greengiraffe]

http://www.smh.com.au/business/energy/la...622-ghu1xu

Lack of demand to delay Australian LNG projects
Date
June 22, 2015 - 6:12PM

Angela Macdonald-Smith
Energy Reporter

LNG producers will have to wait years to get new projects off the ground as global markets work through a glut of supply.


A variety of LNG projects in Australia and overseas will 'have to wait' for customers.

Australian liquefied natural gas producers hoping to get new projects off the ground will have to wait years before they can find customers as global markets work through a glut of supply and higher-cost projects are pushed down the development queue, according to respected energy forecaster Fereidun Fesharaki.

Woodside Petroleum's Browse floating project, the Sunrise venture in the Timor Sea, and the ExxonMobil-led Scarborough project off Western Australia will all take longer than anticipated, as will most Canadian LNG projects, said Singapore-based Dr Fesharki, chairman of FACTS Global Energy.

The Australian projects, there is room for them, but they will have to wait,

Fereidun Fesharaki, energy forecaster
"The Australian projects, there is room for them, but they will have to wait," Dr Fesharaki said, pointing to a need for more contracted supplies only in 2025 or later.

Woodside and its partners are nearing a decision within weeks to start detailed engineering and design work on their Browse floating project, and are targeting a final go-ahead for the venture by the end of 2016 with the aim of commencing production after 2020. But Dr Fesharaki said Browse wouldn't be able to proceed to a final investment decision without contracts with customers, which looked unlikely in the current market.

"There's no buyer: I don't see who is going to buy at any price," he told Fairfax Media from Singapore.

Similarly the proposed LNG projects in Canada will take longer, with a lack of demand the hurdle, not that low oil prices had made them uneconomic, Dr Fesharaki said, noting that Petronas' Pacific NorthWest LNG project, currently poised to get the go-ahead, would be an exception.

"There is a perception in the market that these projects aren't going ahead because of low prices, but if oil was at $US200 ($256), they still could not go forward – there is no demand," he said.

"Canada, Alaska, Browse, Sunrise – there is a need for all these projects but over an extended period of time."

Multi-year surplus
Dr Fesharaki said that Papua New Guinea's proposed LNG projects would be an exception to the rule, with their much more favourable economics allowing them to compete against US export ventures in the 2021-25 period.

Both the Total-led Elk-Antelope LNG project and an expansion of ExxonMobil's PNG LNG venture would likely proceed, although probably still later than targeted, with PNG LNG train three possibly starting up in 2021 or 2022, and Elk-Antelope potentially in 2022, he said.

FACTS' views are echoed by JPMorgan, which warned earlier this month that the global LNG market would be "shifting to a multi-year surplus" due to large blocks of new supply starting in Australia and the US and softening demand trends in China and South Korea. It said the "power shift" in LNG to buyers from sellers posed risks to Woodside because of lower prices for its production and delays to developing new gas resources.

Dr Fesharaki, a former energy adviser to the prime minister of Iran who has close links with Asian LNG buyers, said new projects would have to compete against US export ventures, which had sold a chunk of their capacity to traders rather than to end-users, adding to available supply.

FACTS estimates the US will export 70 million to 75 million tonnes a year of LNG, of which about 60 million tonnes had been sold under contract. However, about one-third of that gas was not sold to end-users but to traders or other players who would be eagerly seeking to on-sell it, providing stiff competition in the market.

More immediately, LNG producers are facing challenges because of an unusually large gap between prices for contract sales, which are linked to crude oil prices, and spot prices, which have plummeted because of low demand, Dr Fesharaki said.

Spot prices
Buyers have already secured enough LNG, while available supply is rising with the start-up of new projects in PNG and Australia.

Spot prices for LNG to be delivered in July to north-east Asia average $US7.60 ($9.76) per million British thermal units, down from $US12.95 12 months ago and from almost $US20 in early 2014, according to pricing service Platts. Average contract prices are closer to $US12 for Australian LNG shipped to Japan.

"All needs have been satisfied," Dr Fesharaki said, noting that if oil prices were $US80 or $US90 spot LNG would still be only "$US6 or $US7".

"The separation of spot from the contract market is the most unusual I have seen in my life," Dr Fesharaki said, pointing to difficulties for producers relying on the spot market for some sales.

Dr Fesharaki said new long-term demand in Asia would emerge mostly from buyers needing to replace expiring contracts, with a wave of contracts set to lapse in the major Japanese market in the 2019-24 period. But he is bearish about demand growth in China, where high domestic prices are discouraging consumption, and in India, where low domestic prices are making LNG imports uneconomic.