A world well-supplied

Natural gas is still not a global fungible commodity, although the LNG trade steadily grows as projects and the global fleet expand. ExxonMobil thinks that worldwide natural gas use will grow more than any other fuel – by 65% over the next 30 years. Increasingly, that demand will be supplied by ‘stranded’ gas – from fields afar – and conversion to LNG will get the gas to where it’s needed. Asia and Australia will account for 74% of all the LNG expenditures over the next five years. Douglas-Westwood forecasts that by 2018, $38 billion will be spent on FLNG vessels and a further US$15 billion on floating regasification terminals.

On the supply side, nothing is more spectacular than Shell’s Prelude FLNG floating project. Shell officially began construction on the system in October 2012. Development drilling is expected to begin this year in the Prelude and Concerto gas fields in the Browse basin, 125 miles off the northwest coast of Australia. The massive structure will be 488m (1601ft) in length and weigh around 600,000 tonnes, six times more than the largest aircraft carrier; first LNG is scheduled for 2017. Shell intends its FLNG design to be the first of many. There are a few other stranded-gas candidates offshore Australia, such as GDF Suez/Santos’ Bonaparte development, PTT’s Cash and Maple fields, and Woodside’s Sunrise project.

Elsewhere in Australia, there are seven facilities under construction; all are expected onstream 2014-17. They could provide more than 90 million tonnes/year capacity if they all get built. Note that 35 million tonnes/year is coalbed methane supplied – a first at these volumes.

Meanwhile, the on-again, off-again, on-again massive Shtokman gas field offshore Siberia is . . . well, who knows? Gazprom and partners Total and Statoil made a joint announcement to reporters in August 2012 that ‘excessive costs had made it unfeasible to develop the field’. However, two months later at a press conference, Russian president Vladimir Putin said: ‘The investment decision is planned to be taken in the near future, so we are talking project launch before 2017.’ Then, in mid-December, Gazprom said a tender would be held this month for the construction of a large 30 million tonnes/year plant to be built on the Kola peninsula.

Statoil gave back its 24% stake to Gazprom in August after spending $336 million. Total is hanging in there with its 25% stake. A 137tcf gas field is hard to give up, even if it is 375 miles from shore in iceberg-laden waters.

While Russia fiddles, another gas elephant has emerged in the warm waters off East Africa, which may hold at least 100tcf and is still in the discovery and delineation process. Wood Mackenzie estimates that there is at least 80tcf recoverable off Mozambique and 18tcf off neighboring Tanzania. With the expectation that recoverable reserves will eventually rise much higher; Mozambique is likely to become the world’s fourth largest gas holder after Qatar, Iran and Russia.

Among the various players, Anadarko and Eni lead consortia that are farthest along. The two companies will coordinate development of their offshore gas fields and an LNG plant in northern Mozambique. The plant will ultimately supply about 50 million tonnes/year, which would be the largest LNG production outside Qatar.

Anadarko plans to establish firm reserves figures in 2013 and hopes to make a final investment decision and award engineering, procurement and construction (EPC) contracts near year-end. First LNG is slated for 2018. Statoil, ExxonMobil, BG and others will continue exploring and amassing reserves off Tanzania.

ExxonMobil is busy building its PNG-LNG export terminal in Papua New Guinea. The $4.5 billion project has had some setbacks and cost overruns, but should still come onstream by 2016. It’s unclear whether other nearby gas discoveries will become part of PNG-LNG.

The US is in a frenzy to resolve its gas glut and turn import facilities into export facilities (some LNG is already being re-exported from the Gulf Coast). The first LNG export terminal is scheduled for completion in 2016.

In a discussion with George Littell about LNG prices, a partner in the forecasting firm Groppe, Long & Littell, OE asked: ‘Doesn’t there seem to be a lot of LNG projects coming online in the next five years? Will there be enough demand to keep up prices?’

Littell thinks that won’t be a problem. ‘Globally, nearly a third of all oil is still used for stationary thermal applications, primarily power generation, but also other thermal stuff. There remains a huge section of the oil market that natural gas can displace, so I don’t see enough of a demand problem to push LNG prices down very much. Gas is still relatively cheap.’

On the demand side, China will increase its LNG imports through six terminal projects now under construction. Zhuhai and Tangshan are now in their first phase. Douglas-Westwood says these projects will provide an additional 18 million tonnes/year import capacity.

Japan’s unending nuclear crisis helped sop up some of the excess LNG being offered on world markets, firming prices. The country has increased LNG imports 27% year-on-year but the new administration that takes office this month is widely viewed as being pro-nuclear energy, meaning that Japan’s 50-plus offline nuclear reactors could be brought back online, depending on political developments. Regardless, the country was already planning eight new import terminals to come online 2013-16. OE

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