En Español



Very usefull links



PW
Bookstore





Institutional
links


OPEC
\





 



 

 

 

 

 

Gas projects supertankers miss the boat on LGN pricing


Energy world's newest supership the PFLNG Satu

HOUSTON/SYDNEY
Petroleumworld.com 06 14 2016

It's longer than three soccer fields, heavier than two aircraft carriers and powerful enough to chill gas into liquid colder than the surface of Jupiter.

And its maiden voyage couldn't have come at a worse time.

The world's first modern vessel for producing liquefied natural gas was ordered by Petroliam Nasional Bhd in 2012, when LNG traded for more than $15 per million British thermal units. It was launched last month, with prices down by about two- thirds. Royal Dutch Shell Plc faces a similar problem with its version of a floating LNG plant, which will be larger than any ship ever built.

“At $15 and above, you can do anything, so everyone went and did everything,” said Trevor Sikorski, a natural gas analyst for Energy Aspects Ltd. in London. “Now all these projects start to come online at the same time, and all of a sudden you have all this supply and now your margins are next to nothing.”

The plight of the PFLNG Satu, as the first vessel is known, reflects the larger struggle of all producers: projects approved years ago, when energy prices were high, are coming online now, adding to a global supply glut that pushed LNG down to $4.62 per million Btu.

Annual LNG demand is forecast to increase by 5 trillion cubic feet from 2015 through 2021, which isn't enough to absorb 6.7 trillion cubic feet of new capacity slated to become operational, the International Energy Agency said in its Medium-Term Gas Market Report 2016, published Wednesday.

“LNG projects take four to five years to get delivered,” said Prasanth Kakaraparth, Wood Mackenzie Ltd.'s LNG supply analyst for Southeast Asia. “By the very nature of these long delivery periods, they get hit quite a bit by these commodity cycles.”

Petronas, Malaysia's state-owned energy company, is betting the cycles will even out in the long run. PFLNG Satu will produce about 1.2 million metric tons of LNG annually for the next 20 years from the Kanowit gas field, which is about 112 miles north of the coast of Borneo.

“We are taking a long-term view for this project,” Petronas said in a written statement. “In terms of profitability, the project is still viable as an additional supply point within our larger portfolio of LNG assets.”

SOME ADVANTAGES

Floating LNG has some advantages over land-based liquefaction, said Rafael McDonald, the Cambridge, Mass.-based global director of gas and LNG for IHS Inc. It eliminates the need for pipelines to connect far-flung fields to shore. Companies also hope that they can better control costs in a shipyard than on a distant construction site, he said.

Putting production on the water isn't a new idea in the LNG world. In fact, it's the original idea. The first plant to chill natural gas for transport was mounted on a barge in a Mississippi shipyard in 1954, according to an account from Cedomir “Cheddy” M. Sliepcevich, a chemical engineer instrumental in the birth of the industry. The barge, which was to liquefy gas for shipment to the Chicago Stock Yards, couldn't operate economically, and the LNG industry moved on-shore for the next 60 years.

LNG MOVEMENT


The Shell Prelude. Source: Royal Dutch Shell Plc

The modern LNG movement began in 2011. Crude oil rose back to $100 for the first time since the recession, and the Fukushima nuclear disaster led Japan to shut its nuclear power plants and increase LNG imports for gas-fueled power generation. The fuel in Japan rose from $11 per million Btu at the start of 2011 to nearly $17 by the end.

Shell approved its facility, called Prelude, in May 2011. The platform will produce three times as much LNG as Satu and extract condensate, an ultra-light form of crude oil, and liquefied petroleum gases. Shell says it's not technically a ship because it won't propel itself between destinations. Prelude is expected to be generating “material” cash by 2018, Shell Chief Executive Officer Ben Van Beurden said in April.

Prices have dampened demand for floating LNG projects. Petronas has delayed its second floating liquefaction plant by two years. The ship had its keel-laying ceremony at a South Korean shipyard at the end of April and is expected to be operating by 2020. Colombia's Pacific Exploration & Production Corp. terminated in March a contract to lease a floating liquefaction facility from Exmar NV. Shell, Woodside Petroleum Ltd. and other partners in March shelved a $40 billion project in western Australia.

“The fact that we have not gone ahead with that project at this stage as a consortium doesn't mean the concept of floating LNG doesn't work,” Van Beurden said at a conference in Perth in April. “It does mean that the commodity cycle makes projects of that scale and investment level uninvestable at this point in time.”



Story by Dan Murtaugh and James Paton from Bloomberg.

bloomberg.com | 06 09 2016

Copyright© 1999-2016 Petroleumworld or respective author or news agency. All rights reserved.

We welcome the use of Petroleumworld™ (PW) stories by anyone provided it mentions Petroleumworld.com as the source.

Other stories you have to get authorization by its authors. Internet web links to http://www.petroleumworld.com are appreciated.

Petroleumworld welcomes your feedback and comments, share your thoughts on this article, your feedback is important to us!

We invite all our readers to share with us
their views and comments about this article
.


Write to editor@petroleumworld.com


By using this link, you agree to allow PW
to publish your comments on our letters page.

Any question or suggestions,
please write to: editor@petroleumworld.com

Best Viewed with IE 5.01+ Windows NT 4.0, '95,
'98,ME,XP, Vista, Windows 7,8,10 +/ 800x600 pixels

 

 

 

 

TOP

Contact: editor@petroleumworld.com,

Editor & Publisher:P.Ohep F. /Producer - Publisher:P.Ohep F./
Contact Email: editor@petroleumworld.com

CopyRight © 1999-2016, Paul Ohep F. - All Rights Reserved. Legal Information

PW in Top 100 Energy Sites

CopyRight©1999-2016, Petroleumworld ™  / Elio Ohep Fitzgerald- All rights reservedThis site is a public free site and it contains copyrighted material the use of which has not always been specifically authorized by the copyright owner.We are making such material available in our efforts to advance understanding of business, environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have chosen to view the included information for research, information, and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission fromPetroleumworld or the copyright owner of the material.