Gas & LNG in Review: October 16-21, 2016

Alexandra Marie Ferraro's picture
Alexandra Marie Ferraro, Energy Analyst, Guest Reporter
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Natural gas news this week saw hints that gas demand will increase in Japan, an interesting discussion emerged on global supply between Exxon and Saudi Arabia, efforts to boost efficiency in UAE oil and gas operations, and promising signs for further development of Iran’s output. Check out our highlights below.

Japanese Regional Leadership Change Bodes Well for Natural Gas: A regional election north of Tokyo is likely to tilt the scale further in favor of LNG despite a pro-nuclear central government. According to the Guardian, newly-elected governor of Niigata Ryuichi Yoneyama has vowed not to restart the Kashiwazaki-Kariwa nuclear power plant under existing circumstances. Bloomberg analysts explained the election outcome, by prolonging the restart of the nuclear reactors, means Tokyo Electric Power Co. (Tepco) must continue to replace nuclear with oil, gas, and coal to meet power demand.

With more flexibility, lower costs, and lower emissions, LNG is likely to come out on top as the preferred replacement fuel in the years it may take to restart the Kashiwazaki-Kariwa reactors, which the WSJ details were halted in 2012 and are likely to remain offline given Yoneyama’s stance.

Already as of 2016, 65 percent of Tepco’s electricity consisted of natural gas-generated power, 20 percent more than before the closing of the reactors, and Tepco accounts for 27 percent of the country’s overall natural gas imports, Bloomberg reported. What is your take on the popular sentiment in Japan concerning energy sources? Do you expect future elections to swing the country further in favor of natural gas imports? Let us know below.

Exxon, Saudi Arabia Trigger Debate on Global Supply and Investment: Industry leaders ExxonMobil CEO Rex Tillerson and the Saudi Energy Minister Khalid al-Falih presented opposing views on the current and future states of global supply and investment this week. According to Reuters, Tillerson opposed Saudi Arabia’s position that the industry was in need of investment and non-OPEC growth was in decline which could result in a future supply shortage.

The Financial Times quoted Tillerson, “We have confirmed viability of a very large resource base in North America … that serves as enormous spare capacity in the system.” The New York Times ran a piece this week supporting this viewpoint, arguing that American oil and gas companies can maintain profits and increase production with crude prices above $40 a barrel. As of this week, Brent crude had reached $51.68 a barrel, a 12% climb since OPEC announced its intent to cut production, the WSJ published.

Do you agree that US production has proven itself to be resilient and adaptable throughout years of market volatility? Could this be the dawn of an industry resurgence? Leave us a comment below.

Abu Dhabi Streamlines Shipping and Port Operations in Efficiency Push: The Abu Dhabi National Oil Company announced this week that it will consolidate three of its shipping and services units: the Abu Dhabi National Tanker Co., Petroleum Services Co., and Abu Dhabi Petroleum Ports Operating Co., Bloomberg reported. The process will be complete by end of 2017, Reuters cited the announcement.

This follows ADNOC’s decision to combine two offshore oil companies earlier this month, per Reuters. The decision to streamline operations is expected to increase efficiency and facilitate oversight. The newly combined shipping unit will operate 165 ships including LNG tankers, Bloomberg detailed.

This, along with a $755 million Scotia Gas Networks acquisition by the Abu Dhabi Investment Authority from Britain’s SSE Plc this week, as covered by Bloomberg, indicates that the emirate continues to bet on natural gas as a sound investment. Will the consolidation ensure ADNOC can more easily weather price and market fluctuations? Let us know your thoughts.

Iran Eyes Increased Production, More Deals with International Companies: Iran sent strong signals this week that it intends to boost oil and gas production and sign partnerships with international energy companies, news sources reported. According to Bloomberg, the country is in discussions with 16 firms for the development of 50 oil and natural gas projects. Quoting Iran’s Petroleum Minister Bijan Namdar Zanganeh, Bloomberg wrote Iran is looking to attract around $200 billion in energy investments over the next four years.

This would be in order to achieve production levels of 4.28 million barrels per day, Bloomberg detailed. Doing so would bring Iran back up to pre-sanction output levels, up from the current 3.63 million barrels per day in September, Bloomberg data indicate. This would be in conjunction with Iran’s goals to significantly increase natural gas production.

Reuters also quoted Minister Zanganeh on Monday saying his country aims to reach natural gas output levels similar to Qatar, especially by prioritizing the South Pars. How will these statements and objectives by the Iranian government be received at the next OPEC talks and could they exempt Iran from any OPEC production cuts? Give us your take on the story below.

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