Gas & LNG in Review: February 14-19, 2016

Alexandra Marie Ferraro's picture
Alexandra Marie Ferraro, Energy Analyst, Guest Reporter
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A push for natural gas in Israel, a high-level visit to Iran, changing LNG market dynamics in Asia, and a BP project expansion stole the headlines this week. Here are the highlights of this week’s gas and LNG news in case you missed them:

Israeli Prime Minister Testifies to Defend Gas Field Development. In a new challenge to opposition parties and NGOs, Israeli Prime Minister Benjamin Netanyahu testified before Israel’s highest court in support of his government’s plans to develop the country’s largest offshore gas field, Bloomberg reported. The move comes in a series of several determined attempts to maintain the plan’s momentum, including previously superseding Antitrust Commissioner David Gilo’s objections. Those who oppose the plan fear the potential for a gas monopoly.

In response to the testimony, Israel’s energy stocks began to rebound. Israel has already engaged in discussions with Palestine, Jordan, Egypt, Turkey, and members of the European Union regarding gas exports. As global energy prices continue to plummet, is Israeli gas success in the cards? Let us know your thoughts below.

General Electric’s Oil and Gas Chief Visits Iran for Business Opportunities. In a rare visit by an American energy executive to Iran, CEO of General Electric Oil & Gas Lorenzo Simonelli explored business opportunities in the country emerging from international sanctions, according to the Wall Street Journal. Mr. Simonelli reportedly departed Iran on Monday, and the WSJ said his visit included a meeting with a top Iranian oil official according to a person familiar with the trip.

A GE spokeswoman said, “In line with the easing of sanctions, we have begun looking at potential business opportunities in Iran.” She also acknowledged that the company will do so in full compliance with remaining US sanctions and rules regarding trade with Iran.

The visit occurs during the same week that Iran begins its first shipments of crude oil to Europe in over three years. European companies have been ahead of the curve in opening business with Iran post-sanctions, especially compared with US companies. Reuters says business with Iran could help offset the burden of falling energy prices for GE.

Will other US companies follow suit? Tell us what you foresee below.

BP and Oman Oil Co. Sign Agreement to Further Gas Field Development. On Sunday, BP announced that it had signed a heads of agreement with the Government of Oman to extend the licence area of Oman Block 61, operated by BP, by over 1000km2. The extension will allow for the second phase of development, in particular greater development of the Khazzan tight gas field.

The announcement quoted BP Group Chief Bob Dudley: “Khazzan is a major resource with the potential to produce gas for Oman for decades.” The company stated the combined plateau production from Phases 1 and 2 is expected at nearly 1.5 billion cubic feet of gas per day, with first gas deliveries scheduled for 2017 and 2020, respectively. Together the Phase 1 and Phase 2 extension will cost approximately $16 billion, BP said.

According to Bloomberg, Oman currently receives some gas via pipeline from Qatar, is also in negotiations with Iran, and exploring other options to import LNG. Will Oman Block 61’s production be directed for domestic use? Leave us a comment.

LNG Oversupply Shifts Asian Market from Long-Term to Spot Purchases. Australian LNG producer Woodside Petroleum Ltd. was one of several this week to comment on shifting market dynamics amongst Asian buyers gaining awareness of their position as LNG supply swells. According to Bloomberg, Woodside CEO Peter Coleman said on Thursday that Asian buyers are signing “very, very few” new long-term contracts. Instead, they are making spot purchases while oil-linked contracts lose value as the price of crude continues to fall. This has happened simultaneously with a supply glut in the market.

In a similar vein, a Forbes contributor highlighted that the Thai state-owned oil and gas company PTT has also chosen to make spot purchases rather than engage long-term buying plans. While LNG long-term prices remain low due to the price of crude, LNG spot prices have also been particularly inexpensive this year. According to the contributor, spot prices in Asia dropped from around $20/MMBtu in 2014 to $4.95/MMBtu nearly two years later. Bloomberg cites Goldman Sachs Group forecasting LNG spot prices to cost 31% less than contract purchases this year. Do you think this tide will change? If so, when? Leave a comment below.

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