Gas & LNG in Review: January 17-22, 2016

Alexandra Marie Ferraro's picture
Alexandra Marie Ferraro, Energy Analyst, Guest Reporter
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Major summits, corporate and policy decisions, as well as market forecasts centered in the natural gas headlines this week. Here are the highlights in case you missed them:

Davos Gas & Oil Discussions: Chief Executive of HSBC told leaders at the World Economic Forum at Davos that the world’s biggest banks seek to help finance the $5.5 trillion of commitments from the COP21 agreements. Mr. Stuart Gulliver explained that it makes good business sense, calling upon the public and private sectors to work together. He emphasized a balanced vision of green finance, “It is dangerous to have a binary moment where everyone drops oil and gas companies.”

Separately at Davos, oil executives from Saudi Aramco, BP, Statoil, Repsol, Shell, Total, and Chevron met privately in an effort to cut costs by standardizing exploration and production equipment, according to Bloomberg. The companies believe they can reach a technical consensus with suppliers.

Finally, Saudi Aramco CEO Khalid Al-Falih announced at Davos that they plan to start natural gas production at a field near Jordan next year as they begin “investing big in gas” and expect demand to rebound later this year.

What other oil & gas discussions went on at Davos? Share your news with us below.

US Natural Gas Market Bullish Ahead of Snow Forecast: As the eastern US awaits nearly 30 centimeters of snow, analysts and traders remain bullish on the futures market, according to Bloomberg. Gas withdrawals from stockpiles increased simultaneously with soaring demand. Despite milder temperatures in 2015, this one-time event is expected to increase weather-driven demand by nearly 10 percent in the US, according to President of Commodity Weather Group Matt Rogers.

Also this week the publication of a US Energy Information Administration report showed power companies in the US burned more natural gas than coal in 2015, according to TIME. In 2015, Reuters reports that US power companies retired over 15,000 MW of coal plants.

Is a one-time weather event enough to make a significant impact on the market?

EU Commission Abandons Plans for Common Natural Gas Purchases: Despite hopes of improving security of gas supply and increasing transparency, the EU Commission has dropped centralized natural gas buying plans from their draft proposal for gas supply security regulation, according to Platts. The announcement was made by Stefan Moser, head of the Commission energy department’s supply security unit, who expressed a preference for “the market to cooperate to the extent that is in line with EU competition rules.”

Under the originally proposed common gas purchase plans, EU member states and energy companies would have been “free to explore the potential benefits linked to collective purchasing of natural gas” according to an earlier draft obtained by Bloomberg. This was intended to give the EU bargaining power vis-à-vis Russian gas supply.

How will this affect the competitive gas market in the EU? Let us know your views below.

Chevron Will Supply LNG to China: Chevron announced on Monday that it has signed an agreement with ENN LNG Trading Company for LNG delivery to China from Chevron’s Gorgon LNG project in Australia. Under the terms, ENN will receive up to 0.5 MTPA of LNG over 10 years, beginning in 2018/2019. The shipments would represent about 3 percent of Gorgon’s annual production capacity. The announcement follows Chevron’s agreement in late December to sell as much as 1 million tons of LNG per year to China Huadian Green Energy Co., according to Bloomberg.

This week, Reuters calculations showed China’s natural gas output growth was the slowest in 10 years. Chinese production in 2014 was roughly 7 percent higher than in 2015, Reuters reported using official data from the National Bureau of Statistics. LNG imports as well as piped gas from Central Asia have left China with surplus fuel as domestic demand slows.

Is now the time to enter the Chinese LNG market? Leave your comment below.

Gazprom: Prices Fall, Ukraine Bill, Linde Wins Contract: Gazprom chairman Viktor Zubkov said on Wednesday Gazprom’s first-quarter price may drop $180 per 1,000 cubic meters, a 37% plunge compared to one year ago. This is due to falling crude oil prices. Bloomberg reported Russia is still committed to oil-linking pricing in its long-term gas contracts even as crude hovers near its lowest since 2003.

On Tuesday, Gazprom announced it had charged NAK Naftogaz Ukrainy $2.55 billion under contractual take-or-pay clauses and that Ukraine had 10 days to pay. This brings the total amount Gazprom claims it is owed by Ukraine to $32 billion. Naftogaz has disputed the validity of the claim and will seek international arbitration. This follows several moves by Gazprom to cut its dependence on Ukraine to deliver gas to the EU.

These tensions occurred the same week Gazprom secured a partnership with German gas group Linde. Linde said on Thursday they will build natural gas processing plants in eastern Russia as part of the Gazprom project to supply Russian gas to China via the “Power of Siberia” pipeline.

What is the outlook for Gazprom’s relations with the EU and Ukraine over the next 10 years? Leave a comment below.

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