Gas & LNG in Review: March 06-11, 2016

Alexandra Marie Ferraro's picture
Alexandra Marie Ferraro, Energy Analyst, Guest Reporter
Comments: 0

This week’s natural gas news features important updates on existing projects, an explanation for falling prices, new markets, and pipeline discussions in North America. Check out the highlights below.

Chevron’s Gorgon LNG Project in Australia Comes Online. The largest LNG project in Australia, Chevron’s $54 billion Gorgon plant, has started LNG production in anticipation of its first cargo next week, according to Bloomberg. Gorgon will add significant supply to the LNG market at a time when oil prices are plummeting and Asian demand for LNG weakening. Nonetheless, the WSJ reports that Chevron and its partners at Gorgon have signed oil-linked, long-term agreements with customers in Asia for up to the next 20 years. The news source calls it “Chevron’s biggest global bet on LNG”.

Some are not as optimistic, however, and voice concerns over the effect of falling crude prices on Australian oil and gas projects. Platts cited a report on Wednesday explaining that oil and gas exploration activity in Australia has dissolved in the past year due to the collapse of oil prices, halving the number of exploration and development wells drilled between 2014 and 2015.

The massive investment in the Gorgon project is unprecedented, putting the project and its partnerships in a league of their own. How do you think this latest trend in Australia will impact the Gorgon project, if at all? Leave us a comment.

Falls in Gas Prices Due to Tightly Intertwined Market. The Financial Times published an analysis of falling gas prices on Thursday, noting uncanny similarities in price declines across several regions of the world, especially Asia, the UK, and the US. Not long ago, the FT explains, the global gas market was made up of separate regional markets. Today, however, due to the growth of LNG plants and shipping, the global gas market is increasingly becoming interconnected and true to its name: global.

Weak demand in Asia, for example, has a greater impact on global gas prices today than a decade ago and warm winters in the US have created a surplus, the FT describes. Japan is seeking to re-sell the LNG it over-purchased, oil-linked long-term contracts have taken a hit from falling crude prices, and new buyers such as Egypt and Argentina are arriving on the scene, says the FT. All of these factors have led to a more tightly intertwined market, where price falls or rises in one region are likely to be reflected in another.

There are more players interacting with each other in the gas market today than ever before. Prices have therefore become more challenging to predict, have global implications, and ‘supply glut’ is more likely to occur, while also being potentially easier to remedy.

What does your instinct say about why the global gas prices are in decline? Let us know.

India in Push to Attract Oil & Gas Investment. On Thursday, India’s cabinet approved measures to give price incentives and facilitate licensing to attract oil and gas exploration and development companies, according to Reuters. Although the companies would have more freedom in setting gas prices on new discoveries and production, a ceiling price will be enforced based on the landed price of alternative fuels and reviewed every six months, India’s Cabinet Committee on Economic Affairs’ press release explained.

“Resources worth 2.61 trillion rupees will be brought to production as a result of today’s decision,” Reuters cited India’s Oil Minister Dharmendra Pradhan in a press conference. 2.61 trillion rupees is worth nearly US $40 billion. Bloomberg reported that India is also implementing a single license policy for hydrocarbon exploration and production using revenue-sharing rather than the current profit-sharing. Indian Prime Minister Narendra Modi has made energy policy a priority since taking office and seeks to attract major oil companies to the sub-continent.

Would you invest in India? Tell us why or why not below.

TransCanada in Discussions to Acquire US Pipeline Operator Columbia Pipeline Group. The WSJ was the first to report that TransCanada and Columbia Pipeline Group were in talks regarding the latter’s takeover, a deal anticipated at nearly $10 billion the WSJ says. The discussions come the same week as Canadian Prime Minister Justin Trudeau’s visit to Washington DC and meetings with US President Barack Obama and follow Obama’s move to shut down TransCanada’s proposed Keystone XL pipeline in November last year.

In an update, Bloomberg reported on Friday that people familiar with the talks said a deal is less likely to be agreed upon at the moment. TransCanada has acknowledged it is discussing a potential transaction with a third party, Reuters reported, but has not confirmed the rumors of a deal with Columbia Pipeline Group. Such an acquisition would give TransCanada an important foothold in the Marcellus basin.

What have you heard regarding this deal? Share with us the latest.

Subscribe to our  Newsletter Follow us @GasInteract

Are you interested in speaking at the Gastech Conference? Submit your paper! The Gastech Japan 2017 Call for Papers is Now Open. The conference topics are split between commercial and technical themes - simply submit a short abstract (800 words maximum) in order for our Governing Body to review and then vote on the successful chosen papers.

Related articles: