Gas & LNG in Review: March 20-24, 2016

Alexandra Marie Ferraro's picture
Alexandra Marie Ferraro, Energy Analyst, Guest Reporter
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This week’s natural gas news saw a milestone shipment from the Gorgon project, the abandonment of a $40 billion project, especially low prices, a new Angola deal, and a Russia-China pipeline push. Check out the highlights below.

First LNG Cargo Leaves Chevron’s Gorgon Project for Japan: Chevron announced on Sunday that it has shipped its first cargo of LNG from the Gorgon Project off the coast of Western Australia. The cargo is travelling on Chevron’s Asia Excellence carrier and is headed for Japan, where it has been purchased by Chubu Electric Power.

The cargo is the first in a major commitment Chevron has made to supply its Asian customers with LNG from the massive Gorgon Project. The press release noted that more than 80 percent of Chevron’s Australian subsidiaries’ equity LNG from its Gorgon and Wheatstone projects is already covered by a series of agreements with Asian customers.

Asian demand for LNG has ebbed and flowed recently. How successful do you anticipate the Gorgon Project to be in the long-term? Let us know what you think.

Woodside Halts Development on Australian Offshore Browse LNG Project: Woodside Petroleum announced on Wednesday that it, along with partners including Royal Dutch Shell and BP, has decided to abandon immediate plans to push forward with development of its Browse join venture, citing low prices and a challenging market.

“Woodside remains committed to the earliest commercial development of the world-class Browse resources and to FLNG as the preferred solution, but the economic environment is not supportive of a major LNG investment at this time,” Woodside CEO Peter Coleman stated in the announcement.

The New York Times reported that the costs of the Browse joint venture were estimated at around $40 billion. The project had planned to use FLNG facilities that were based on Shell technology; Platts raised questions about where Shell would now deploy its technology.

How big of a hit is this for FLNG projects worldwide? Will the Browse decision kill momentum for similar investments elsewhere? Leave us a comment.

Henry Hub Price Bobs Around Historic Lows: The Financial Times wrote on Monday that the natural gas benchmark Henry Hub price “wallows at lows not seen this millennium.” The FT referred to growing supply in the US from discoveries and shale, as well as high inventories due to a warm winter. All of this has resulted in the price of US gas falling below the price of US coal per energy unit.

What to expect? Consistently low Henry Hub prices mean investments in liquefaction and shipment of US gas are worthwhile. Expect to see the US come online as a global supplier of LNG. It already has with Cheniere’s shipment to Brazil last week, and could reach Europe sooner than we think.

What does this mean for the price of gas in Europe? The FT says the spot market will become busier. What do you say? Write-in below.

Angola to Supply LNG to EDF Trading: In a step to get Angolan LNG back online following a forced shutdown due to a flare line rupture in 2014, Angola LNG has announced a flexible sales deal to supply LNG to EDF Trading, according to Reuters. EDF Trading chief executive John Rittenhouse indicated that the LNG would be destined for the European wholesale market.

Angola LNG is partly owned by Chevron, who announced earlier this month that exports would resume this year and that the majority of the first production would be for the spot market, Reuters said. Delivery to EDF Trading is expected for the 2016-2018 timeframe.

Do you know more about this agreement? Share with us your news.

China Pushes for Faster Construction of Russia Gas Pipeline: Reuters reported on Tuesday that, speaking in Beijing, the Chinese Vice Premier Zhang Gaoli told Gazprom CEO Alexei Miller that the two countries should accelerate the construction of the Altai natural gas pipeline between them. Reuters cited China Central Television which reported that Zhang advised that Russia and China deepen their ties in both the upstream and downstream.

Miller reportedly responded positively, expressing an active desire for Russia to pursue further negotiations with China on the Altai project. Reuters says the Altai pipeline has been estimated at $20 billion.

With the Russia-EU gas relationship strained, will Gazprom increasingly turn toward the East? Let us know.

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