Gas & LNG in Review: March 27 - April 01, 2016

Alexandra Marie Ferraro's picture
Alexandra Marie Ferraro, Energy Analyst, Guest Reporter
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This week’s natural gas news started off with a major decision by Israel’s Supreme Court, followed by China vamping up its natural gas capacity, a looming bankruptcy, price cut negotiations, and a Kuwait-South Korea deal. Check out the highlights below.

Israel’s Supreme Court Overrules Government’s Natural Gas Development Plan.After much anticipation, the highest court in Israel has blocked the government’s plan to develop Israel’s natural gas fields, according to several news sources. The decision represents a defeat for Prime Minister Benjamin Netanyahu and delays progress on US-based Noble Energy and Israeli Delek Group’s deal to develop the massive offshore Leviathan natural gas field, according to Reuters.

The New York Times reported that the court took issue with the 10-year guarantee clause included in the deal as it would limit the parliament from making regulatory changes during that time period. It has given the Israeli parliament one year to amend the plan and avoid termination of the deal. The NYT cited Netanyahu’s reaction to the ruling declaring it, “severely threatens the development of the gas reserves.”

Bloomberg reported that Delek Group’s shares fell the most in one month following the court’s announcement. On a higher note, Israel’s energy minister Yuval Steinitz expressed hope that the matter would quickly be resolved as reaching a more suitable agreement will “take a few weeks or maximum a couple of months,” Reuters cited Steinitz.

Is this a case of too much government interference in business affairs? Comment below.

China’s Sinopec to Multiply Domestic Natural Gas Capacity. Sinopec’s chairman announced on Wednesday that the state-owned company is looking to significantly increase its domestic natural gas production capacity by 2020, according to Reuters. At a news conference in Hong Kong, Chairman Wang Yupu said Sinopec will vamp up its domestic production capacity to 40 bcm, Reuters reported. Bloomberg explained this would nearly double Sinopec’s 2015 gas production of 20.8 bcm.

The announcement comes the same week as one of China’s biggest gas distributors, ENN Energy Holdings, said natural gas demand in China is on the rise thanks to the government’s price cuts, according to Bloomberg. The move is designed to draw consumers away from coal and seems to be working: gas demand went up by 3.3 percent in 2015 as coal consumption fell 3.7 percent, Bloomberg cited the National Bureau of Statistics.

Can we count on this positive trend for natural gas in China? Let us know your thoughts.

Shale Producer SandRidge Talks of Possible Bankruptcy, Restructuring.Continuously low prices have taken a toll on SandRidge Energy Inc, who confirmed this week in a regulatory filing that its finances are at risk and that it “has engaged advisors to assist with private restructuring or reorganization,” according to Reuters. A restructuring at SandRidge would be one of the most notable in the US shale industry, which has struggled through plummeting prices. The company reported a total debt of $3.63 billion as of the end of 2015, Reuters revealed.

The U.S. shale industry has been battered by the challenge of paying off debts in the face of falling prices. Is SandRidge just the first in what might be a domino effect of high-level casualties in US shale? Let us know what you think.

E.ON Accepts Gazprom Price Cut Offer. Following arbitration proceedings, German utility E.ON and Russia’s Gazprom have agreed on a price cut on the latter’s long-term gas supplies, Reuters reports. The news source says the deal will result in an additional 380 million euros in E.ON’s core earnings in the first quarter. E.ON receives about 30 percent of its gas from Gazprom.

This represents an interesting end to a series of unsuccessful talks between the two companies. Will Gazprom bend similarly to other European gas firms feeling the pinch from their long-term contracts with the Russian giant? Leave us a comment.

Kuwait Signs $2.9 Billion Deal with South Korean Firms for Construction of LNG Import Facility. Kuwait has signed a $2.93 billion deal with three South Korean firms for the construction of what will be the biggest LNG import facility in Kuwait, Agence France-Presse reported. The project completion is projected for early 2021 and will be built at the Al-Zour refinery by Hyundai Engineering Co., Hyundai Engineering & Construction Co., and Korea Gas Corporation. The LNG import terminal will be part of a much larger complex that includes a refinery and a petrochemicals plant.

Who do you expect to see making LNG deliveries to Kuwait’s newest import facility? Tell us your predictions below.

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