Gas & LNG in Review: May 01-06, 2016

Alexandra Marie Ferraro's picture
Alexandra Marie Ferraro, Energy Analyst, Guest Reporter
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This week’s natural gas news covered an array of country and corporate dynamics. A Gorgon LNG leadership shift, Algeria gas exports, Shell’s Q1 earnings, and antitrust regulation in France centered in the headlines. Check them out.

Algeria Signals Increase in Gas Exports to Europe: A deputy general manager at Algeria’s national oil company Sonatrach, Omar Maaliou, said on Wednesday that they were expecting a 15% increase in gas exports to Europe in 2016, according to Reuters. Mr. Maaliou credited exports by pipeline and LNG, which so far in 2016 have “recorded a growth of over 30% compared to the same period in 2015,” Reuters quoted the official. He also said that Algerian government and industry officials would be meeting with the EU about gas at the end of May.

Reuters says four new Algerian fields are expected to begin production in 2016 and two LNG plants were commissioned in 2013-2014, just in time for many of Algeria’s contracts to expire with the European Union (2019-2021), opening opportunities for renegotiations. Algeria has recently struggled through the oil slump.

A Financial Times piece this week detailed Algeria’s plans to strengthen its hydrocarbon-dependent economy and attract investors. The FT referred to the strong multilateral ties between the EU and Algeria and the upcoming negotiations in May as a potential indication for the future of Algeria’s exports. Forbes cast doubt on Algeria’s follow-through this week, saying the domestic demand for energy and existing subsidies would limit future exports despite intent for reform.

Will European buyers be keen on Algerian gas as they look to diversify supply? Let us know.

Shell Reports Drop in Gas Realizations and Earnings, LNG Increase: In its first report since its $54 billion BG Group acquisition, Royal Dutch Shell reported a 36% fall in its gas price realizations for the first quarter, an increase in LNG sales, and a 58% decrease in overall Q1 earnings, according to several news sources. The company cited the continuously low crude prices as “hugely challenging” for its earnings as its net income also dropped 89% in Q1, according to the Associated Press (The New York Times).

The company responded to shareholders’ calls to cut spending, announcing that it had cancelled projects and trimmed exploration costs, according to Reuters. This would bring Shell’s capital investments to $30 billion in 2016, the AP reported.

Lower realized gas prices were apparent in the report, falling to an average of $3.58/MMBtu from $5.62/MMBtu at the same point last year, according to Platts. Thanks to the BG acquisition, however, LNG sales were off to a good start, increasing 25% from the same period in 2015. Gas production was also up as Platts quoted Shell CEO Ben van Beurden, “The combination with BG is off to a strong start.”

Seems to be a mixed bag for Shell’s Q1 report. What is your take on it? Leave us a comment.

French Utility Company Engie Ordered to Raise Gas Prices: France’s antitrust regulator issued an order on Monday to French power company Engie to increase its natural gas prices for non-residential customers, according to major news outlets. The Financial Times wrote that although the full investigation may take months to conclude, if Engie is discovered to have taken advantage of its dominant position in the market (60% of non-residential customers), the fine could be as high as €7bn.

The Autorité de la Concurrence investigated the matter in response to a complaint submitted by Engie’s competitor Direct Energie claiming that Engie was making offers to non-residential customers that did not reflect gas costs, according to the Wall Street Journal. Reuters said that the competition authority found that some of the costs of Engie’s unregulated gas offers were being subsidized by profits from Engie’s regulated sales. The WSJ reported Engie might appeal the decision.

The order comes on the heels of an executive leadership change for the company, as Isabelle Kocher replaced Gérard Mestrallet as CEO on Tuesday and has signaled a different outlook for the company, according to the FT. Will Engie weather this storm? Give us your thoughts.

New Chief Executive Slotted to Lead Chevron’s Gorgon LNG Project: On Thursday, Chevron appointed the deputy managing director in Australia Nigel Hearne to replace managing director Roy Krzywosinksi as chief executive of the Gorgon Project, according to Reuters. Mr. Krzywosinksi, in turn, will become the head of engineering for Chevron’s Energy Technology Company in Houston, Texas.

The Sydney Morning Herald reported Mr. Hearne is expected to begin in his new capacity on June 1st. Reuters quoted Chevron’s Asia Pacific Exploration and Production president Steve Green saying that Mr. Hearne has a “proven record of leading large, complex operations”.

The Gorgon project has had its ups and downs. Will this leadership change ensure stability in the project’s operations or rock the boat? Share your opinion.

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