Gas & LNG in Review: May 15-20, 2016

Alexandra Marie Ferraro's picture
Alexandra Marie Ferraro, Energy Analyst, Guest Reporter
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This week, the natural gas headlines featured a mix of good and bad news: the construction of the Trans Adriatic Pipeline, a high profile bankruptcy, a future for Israeli natural gas, and financial challenges facing Gazprom. Check out the highlights below.

Trans Adriatic Gas Pipeline in Construction. In groundbreaking progress for the massive Southern Gas Corridor project, construction began this week on the Trans Adriatic Pipeline, according to several news sources. The pipeline is a key component of a $45 billion Southern Corridor project to route natural gas from the Caspian Sea to Europe in an attempt to diversify energy imports, according to the Financial Times.

The FT said the pipeline will connect the Trans Anatolian Pipeline from Azerbaijan’s Shah Deniz II field to Greece and then cross Albania and the Adriatic Sea finally arriving in Southern Italy. The Wall Street Journal detailed that the construction of the pipeline is expected to cost €5 billion and transport 10 billion cubic meters per year of Azeri gas into Europe.

It appears the construction of the Trans Adriatic Pipeline will bring the EU one step closer to its goal of reducing reliance on Russian gas. The WSJ quoted the European Commission Vice President Maros Sefcovic, “Timely completion is crucial so that gas from the new suppliers can flow to Europe by 2020.”

Is this timeline realistic? Give us your thoughts below.

Natural Gas Exploration Company SandRidge Energy Declares Bankruptcy. US-based SandRidge Energy filed for bankruptcy protection on Monday with $4.1 billion in debt, according to the New York Times. The NYT also said that the company hoped in its bankruptcy plan to be able to turn $3.7 billion of its long-term debt into equity and asked to be able to continue its daily operations in the meantime.

The International Business Times explained that SandRidge is the latest in a chain of American companies to suffer a hit from the drop in oil prices; it is among 77 companies since 2015 to have filed for bankruptcy protection according to the IBT. The move, however, should allow SandRidge to restructure and resurge relatively quickly. In a statement cited by the NYT SandRidge President and CEO James Bennett indicated that the company would prioritize oil and gas exploration in its Oklahoma and Colorado projects under the new structure.

What will it take for this wave of bankruptcies to subside? Let us know your take on the story.

Israel Moves Forward with Natural Gas Development, Egypt Compromise. Israel made a series of moves that reflect both compromise and progress for the future of Israeli natural gas this week. The country reached a new agreement on Wednesday with Delek Group and Noble Energy to continue developing the Leviathan gas field, according to Reuters. Also, Bloomberg sources revealed on Wednesday that Israel was nearing a settlement with Egypt wherein the former would accept half of the $1.73 billion December 2015 fine Egypt owes for violating contract terms, allowing gas deals with Egypt to resume. Finally, the Financial Times reported that Israeli Prime Minister Benjamin Netanyahu is in talks with his rival party that could add six more seats to his majority in the government, solidifying his influence on natural gas issues.

Reuters says the new deal for the development of the Leviathan gas field will allow the state more flexibility in implementing regulatory changes, following the Israeli High Court’s decision to block development under the previous contract provisions earlier this year. With negotiations set to come back online with Egypt, and a potentially strong majority for PM Netanyahu, it seems the future of Israeli natural gas may be looking brighter.

Are you as optimistic? Share with us your insight.

Gazprom Maintains Low Dividend, Faces Price Disputes. After coming under significant pressure by the Russian government to increase its dividend payouts to nearly 16.6 roubles per share, Gazprom announced on Thursday that it will keep its dividends at 7.89 roubles per share, according to the Financial Times.

Last month, the Russian government issued a decree whereby state companies had to pay 50% of their 2015 net profits in dividends; Reuters reports that Gazprom was able to obtain a waiver allowing it to set its dividend recommendation lower than the 50% threshold. The move will allow Gazprom to maintain its investment programs.

Separately, on Monday Gazprom announced in its 1st quarter report that Dutch GasTerra had filed a price arbitration case against Gazprom regarding long-term oil-linked contracts, says Bloomberg. Gas prices have fallen in the past year, and GasTerra is looking to cut costs following lower production rates.

Are these signs that Gazprom may face a year of financial challenges? Leave us a comment.

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