Gas & LNG in Review: September 04-09, 2016

Alexandra Marie Ferraro's picture
Alexandra Marie Ferraro, Energy Analyst, Guest Reporter
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Natural gas news this week witnessed a major pipeline deal, Russian interest in sending LNG to the Middle East, a win for LNG in a BHP-Woodside deal, and an Argentine tariff increase to encourage domestic gas production. Take a look at the highlights below.

Energy Infrastructure Majors Enbridge and Spectra to Merge in Massive Deal. Canada’s Enbridge agreed on Tuesday to buy Texas-based Spectra Energy, in a deal valued at $28 billion which is also the biggest pipeline deal of the year, Bloomberg said. According to the New York Times, the deal will help bolster the pipeline industry, and the merger will add utility and midstream assets to the newly combined company.

The deal marks a pivot for Enbridge, traditionally a transporter of crude oil, in making a heavy investment in natural gas infrastructure, the Wall Street Journal discussed. The Enbridge-Spectra merger would create the largest energy infrastructure company in North America, according to the WSJ, and follows similar pipeline deals to join infrastructure on the continent this year.

What do you think about Enbridge’s strategy? Will the merger and resulting diversified portfolio ensure the company’s success in an industry that ebbs and flows? Give us your take on the story below.

Russia and Bahrain Discuss LNG Partnership. Russia’s Gazprom and Russian geological exploration firm Rosgeologia signed MOUs with Bahrain’s National Oil and Gas Authority (Noga) this week during King Hamad bin Isa Al Khalifa of Bahrain’s state visit to Moscow, according to Platts. Bahrain’s thirst for gas has grown over the years; the island nation is currently building an 800 MMcf/day LNG terminal, Platts detailed.

While neither specific volumes nor dates were revealed, the agreement solidifies Russia’s interest in developing LNG for new markets. According to Reuters, Gazprom already sells LNG to over 10 countries. Platts referred to St. Petersburg governor Georgy Poltavchenko who in May said Gazprom could use the Bahraini terminal to facilitate distribution to other countries in the region as well.

Do you expect to see Gazprom ramp up LNG production significantly in the coming years? Why or why not? Leave us a comment.

Woodside Bolsters LNG with BHP Billiton Deal. Woodside Petroleum will acquire half of BHP Billiton’s stake in the Scarborough gas field off the coast of Western Australia for $400 million, according to news sources this week. Bloomberg cited analysts who indicated the move is likely part of Woodside’s strategy to develop the gas in one of its LNG plants at Pluto or North West Shelf. Bloomberg quoted Woodside CEO Peter Coleman who commented his company is open to floating LNG and onshore development possibilities. Partner and stakeholder in the Scarborough fields Exxon Mobil Corp. has yet to approve the deal and has indicated a preference for floating LNG as a first choice in development, Bloomberg wrote. Reuters cited analysts who expressed that the current inclination for the market is to develop the gas using existing infrastructure, and not to build new plants.

According to Reuters, the deal is mutually beneficial for Woodside and BHP Billiton; the former would benefit from the new resource for its LNG plants, and it would allow the latter to place more emphasis on its oil assets. Will the Scarborough gas be routed to Woodside’s LNG plants for development? What will Exxon’s strategy be following this deal? Share with us your opinion.

Argentina Gas Tariff Increase Aims to Spur Gas Production. Argentina’s government proposed a revised plan to increase residential gas tariffs by 203% in an effort to encourage investment in domestic gas production and reduce state subsidies, Platts reported on Tuesday. Platts cited Argentina’s Energy Minister Juan Jose Aranguren who explained the increases would occur twice yearly at a slightly under 10%. The price hike will officially be proposed at a public governmental hearing on 16 September, according to Bloomberg.

Argentine President Mauricio Macri’s government had originally changed tariffs to up to a 500% increase after taking office, but this was blocked last month by Argentina’s Supreme Court in defense of consumer rights, according to Platts. The new, 203%, gradual increase is expected to satisfy consumers’ demands while encouraging investment in domestic gas production thanks to reduced government subsidies and a smaller fiscal gap.

Is this tariff increase enough to set Argentina on the path of natural gas prosperity, or would the government’s original price hike have been more effective? Let us know your thoughts.

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