Gas & LNG in Review: September 25-30, 2016

Alexandra Marie Ferraro's picture
Alexandra Marie Ferraro, Energy Analyst, Guest Reporter
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This week’s natural gas news brought in strong prospects for the industry. Oil prices are on the rise again thanks to an OPEC agreement, Canada approved Petronas’ LNG project plans, stakeholders in Israel’s Leviathan project signed a supply deal with Jordan, and the UK received its first cargo of US shale gas. Check out the stories below.

OPEC Deal Ushers in Higher Oil Prices, Strengthens Market: Reuters reported on Thursday that OPEC has reached an agreement to lower oil production levels, capping production to between 32.5-33.0 million barrels per day, down from the current 33.24 million bpd. The market rallied on Wednesday in anticipation of the announcement. According to the Guardian, Brent crude settled up 5.9% at $48.69 a barrel and WTI crude increased by 5.3%, reaching $47.05; two- and three-week highs, respectively.

The decision also created a positive spill-over into the stock market. Both European and Asian markets rose, led by oil and gas companies which saw a 4.12% rise overall on the Stoxx Europe 600, the Wall Street Journal reported. Bloomberg aptly quoted a fund manager at Royal London Asset Management who summarized the positive turn for the oil market, “A tighter oil market will support earnings.” How does this latest decision by OPEC change your or your firm’s strategic outlook for 2016-2017? Let us know below.

Canadian Government Gives Go-Ahead for Major West Coast LNG Project: Canadian Prime Minister Justin Trudeau’s government approved Malaysian state firm Petronas’ $27 billion Pacific NorthWest LNG project on Tuesday, according to news sources. The approval came with 190 attached conditions including environmental monitoring and limits on carbon emissions, Bloomberg detailed. As of now, the industry is anticipating Petronas’ decision post-approval. Reuters quoted Petronas CEO Wan Zulkiflee Wan Ariffin who said, “We need time to look at the conditions and then we will have a review of the project.”

The Financial Times referred to analysts acknowledging that Petronas has already made significant investments which bodes well for the pursuit of the Pacific NorthWest project, but the government’s conditions and timing mean the firm might take its time in making a final decision. Regardless, the massive LNG project represents benefits for both the Canadian economy and Petronas’ standing as an LNG supplier. This is the first major energy and resource development decision made by the newly elected Canadian government. Do you think it will stimulate Canada’s growth in the global LNG market? Leave us a comment below.

Israel’s Leviathan Partners Agree to $10bn Export Deal with Jordan: Partners in Israel’s major Leviathan gas field, including majority stakeholder Noble Energy, have agreed to a 15-year supply deal with Jordan’s National Electric Power Co. valued at $10bn, according to the Financial Times. The FT detailed that the contract would be for a total of 45 billion cubic metres of natural gas upon production start-up and, according to the Wall Street Journal, first gas delivery can be expected in 2019 or 2020.

The step forward is a positive sign for Leviathan which has faced regulatory challenges along the way, establishing it as a top regional supplier. Bloomberg quoted CEO of Delek Drilling Yossi Abu who affirmed this as an initial step in Leviathan’s regional vision saying they would “continue to pursue long-term agreements with other customers in the eastern Mediterranean…” Who do you expect will be next to sign on to Leviathan’s supply? Share with us your predictions below.

First Cargo of US Shale Gas Arrives in the UK: The UK received its first cargo of US shale gas this week with the arrival of Ineos’ Insight tanker in Scotland, Reuters reported. The 27,500 cubic metres of ethane are destined for the Grangemouth petrochemicals plant and arrived at a time when Scotland has banned fracking domestically and the topic is under scrutiny in the UK at large, according the BBC. US shale gas is proving to be a way for Ineos to keep its plants running and secure jobs amid shale drilling uncertainty.

The shipment establishes a first for US shale gas in northwest Europe; while Cheniere’s US LNG has been delivered to Portugal and Spain, Ineos’ cargo is a precedent-setting delivery for US gas for Europe’s northern network, Bloomberg discussed. According to the BBC, Ineos’ 15-year contracts with US suppliers will aid in securing the UK’s gas supply and especially the livelihoods of plant operators. Are US gas imports the best option for the UK moving forward or can we expect to see significant shale drilling in the region’s near future? Give us your take on the story.

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