News & Updates

Alaska buys TransCanada’s stake in LNG megaproject

Nov 27, 2015

Alaska has bought Calgary-based TransCanada Corp.’s stake in an LNG megaproject for $64.6-million (U.S.) – another twist in a four-decade quest to build a natural gas conduit from the state’s remote North Slope.

Developed by Exxon Mobil Corp., ConocoPhillips Co. and BP PLC, the Alaska LNG proposal includes a 1,300-kilometre pipeline to a terminal at Nikiski, southwest of Anchorage, where the gas would be liquefied for export to Asia as early as 2024. The project’s final price tag could reach $65-billion.

The Canadian pipeline company and the state signed an agreement last year, which authorized TransCanada to pay upfront capital costs and hold the state’s 25-per-cent share of ownership in the project’s gas treatment plant and pipeline. TransCanada spokesman Mark Cooper said the agreement also provided Alaska the right to buy the Canadian pipeline company’s stake in the project.

After being recommended by Alaska Governor Bill Walker in September, the acquisition was finalized on Tuesday. The deal allows Alaska to become a direct participant in the project and could make the venture more beneficial to state coffers – by up to $400-million annually when gas starts flowing, based on the expectation by the state that it can finance its share of the project at a lower cost than TransCanada could.

Prior to 2010, TransCanada and Exxon had been eyeing an overland pipeline project through Western Canada to reach U.S. markets. But with the continental U.S. awash in natural gas owing to booming production from shale fields, the focus shifted to potential LNG exports to Asia.

“TransCanada has been committed to the development of natural gas resources in Alaska for decades, and has made considerable contributions to the advancement of the Alaska LNG project over the last few years,” Mr. Cooper said in an e-mail. “While our role in this project has concluded, we will continue to watch its progress closely.”

However, it is now unclear who will operate the Alaska LNG project. TransCanada said there is currently no plan to get involved.







Source: Cryderman, Kelly. "Alaska Buys TransCanada's Stake in LNG Megaproject."The Globe and Mail. Phillip Crawley, 25 Nov. 2015. Web. 26 Nov. 2015.

The Making of a Buyer’s Market in Natural Gas

Nov 23, 2015

Next year, on a remote island off Australia’s western coast, the world’s most expensive liquefied natural gas export terminal will start shipping cargoes into a market that has changed vastly since 2009, when the project was approved. Chevron’s $54 billion Gorgon LNG facility, initially budgeted at $31 billion, was supposed to have begun operations in 2014. Labor disputes have delayed it, and lower LNG prices have potentially reduced its profitability.

LNG producers no longer have the bargaining power they once did. Weakening demand in Asia combined with an increase in LNG supply is giving the world’s biggest buyers not only cheaper gas but also more say on how contracts are designed. “The buyers have the upper hand,” says Neil Beveridge, an analyst at Sanford C. Bernstein.

LNG suppliers have historically been able to lock customers into 20-year contracts, with clauses that restrict the resale of gas. In Japan, the world’s largest LNG market, two of the country’s largest utilities have teamed up to gain leverage and demand more flexibility. Jera, a joint venture of Tokyo Electric Power and Chubu Electric Power, says it will no longer sign contracts that give producers control over the destination of the product.

If buyers succeed in negotiating better terms, the LNG market could become more like the one for crude oil, where producers, suppliers, and traders all compete for profits through constant buying and selling. That would require a fully functioning spot market, where supplies are traded for immediate delivery, a development that’s still a decade away, Beveridge says.

By then, Australia will be the world’s top LNG exporter, unseating Qatar. For the first time in eight years, exports from Qatar shrank in 2014. Qatar still provides about a third of the world’s LNG, but customers are lining up for new supplies from Australia and the U.S.

Gorgon will join three other LNG megaprojects that have been completed recently along Australia’s east coast and will tap the country’s vast gas deposits. In the U.S. five LNG projects under construction will export cheap natural gas unlocked by the shale boom. The first will begin exports in 2016. Over the next decade the U.S. is likely to become a net exporter of natural gas and compete with Australia to be the world’s leading LNG supplier.

After these projects come online, it may be a while before any others are built. “LNG is the last of those sectors where we’re seeing a wave of new projects hit the market,” says Daniel Hynes, a commodity strategist at Australia & New Zealand Banking Group. “It’s coming at a time when demand is weakening across the board. It’s clearly a tough market.”





Source: Sharples, Ben. "The Making of a Buyer's Market in Natural Gas." Bloomberg, 5 Nov. 2015. Web. 19 Nov. 2015.

Shell to Focus on Liquefied Natural Gas in Deal for BG Group

Nov 9, 2015

Seeking to reassure investors, Royal Dutch Shell on Tuesday said its $70 billion acquisition of the BG Group would allow it to realize $3.5 billion in savings, shed $30 billion in uncompetitive assets, and expand its operations in the fast-growing liquefied natural gas industry.

Although the British-based BG is only a midsize oil company, it is a major player in liquefied natural gas, known as L.N.G., which is becoming an increasingly popular alternative to other fossil fuels. The deal gives Shell a world-leading position in producing and trading L.N.G.

The company has been criticized for making a big acquisition at a time of low oil prices, but it is portraying the BG deal as an opportunity to streamline its own portfolio. Shell said it now expected to gain $3.5 billion in cost savings through job cuts, procurement savings and other operational efficiencies.

Shell, which hopes to complete the BG dealby early next year, said it would place its liquefied natural gas and related businesses into a separate unit called Integrated Gas.

The energy giant has invested heavily in L.N.G. in recent years — to the tune of about a third of its overall $200 billion in invested capital, including in a process called gas-to-liquids that converts natural gas into fuels like diesel and jet fuel.

A study by Oswald Clint of Bernstein Research in London concluded that with BG, “Shell will take the No. 1 spot in global L.N.G.,” with about 18 percent of the global market by 2020. The Persian Gulf emirate of Qatar would remain a bigger player than Shell, but its output is divided between two state-controlled companies, Qatargas and RasGas.

Mr. Clint estimated that Shell could add $1 billion ayear to its earnings through measures including sending L.N.G. to countries offering the highest prices.

As an indication of the increasing importance of liquefied gas to Shell, the company said that Maarten Wetselaar, who will head the new Integrated Gas unit, would join Shell’s executive committee, its top management rung.

Shell calculates that countries in Asia and other emerging markets will increasingly turn to gas, which burns cleaner than coal, as a fuel for generating power and for other uses. It is also betting that L.N.G., because it is not dependent on pipelines, will increasingly find markets in locales that have not traditionally burned natural gas.

Because BG holds undeveloped oil and gas properties in Brazil, East Africa and other areas, Shell, which has had lackluster exploration results, also says it can make large reductions in drilling and other exploration expenses. Previously, Shell had put the overall gains from BG at around $2.5 billion.

In other areas, Shell said it would cut back on North American shale activities, which have led to large write-downs at the company, and stop making new investment in tar sands projects.

The L.N.G. business is partly cushioned from the impact of lower oil prices because the fuel is usually sold on long-term contracts that are linked to oil with a delay of three to six months. Still, low prices cut Shell’s earnings from L.N.G. and related products in the third quarter to about $820 million, compared with $2.8 billion in the period a year earlier.

Over all, the company reported a loss of $7.4 billion for the third quarter. It took $7.9 billion in write-offs for operations including its recently halted exploration venture off Alaska and a Canadian heavy-oil project that it recently canceled.

“Low oil prices are driving significant changes in our industry; I am determined that Shell will be at the forefront of that and emerge as a more focused and more competitive company,” Ben van Beurden, Shell’s chief executive, said in a conference call with reporters on Tuesday.






Source: Reed, Stanley. "Shell to Focus on Liquefied Natural Gas in Deal for BG Group." The New York Times. The New York Times, 03 Nov. 2015. Web. 06 Nov. 2015.

World's first LNG-powered container ship, the Isla Bella, begins service

Nov 2, 2015

Isla Bella

On Friday, General Dynamics subsidiary NASSCO has delivered Isla Bella, the world's first container ship to be powered by liquefied natural gas.

Isla Bella is the first of two 764-foot long Marlin Class container ships contracted by TOTE Maritime. Together, the two vessels will be the largest LNG-powered dry cargo ships in the world.

Officials with NASSCO say the ship's natural gas-powered engine will boost the vessel's fuel efficiency, drastically reducing its emissions— equivalent to taking 15,700 gas-powered cars off the road.

"Successfully building and delivering the world's first LNG-powered container ship here in the United States for coast-wise service demonstrates that commercial shipbuilders, and owners and operators, are leading the world in the introduction of cutting-edge, green technology in support of the Jones Act," Kevin Graney, vice president and general manager of General Dynamics NASSCO, said in a press release.

The Jones Act requires that all domestic shipping—shipping from one American port to another— be carried out by American-made and operated ships.

Isla Bella will carry cargo between Jacksonville, Florida, and San Juan, Puerto Rico.






Source: Hays, Brooks. "Isla Bella Is the World's First LNG-powered Container Ship." United Press International, Inc., 16 Oct. 2015. Web. 30 Oct. 2015.