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China’s state-owned gas importers are considering declaring force majeure on LNG imports, which would amplify the turmoil in global gas markets.

LNG prices have already plunged to their lowest levels in a decade in Asia as the ramp up of supply in 2019 came at a time when demand has slowed. That was true before the outbreak of the coronavirus. But the quarantine of around 50 million people and the shutdown of huge swathes of the Chinese economy has sent shockwaves through commodity markets.

Shipments of oil and gas are backing up at Chinese ports, which is creating ripple effects across the world. Now, Chinese state-owned CNOOC is considering declaring force majeure on its LNG import commitments, according to the FT. Sinopec and CNPC are also apparently considering the move.

Prices were already in the dumps. JKM prices recently fell to 10-year lows. But they have continued to decline, approaching $3/MMBtu for the first time in history. Just a few weeks ago, JKM prices were trading at around $5/MMBtu, itself an incredibly low price for this time of year.

LNG exports from the U.S. are uneconomical at these price levels. Many exporters have contracts at fixed, higher prices. But shipments can be cancelled for a fee. And any spot trade would be hit hard. The question now is whether shipments will come to halt. “Forward prices for summer are now at levels where U.S. LNG shut-ins begin to seem viable,” Edmund Siau, a Singapore-based analyst with energy consultant FGE, told Bloomberg. “There is usually a lead time before a cargo can be canceled, and we expect actual supply curtailments to start happening in summer.”

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Green Myths Canada’s LNG Sales Force Tells the World

January 24, 2020

Green Myths Canada’s LNG Sales Force Tells the World

No, methane’s no fix for global coal-fired energy. Here’s why.

Prime Minister Justin Trudeau and B.C. Premier John Horgan shake hands as LNG Canada CEO Andy Calitz, back right, watches during a news conference in October 2018. Photo by Darryl Dyck, the Canadian Press.

Representatives of the British Columbia, Alberta and federal governments are making the global rounds these days to sell the notion that liquefied natural gas exports can help the climate crisis.

Dave Nikolejsin, deputy minister of the B.C. Ministry of Energy, Mines and Petroleum Resources, for example, flew to Japan last September along with members of the Canadian Society for Unconventional Resources.

There they tried to impress upon the Japanese attendees “the role of Canadian LNG in meeting global climate policy objectives and reducing emissions of carbon dioxide.”

The pitch goes like this: According to LNG Canada, the big Shell project now under construction in northern B.C., could replace 20 to 40 coal-fired plants in countries like China and India with Canadian methane, and reduce their emissions by 60 to 90 million tonnes.

That’s impressive, says LNG Canada, because 90 million tons equals about 80 per cent of Canada’s car pollution. Or all of B.C.’s annual greenhouse gas emissions. The Tyee is supported by readers like you Join us and grow independent media in Canada

In fact, Darren Gee, president and CEO of Peyto Exploration, which fracks for gas in B.C., believes Canada has a “moral obligation to provide the rest of the world with the country’s clean, responsibly-developed energy to improve lives and preserve the environment.”

And so, while the blockaders of northern B.C.’s LNG Canada pipeline await police eviction while claiming to stand up for Indigenous sovereignty and climate protection, backers of the project lay claim to their own moral high ground.

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‘Clean’ natural gas is actually the new coal, report says: Don Pittis

July 2, 2019

‘Clean’ natural gas is actually the new coal, report says: Don Pittis

Global investment of more than $1 trillion in planned LNG plants at risk

Employees work next to tanks for liquefied natural gas at a factory in Xian, China in June. China is a prime customer in a worldwide LNG expansion. (Reuters)

There’s no question that when you burn it, methane, the main component of natural gas, is much cleaner than coal.

With that in mind, you might think a newly released report titled The New Gas Boom should be cause for celebration.

Instead, the fresh analysis from Global Energy Monitor, a group well known in energy circles for keeping track of coal plant construction in Asia, sounds a warning, not just for the climate but for investors in what it calculates as a risky $1.3 trillion US worth of global gas infrastructure.

Effectively, the report warns that rather than being an environment-friendly product that can help solve our climate problems, gas is the new coal.

The explosion in spending on planned new liquefied natural gas (LNG) facilities — the vast majority in the U.S. and Canada — combined with new calculations for leakage from the LNG supply chain called fugitive gas — means the world may soon turn against gas in the same way it turned against its solid fuel relative.

“New studies have shown there is significantly more fugitive gas than studies showed five years ago, and the gas is also a bigger contributor to climate change than was understood,” said James Browning, one of the report’s authors.

A 34,000-ton heavy lift vessel carries barges for LNG Canada completing pre-construction work at Kitimat, B.C., last fall to prepare the port for larger vessels once the new $40-billion natural gas export facility is constructed.(YouTube/LNG Canada)

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Latest Weapon of US Imperialism: Liquified Natural Gas

June 29, 2019

Latest Weapon of US Imperialism: Liquified Natural Gas

One of the most important energy battles of the future will be fought in the field of liquid natural gas (LNG). Suggested as one of the main solutions to pollution, LNG offers the possibility of still managing to meet a country’s industrial needs while ameliorating environmental concerns caused by other energy sources. At the same time, a little like the US dollar, LNG is becoming a tool Washington intends to use against Moscow at the expense of Washington’s European allies.

To understand the rise of LNG in global strategies, it is wise to look at a graph (page 7) produced by the International Gas Union (IGU) where the following four key indicators are highlighted: global regasification capacities; total volumes of LNG exchanged; exporting countries; and importing countries.

From 1990 to today, the world has grown from 220 million tons per annum (MTPA) to around 850 MTPA of regasification capacity. The volume of trade increased from 20-30 MTPA to around 300 MTPA. Likewise, the number of LNG-importing countries has increased from just over a dozen to almost 40 over the course of 15 years, while the number of producers has remained almost unchanged, except for a few exceptions like the US entering the LNG market in 2016.

There are two methods used to transport gas. The first is through pipelines, which reduce costs and facilitate interconnection between countries, an important example of this being seen in Europe’s importation of gas. The four main pipelines for Europe come from four distinct geographical regions: the Middle East, Africa, Northern Europe and Russia.

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Multipolar World Order in the Making: Qatar Dumps OPEC

December 13, 2018

Multipolar World Order in the Making: Qatar Dumps OPEC

The decision by Qatar to abandon OPEC threatens to redefine the global energy market, especially in light of Saudi Arabia’s growing difficulties and the growing influence of the Russian Federation in the OPEC+ mechanism.

In a surprising statement, Qatari energy minister Saad al-Kaabi warned OPEC on Monday December 3 that his country had sent all the necessary documentation to start the country’s withdrawal from the oil organization in January 2019. Al-Kaabi stressed that the decision had nothing to do with recent conflicts with Riyadh but was rather a strategic choice by Doha to focus on the production of LNG, which Qatar, together with the Russian Federation, is one of the largest global exporters of. Despite an annual oil extraction rate of only 1.8% of the total of OPEC countries (about 600,000 barrels a day), Qatar is one of the founding members of the organization and has always had a strong political influence on the governance of the organization. In a global context where international relations are entering a multipolar phase, things like cooperation and development become fundamental; so it should not surprise that Doha has decide to abandon OPEC. OPEC is one of the few unipolar organizations that no longer has a meaningful purpose in 2018, given the new realities governing international relations and the importance of the Russian Federation in the oil market.

Besides that, Saudi Arabia requires the organization to maintain a high level of oil production due to pressure coming from Washington to achieve a very low cost per barrel of oil. The US energy strategy targets Iranian and Russian revenue from oil exports, but it also aims to give the US a speedy economic boost. Trump often talks about the price of oil falling as his personal victory.

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Natural Gas Skyrockets As China Pledges Huge Supply Boost

November 15, 2018

Natural Gas Skyrockets As China Pledges Huge Supply Boost

With an eye on last winter’s natural gas supply debacle, Chinese state-owned energy giant CNOOC has pledged a 20 percent rise in gas supply, the company said on Tuesday. The company, one of three state-run oil majors, said that it will supply 24.6 billion cubic meters (bcm) of natural gas during the heating season that kicks off this week, up 20 percent year-on-year, to meet rising natural gas demand in the country.

China is in the process of replacing over reliance on coal usage for both industrial and residential end users to offset rampant air pollution, particularly in its larger urban centers. By government mandate, at least 10 percent of the country’s energy mix needed for power generation by 2020 must be natural gas, with further earmarks set for 2030.

CNOOC, the country’s largest oil and gas producer, said 6.1 bcm of natural gas will be supplied to seven northern provinces and municipalities, up 63.5 percent from last year. The company added that most of the natural gas it’s supplying this year is from offshore fields, coal bed gas and imported liquefied natural gas (LNG). According to reports, CNOOC has also been negotiating with LNG suppliers to ensure gas supply, including dealers from Australia, Indonesia, Malaysia, Qatar, Nigeria and Russia. However, due to the ongoing trade war between the US and China, CNOOC spot purchases of LNG is coming to a halt amid Beijing’s retaliatory tariff on US-LNG imports.

LNG tariffs will also come full circle, since other LNG producers will likely increase their spot prices in the mid-term to a point just under US LNG prices including a tariff, with Chinese firms being forced to pay the extra price.

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Nord Stream 2 Could Still Be Derailed By U.S. Sanctions

November 14, 2018

Nord Stream 2 Could Still Be Derailed By U.S. Sanctions

The potential for more tensions in relations between the U.S. and Russia continue to mount. Late last week, U.S. Energy Secretary Rick Perry said that Washington could still impose sanctions related to the building of the controversial Nord Stream 2 pipeline, which would bring Russian gas directly to Germany under the Baltic Sea. Perry made his comments in Warsaw as the Trump administration tries to convince EU members to sign LNG deals with U.S. producers to offset over reliance on Russian pipeline gas.

On Thursday, Polish state-run gas firm PGNiG signed a long-term LNG deal with U.S.-based Cheniere Marketing International. Poland has been fervent in its resistance to the Nord Stream 2 pipeline as well as working to reduce its reliance on geopolitically charged Russian gas. Moscow, for its part, has cut gas supply to Europe in the past during cold winter months to exert its influence in the region.

Warsaw and Washington also signed on Thursday a joint declaration on enhanced energy security cooperation. “This is also a clear signal that the U.S. strongly supports a pro-Poland and pro-Europe energy security policy,” Perry said. “Energy security in turn requires energy diversity. That is the reason we oppose the Nord Stream 2 project which would further increase the dangerous energy dependence many European nations have on the Russian federation,” he added.

Poland consumes around 17 billion cubic meters of gas annually, more than half of which comes from Russian energy giant Gazprom under a long-term deal that expires in 2022. However, Poland has said that it would not renew the gas supply deal, making the country race against time to replace the contract with new gas volumes.

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Germany Admits it Needs More from Russia than Nordstream 2

October 26, 2018

Germany Admits it Needs More from Russia than Nordstream 2

During the years the U.S. and its satraps in Poland and the Baltics fought the Nordstream 2 pipeline it was always apparent Germany was in the driver’s seat. It was also apparent that this would be the wedge issue that would ultimately force Germany to pursue independent policy from the U.S.

Nordstream 2 is and was always a reaction to the U.S.’s meddling in Europe’s energy policy which this cycle of began with the scuttling of the South Stream pipeline in 2013.

From the EU’s perspective changing the rules under which South Stream would operate after the contracts for it were signed was a way of gaining leverage over Russia and Gazprom. So too was the help protesters in Kiev received to overthrow the Yanukovich government from the U.S. and the EU.

That operation was meant to put the Ukrainian pipelines under EU control where they could dictate terms to Gazprom and choke the profit out of its gas deliveries. It would also advance NATO and the EU to Russia’s western border and there was to be nothing Putin could do to stop the U.S. from putting nukes targeting Moscow there.

Too bad for them it didn’t work out that way.

This is one of the reasons why the U.S. is so incensed with Russia and Putin over Ukraine. It’s why his chickenhawks in his cabinet and John McCain pushed so hard for sanctions and weapons support to Ukraine before the dearly-departed Brain Tumor killed him.

Obviously, the other was being stymied in taking over Crimea and forever losing the opportunity to grab the port at Sevastopol.

So, why the history lesson?

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Is The U.S. Using Force To Sell Its LNG To The World?

October 8, 2018

Is The U.S. Using Force To Sell Its LNG To The World?

The Trump Administration trade policy is nowhere so clear as in the energy area. For years it was thought that the younger Bush Administration was one of the most energy industry friendly in history. But the Trump Administration has gone far beyond that.

Hiring Ray Tillerson, the former CEO of ExxonMobil, as U.S. Secretary of State, sent a strong signal to the entire industry, even though his tenure proved to be temporary.

Prior to that, the Administration withdrew from the Paris Climate Agreement, a long-held priority of Exxon and the entire oil industry. Following hard upon that, the Environmental Protection Agency (EPA) has reduced or eliminated regulations limiting carbon and other pollutants.

Exxon has for more than a decade underwritten the now discredited, right wing attack on climate change as a hoax. Although the energy industry has now publicly acknowledged climate change as a global threat, in practice the subject is still largely ignored.

Going further, the Trump Administration has removed and reduced regulations that hampered the industry expansion, including allowing drilling on both ocean coast, while easing safety regulations that were brought into effect after BP’s Gulf of Mexico disastrous spill, the worst in U.S. history.

Government protected nature preserves are being opened to exploration and drilling for the first time in generations. Added to that was the dropping of regulations that for many years prohibited export of U.S. crude. Since then, the U.S. has become a major player in the global energy industry.

The Administration currently plans to rescind and lower fuel efficiency standards for autos and trucks. That is likely to encourage increased purchase of larger SUVs, increased oil consumption, and rising gasoline prices.

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Australia Looks To Tackle Its Looming Gas Shortage

June 19, 2018

Australia Looks To Tackle Its Looming Gas Shortage

In a strange about-face for the world’s soon to be top liquified natural gas (LNG) exporter, Australia is now considering importing the fuel. On Monday, ExxonMobil, Australia’s top gas supplier, said it is considering importing the super-cooled fuel to help offset an anticipated gas shortage from 2021 going forward as well as protecting its market share.

ExxonMobil is also stepping up exploration off the coast of Victoria and considering developing a gas field called West Barracouta close to an existing field, the oil major also said in an emailed statement on Monday.

“Combined with the existing Gippsland resource and infrastructure, an LNG import facility could ensure ExxonMobil can continue to meet our customers’ needs,” the company said, adding that the facility could become operational by around 2022.

Looming gas shortage Down Under

This disclosure comes as Australia struggles with a natural gas shortage, a unique phenomenon for the gas exporting giant. Late last year, the Australian Competition & Consumer Commission and the Australian Energy Market Operator said that gas shortfalls in the country for 2018 and 2019 would be much worse than originally forecasted. They both predicted a shortfall of nearly 110 petajoules of gas in 2018 and similar in 2019, which represents about one-sixth of the projected amount of gas demand in Australia.

In light of this growing problem, late last year Canberra threated to put gas export regulations in place, but the idea has been put on hold as the government and suppliers work out a deal.

However, upping the ante even more, Australia’s energy market operator warned in March that Victoria, the country’s biggest gas consuming state, could face shortages from mid-2021 due to a rapid drop in supply from the Gippsland Basin Joint Venture, owned by ExxonMobil and BHP Billiton, Reuters said in a report. Related: The Fed Is Driving Down Oil Prices

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Huge Chinese Demand Fuels The Next U.S. Gas Boom

March 12, 2018

Huge Chinese Demand Fuels The Next U.S. Gas Boom

China’s push for cleaner air and fuel is driving an unprecedented demand for natural gas, and the United States is well-positioned to seize this opportunity and export even more of its growing gas production to the thirsty nation.

U.S. companies have plans for even more liquefied natural gas (LNG) export trains and facilities to come online in the coming years, and this winter’s surge in Chinese LNG demand and imports underpins a second wave of LNG investment in the United States, analysts and company executives believe.

The Chinese push to cut pollution and make millions of households switch to natural gas from coal for heating resulted in China becoming the world’s second-largest LNG importer in 2017, outpacing South Korea and second only behind Japan, the U.S. EIA said last month. Chinese LNG imports surged 46 percent last year. And while China increased its domestic production and pipeline imports last year, it was not enough; natural gas shortages in northern China led to record levels of LNG imports during the winter. Overall, natural gas imports accounted for 40 percent of China’s 2017 natural gas supply, and LNG made up more than half of those imports. True, China is planning to hit an all-time high for natural gas production this year, which includes raising the share of gas in its energy mix—still, domestic production growth will be woefully insufficient compared to its soaring consumption.

So, the United States is all too happy to step in to supply part of that demand.

Cheniere Energy is one such supplier, which signed last month two long-term deals—through 2043—to supply LNG to China National Petroleum Corporation (CNPC), with the LNG price indexed to the Henry Hub price plus a fixed component.

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Momentous Shift in US Natural Gas, with Global Consequences

March 3, 2018

Momentous Shift in US Natural Gas, with Global Consequences

And this is just the beginning.

The year 2017 was when the US became a net exporter of natural gas for the first year in history. The production of natural gas has been surging since 2007, when fracking turned into a boom, whittling away at the need for importing natural gas via pipeline from Canada and via LNG from the global markets. Last year, according to the EIA’s just released data, the US exported 129 billion cubic feet (Bcf) more natural gas than it imported. And this is just the beginning:

Exports to Mexico via pipeline have been rising for years as more pipelines have entered service and as Mexican power generators have switched from burning oil to burning cheap US natural gas (the US imports no natural gas from Mexico).

In 2017, natural gas pipeline exports to Mexico surged 12% year-over-year to 1,543 Bcf. But in 2016, a new trend became visible: US natural gas exports via LNG tanker to Mexico (marked in red in the chart below), which rose from negligible in prior years to 28 Bcf in 2016 and to 141 Bcf in 2017. Total exports to Mexico jumped 20% year-over year in 2017, to 1,684 Bcf:

The US has a bilateral natural-gas trading relationship with Canada, both importing and exporting. Exports to Canada have surged from almost nothing in the late 1990s to a peak of 2,145 Bcf in 2016 but fell 5% in 2017 to 2,043 Bcf.

Imports from Canada, while they rose over the past two years, remain in the range established over the past two decades. But due to the surge in exports to Canada, net imports (imports minus exports) have plunged 43% from a peak of 3,600 billion cubic feet in 1999 to 2,042 Bcf:

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Something Unexpected Just Happened In LNG Markets

February 28, 2018

Something Unexpected Just Happened In LNG Markets

In the increasingly topsy-turvy world of liquefied natural gas (LNG) markets, the world’s largest LNG importer could soon be exporting the super-cooled fuel to the world’s second largest LNG exporter – a situation unimaginable, even laughable just a few years ago.

On Monday, news broke that a Japanese consortium, made up of JERA, the world’s largest private LNG buyer, and Marubeni Corp., were planning to export gas to industrial users on Australia’s eastern coast. There is even a possibility that the Japanese consortium will construct an LNG import terminal in New South Wales (NSW), Australia’s most populous state.

A report three days ago in The Australian Financial Review said that the proposed terminal’s imports could represent up to 75 percent of NSW’s gas demand, while plans to increase the number of gas-fired power stations will increase that demand pull.

How could Japan, for all practicable purposes a hydrocarbon anemic country with scant oil and gas resources, import gas to oil and notably gas rich Australia?

The answer is straight forward: In an effort lock in lucrative prices for LNG in the Asia-Pacific region amid limited supply around the start of the decade, Australia went on an LNG export project development feeding-frenzy. Since the country doesn’t have an energy master plan there was no coordination on these massive CAPEX export projects. Adding insult to injury, budget blowouts and cost overruns since then have been the norm, casting further doubt on the wisdom of Australia having as many as ten major LNG export projects.

As a result, Australia will soon overtake Qatar as the world’s largest LNG exporter, with more than 80 million tons per annum (mtpa) of liquefaction capacity. Qatar, however, and likely for geopolitical reasons as much economic, has vowed to increase its production capacity from 77 mtpa to over 100 mpta in the next five years.

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China Is Erasing The Gas Glut

February 23, 2018

China Is Erasing The Gas Glut

China and other countries in Southeast Asia are helping erase the LNG glut, which was thought to last well into the next decade.

China is in the midst of a radical overhaul of how many of its citizens heat their homes. The government has made an aggressive push to scrap coal burning, particularly in smoggy cities, replacing home coal furnaces with natural gas. The effort has been so successful, arguably too successful, that there has been natural gas shortages this winter.

At the global level, China is helping to eliminate the glut of LNG, which many analysts predicted would stretch into the 2020s after a series of high-profile LNG export terminals came online in recent years.

Several of them, including Chevron’s Gorgon LNG facility in Australia, saw tens of billions of dollars’ worth of investment, massive bets on the future of LNG demand in Asia.

At the start of 2017, there was an estimated 340 million tonnes of annual LNG capacity (mtpa) around the world, up by more than a quarter since 2012. But all of the new capacity helped crash prices. At the start of 2014, for instance, spot LNG prices in Asia – the Platts JKM marker – traded at about $20/MMBtu. A year later, spot cargoes were down by two thirds.

The long lead times for LNG export terminals make it hard for the markets to respond nimbly to changes in supply and demand. Sudden large additions of export capacity leave the market drowning in supply, while demand increases at a more gradual pace.

So many new terminals have already come online, but with 114 mtpa of LNG under construction, the LNG markets are thought to be under threat from still more waves of new supply. An estimated 57 mtpa was under construction in Australia, as of last year, with a further 31 mtpa in development in the U.S.

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U.S., Canada Face Off For LNG Dominance

February 20, 2018

U.S., Canada Face Off For LNG Dominance

Considering that the North American shale revolution is the key global energy development of the past decade, it’s surprising that Canada’s natural gas production has actually been falling. Canada is still the world’s fifth largest gas producer, but output has dropped around 15 percent over the past 15 years to 16 Bcf/d.

As a free market economy without the over-influence of a national oil company, Canada’s future gas production is desired by the rapidly globalizing gas market. According to BP, Canada has about 80 Tcf of proven gas reserves, and with low incremental needs, this large endowment could make the country a worldwide gas exporter at some point in the 2020s.

The main problem for Canadian gas production is the decline of its sole export market, the U.S., where dry gas production has risen 35 percent to nearly 80 Bcf/d since 2010. In turn, over the past decade, Canada’s gas exports to the U.S. have been sliced in half to 5.5 Bcf/d. This decline will continue: The EIA projects that U.S. gas production will increase 40 percent by 2040.

Enter Canada’s necessity for LNG, the fastest-growing way to trade gas and a market that constitutes a rising 12 percent of all global use. There is great potential to export LNG off the coast of British Columbia, where cargoes can ship gas produced in western Canada to fast growing Asian markets. Western Canada accounts for around 70 percent of the country’s gas production.

Now already online, U.S. LNG will be a competitor for Canadian LNG. But, even with the Panama Canal expansion, the trip from British Columbia to Asia is still approximately two-thirds shorter than from the U.S. Gulf. Hampered today by a global supply glut, potential western Canada’s LNG projects should come online early next decade, right when expected higher oil prices will make Canada’s oil-linked LNG profitable, and the end of many long-term existing contracts will allow Asian buyers to seek new sources of supply.

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