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Mezzaluna, Mr. Souki and the Journey to the Top

“If you keep digging, digging, digging, you find something.”
~ Charif Souki

O.J. Simpson died last month. Unless you’ve been living under a rock, you probably know that.

Well, I guess I sort of have been. I’d been busy working on the latest issue of Crisis Investing, so I only found out about it over the weekend. But, as I caught up on media reports about his “legacy,” I couldn’t help but think about a different yet parallel story… and one that has important investment implications for us.

And that’s the story of Charif Souki, an American restaurateur-turned-energy titan.

In the 90s, Charif owned an Italian restaurant in West L.A.’s Brentwood neighborhood. It was called Mezzaluna and, coincidentally, it was where Nicole Simpson had her last meal on June 12, 1994.

On that fateful night, Simpson’s mother left her glasses there, so a waiter from the restaurant, Ron Goldman, went to Simpson’s home to return them. Shortly after midnight, Goldman was found dead with Simpson outside her condo.

The Switch

After the murders, Mezzaluna was swarmed by reporters, photographers, and curious tourists. People bombarded employees for details, even asking about Simpson’s final meal. Charif was appalled by the media frenzy – “the morbid curiosity, the lack of taste and decency of people, was pretty astonishing,” he would later remark. It was then that he made the decision to sell Mezzaluna and venture into something new.

After some deliberating, he made the unlikely transition to the oil-and-gas industry.

His first big idea was to import cheap, plentiful natural gas from the Middle East in the form of liquefied natural gas, or LNG.

…click on the above link to read the rest of the article…

The Four Key Reasons Why The U.S. Will Never Stop Targeting Russia’s LNG Sector

May 1, 2024

The Four Key Reasons Why The U.S. Will Never Stop Targeting Russia’s LNG Sector

LNG has become the most important swing energy source in an increasingly insecure world.
Energy exports remain the foundation stone of Russia’s essentially petro-economy.
Russia’s LNG industry is closely associated in Russia with President Vladimir Putin personally.

Perhaps even more than its targeting of Russian oil exports, the U.S. has been laser-focused on its liquefied natural gas (LNG) sector as they key area it wants to effectively destroy over the long term. Last week’s suspension of Russia’s flagship Arctic LNG-2 project by lead operator Novatek is the latest of Washington’s trophies in this regard, but it is very unlikely to be the last. As U.S. Assistant Secretary of State for Energy Resources Geoffrey Pyatt said on 24 April: “[Novatek] has recently had to suspend production at its Arctic LNG-2 liquefaction facility, in part because of sanctions that the Biden administration has led.” He added: “We’re going to keep tightening the screws […] We’re going to continue to designate a broad range of entities involved in development of other key energy projects, future energy projects as well, and associated infrastructure including the Vostok Oil Project, the Ust Luga LNG Terminal, and the Yakutia Gas Project.” So, why is the U.S. so concerned about Russia’s LNG sector?

The first of four key reasons is that LNG has become the most important swing energy source in an increasingly insecure world. Unlike oil or gas that is transported through pipelines, LNG does not require years and vast expenses to build out a complex infrastructure before it is ready to transport anywhere. Once gas has been converted to LNG, it can be shipped and moved anywhere within a matter of days and bought reliably either through short- or long-term contracts or immediately in the spot market…

…click on the above link to read the rest of the article…

EU Prepares to Tighten Screws on Russian LNG Imports

April 26, 2024

EU Prepares to Tighten Screws on Russian LNG Imports

In a move that could reshape Europe’s energy landscape, the European Commission is poised to propose new sanctions targeting Russian liquefied natural gas (LNG) imports. According to Reuters sources close to the matter, the proposed measures will include a ban on shipments within the EU and sanctions on three Russian LNG projects.

The European Commission’s decision comes amid growing concerns over Europe’s reliance on Russian energy, particularly in the wake of the ongoing conflict in Ukraine. While the EU imposed a ban on Russian seaborne oil imports earlier this year, it has thus far refrained from taking similar action against LNG imports. However, with imports of Russian LNG surging since the start of the war, accounting for around 15% of EU gas supply, pressure has been mounting on Brussels to act.

The proposed ban on trans-shipments within the EU is aimed at preventing the diversion of Russian LNG cargoes to other destinations. Currently, Belgium, France, and Spain are the largest importers of Russian LNG, with many of these imports being re-exported to other countries, including China. By imposing restrictions on trans-shipments, the EU hopes to ensure that Russian LNG does not find its way to markets outside of Europe.

In addition to the ban on trans-shipments, the European Commission is also considering sanctions on three Russian LNG projects – Arctic LNG 2, Ust Luga, and Murmansk. While the details of these sanctions are still being discussed, they are expected to target projects that are not yet operational, further complicating Russia’s efforts to expand its LNG exports.

The move by the European Commission reflects growing unease within the EU over its dependence on Russian energy. With tensions between Russia and the West showing no signs of abating…

…click on the above link to read the rest of the article…

Peter Zeihan: You’re Being Instructed Not to Notice This!!!

November 29, 2022

Peter Zeihan: You’re Being Instructed Not to Notice This!!!

https://youtu.be/6pLAaWUUM6c

Europe May Face LNG Crisis This Winter

May 11, 2022

Europe May Face LNG Crisis This Winter

Rush to wean off Russian gas has made European consumers highly vulnerable to LNG price shocks.
Global LNG demand outstrips supply in 2022.
New LNG projects are unlikely to provide relief until 2024.

A liquified natural gas (LNG) crisis is brewing for European countries dealing with energy insecurity in the wake of Russia’s invasion of Ukraine, as demand will outstrip supply by the end of this year, Rystad Energy research shows. Although soaring demand has spurred the greatest rush of new LNG projects worldwide in more than a decade, construction timelines mean material relief is unlikely only after 2024. Global LNG demand is expected to hit 436 million tonnes in 2022, outpacing the available supply of just 410 million tonnes. A perfect winter storm may be forming for Europe as the continent seeks to limit Russian gas flows. The supply imbalance and high prices will set the scene for the most bullish environment for LNG projects in more than a decade, although supply from these projects will only arrive and provide relief from after 2024

The European Union’s REPowerEU plan has set an ambitious target to reduce dependence on Russian gas by 66% within this year – an aim that will clash with the EU’s goal of replenishing gas storage to 80% of capacity by 1 November. By shunning Russian gas, Europe has destabilized the entire global LNG market that began the year with a precarious balance after a tumultuous 2021. The decision to sharply reduce reliance on Russian gas and LNG from current levels of between 30-40% will transform the global LNG market, resulting in a steep increase in energy-security based European LNG demand that current and under-development projects will not be able to supply.

…click on the above link to read the rest of the article…

US Gas Prices Soar As Europe And Asia Scramble For LNG

May 9, 2022

US Gas Prices Soar As Europe And Asia Scramble For LNG

U.S. gas prices have surged to the highest level in real terms since the financial crisis in 2008 as strong demand for LNG from buyers in Europe and Asia puts pressure on inventories. Front-month futures for gas delivered to Henry Hub in Louisiana are trading at almost $9 per million British thermal units, up from just over $3 at the same point last year and less than $3 in 2019.

Front-month futures have surged into a record backwardation of almost $4 above futures for delivery one-year from now, as traders anticipate inventories will remain under pressure through the rest of the year.

Working gas stocks in underground storage are 335 billion cubic feet or 18% below the pre-pandemic five-year seasonal average for 2015-2019.

Inventories have remained low despite a fairly mild winter, with population-weighted heating demand this winter in the Lower 48 states around 7% below the average.

Domestic gas production has recovered to its pre-pandemic peak, according to data from the U.S. Energy Information Administration. But exports especially in the form of LNG have risen sharply, which is keeping inventories low and putting upward pressure on prices.

In recent months, LNG exports have been equivalent to 10-12% of domestic dry gas production, up from around 4% in early 2019. Exports have become a big enough share of the market they have started to enforce a partial convergence with prices in Europe and Asia.

U.S. gas supplies have tightened as Europe and Asia scramble to buy LNG to refill their own depleted storage after last winter and amid fears about a disruption of gas supplies from Russia.

The rise in prices will enforce maximum fuel-switching among power generators from gas to coal to conserve fuel stocks this summer, with spot gas now uncompetitive against coal except for peak generation.

…click on the above link to read the rest of the article…

Why liquefied coal (CTL) and natural gas (GTL) can’t replace oil

March 21, 2022

Why liquefied coal (CTL) and natural gas (GTL) can’t replace oil

Preface. Here are just a few of the reasons why we aren’t likely to convert enough coal to diesel to matter as oil decines (see Chapter 11 Liquefied Coal: There Goes the Neighborhood, the Water, and the Air for more details on this in When Trucks Stop Running: Energy and the Future of Transportation)

It is not likely much coal will be converted to diesel, because if all global coal production were converted to liquid coal, perhaps 17 million barrels a day (Mb/d) could be produced. That amounts to 22 % of current world oil production. If more efficient liquefaction technologies came along, and coal now used to generate electricity and make cement, steel, aluminum, paper, and chemicals were all diverted to make liquid fuels, as much as 54 Mb/d could be made. But roughly 17 Mb/d is more likely because diverting most or all of the coal from other uses to make CTL is not realistic. After all, we do need cement and steel to build the CTL coal liquefaction plants, roads, and the trucks and pipelines to transport the CTL itself.

In the U.S. coal production could be doubled to make CTL, but that might cut reserve life in half. In the U.S., there may be 63 years of reserves at current rates of production, but only 31.5 years if we doubled coal production.

The thermal efficiency of liquefaction is roughly 50–60 %; hence, only half the coal energy used in liquefaction will come out as the energy available in the CTL fuel. And there may be other losses. An inconvenient truth about coal is that it is a dirty fuel. If carbon capture and sequestration were to be required, 40 % of the remaining energy in a liquid coal power plant would be consumed.

…click on the above link to read the rest of the article…

European LNG Imports Hit Two-Year High As US Flotilla Delivers Much-Needed Supplies

January 11, 2022

European LNG Imports Hit Two-Year High As US Flotilla Delivers Much-Needed Supplies

A flotilla of liquefied natural gas (LNG) from the US has finally arrived in Europe, increasing LNG imports on the fuel-starved continent to a two-year high. The fresh injection of natural gas is helping to offset declining Russian shipments. Prices of European natural gas fell Monday.

Data compiled by Bloomberg shows LNG gas imports in northwest Europe jumped to their highest levels since December 2019. The supply comes from a flotilla of up to 20 LNG vessels from the US that began their sailings in mid/late December.

Fresh supplies of LNG are helping to ease supply woes but will not solve the energy crisis on the fuel-starved continent this winter because stockpiles are at very low levels for this time of year. News of fresh supplies is temporary relief and has resulted in front-month Dutch gas futures falling as much as 6% to 82.50 euros a megawatt-hour and traded at 88 euros around 0600 ET.

Since mid-December, European gas prices have been halved from about 182 euros to 88 euros today. The downdraft is primarily due to the prospects of the flotilla.

Notably, there is still a significant arbitrage spread between US and EU Nattie prices over and above historical norms…

Here’s our reporting on the new supplies:

“With the peak of winter still ahead, we see a wide range of potential near-term price outcomes and expect elevated volatility to persist,” Morgan Stanley wrote in a commodity note.

…click on the above link to read the rest of the article…

This economy is going down

December 28, 2021

This economy is going down

UK gas prices have fallen back this week – although they are still some 400 percent higher than at the start of 2021. And the reasons for the fall in price should not breed complacency. First, the arrival of a south-westerly airflow off the Atlantic has finally begun to spin those offshore wind turbines after last week’s doldrums. At the time of writing, wind is supplying 28.5 percent of our electricity, allowing gas to fall back to 27.4 percent, and for coal plants to be switched off – although nuclear is being run flat out at 20 percent, reflecting the still too high price of gas. With stronger winds forecast for next week, demand for gas may fall even further. But the winter is only just beginning, and it is doubtful that we will get through January, February and early March without at least one more week of cold, still, high pressure air. And if we are unlucky, we could face several weeks in a row.

The second reason for the lull in price is worrying for a more complicated reason. On Wednesday, Marwa Rashad at Reuters reported that:

“At least ten cargoes of liquefied natural gas (LNG) have recently been diverted from Asia to head west drawn by Europe’s record high prices amid supply concerns ahead of peak winter demand, industry sources said…

“In addition to the above cargoes, a U.S. cargo onboard Marvel Crane had headed toward Panama bound for Asia before being diverted northeast and now signalled it was bound for the UK’s South Hook terminal, according to ICIS LNG Edge.

“Data Intelligence firm Kpler said it has listed more tankers diverting towards Europe from Asia and Other destinations like Brazil including British Contributor, Tembek, LNGShips Manhattan, LNG Alliance and are eying two more for possible route change.

…click on the above link to read the rest of the article…

BC Looks like an LNG Loser: Report

June 24, 2021

BC Looks like an LNG Loser: Report

Prospects have been battered by global competition, volatility, delays and cost overruns.

Facing a world of challenges: Artist’s rendition of the sole LNG project under construction in BC, the LNG Canada terminal in Kitimat. Image via Fluor.

Once touted as an economic powerhouse, the liquified natural gas industry is on the rocks, according to a worldwide survey of LNG terminals from the Global Energy Monitor, a non-profit research group responding to climate change.

LNG terminals are among the largest capital projects attempted in modern industry, costing up to $30 billion per project. Gas is extracted from underground deposits, piped to LNG plants where it is compressed by cooling to liquid form, loaded onto ships and transported to other markets.

“The sheer size of the projects has exposed investors to catastrophic losses,” said Lydia Plante, lead author of the just-released report.

The survey found that planned projects representing 38 per cent of global export capacity are facing delayed final investment decisions and other serious hold-ups. Cost overruns are common.

Canadian LNG is particularly bad off, Ted Nace, executive director of the Global Energy Monitor, told The Tyee. “The problem with the Canadian LNG expansion is that it’s especially vulnerable because Canada is a high-cost producer on a world basis.”

That’s because Canada plans to produce its LNG from fracking — an energy and capital-intensive process to access gas hidden deep inside shale rock.

Canadian LNG comes up short on the global market, said Nace, particularly when it competes against countries where conventional gas sources make LNG cheaper to produce.

And global competition is only getting fiercer. Qatar and Russia, for example, have vast supplies of cheap natural gas. “These super low cost producers,” said Nace, “are not giving up market share without a fight.”

…click on the above link to read the rest of the article…

Worst Drought in 91 Years Turns Brazil Into Hot Spot for LNG

June 6, 2021

Worst Drought in 91 Years Turns Brazil Into Hot Spot for LNG

State-run oil company is seeking liquefied natural gas cargoes
Water crisis curbs hydropower supplies across South America

As hydropower output declines, South America’s most populous nation is turning to the super-chilled fuel to keep lights on for its 212 million people. Brazil has already imported a record number of LNG cargoes just from the U.S. this year while state-run oil company Petrobras SA is tapping the spot market for another four.

The drought comes as the nation — which boosted its ability to import LNG in 2014 to avoid blackouts during soccer’s World Cup — is facing declining gas production from major supplier Bolivia. The conditions are also affecting other countries in South America, with Chile seeking to buy LNG and traders speculating Argentina could be next.

Brazil's Thermal Power Rises as Hydro Slides

“South America is running out of hydropower because of dry weather, and I wouldn’t be surprised if buyers all across the region were buying more LNG,” said Henning Gloystein, global director of energy and natural resources at consultants Eurasia Group. “Besides Southeast Asia and India, South America is a growth area for gas demand.”

Hydropower currently accounts for about 70% of Brazil’s electricity mix, and the lack of rainfall has forced the country to import 34 U.S. LNG cargoes over the past six months to bridge the power-supply gap, shipping data compiled by Bloomberg show. That eclipses the 17 sent to Chile and four to Mexico, which has long been the top buyer of U.S. LNG in the Western Hemisphere. Brazilian imports are approaching levels typically seen only from buyers in Asia and Europe.

…click on the above link to read the rest of the article…

LNG in BC Is a ‘Losing’ Bet, Report Finds

October 22, 2020

LNG in BC Is a ‘Losing’ Bet, Report Finds

New analysis calls out rosy job projections for industry ‘misleading’ and unrealistic.

BC’s LNG Canada project under construction earlier this year. Photo by Robin Rowland, the Canadian Press.

A respected U.S. energy group has criticized a rosy Conference Board of Canada report championing more liquefied natural gas development in British Columbia as “a lobbying effort for government subsidies, support and flexibility.”

The scathing critique by the Institute for Energy Economics and Financial Analysis characterized the Conference Board report as “misleading,” short on facts and unrealistic.

“The Conference Board, a non-profit economic research organization based in Ottawa, believes Asian, or more specifically, Chinese demand growth can sustain a further leap in British Columbian LNG capacity growth, despite corporate investors already folding their hands,” said the institute in its highly-critical paper.

The Ohio-based institute is funded by a variety of philanthropic organizations and examines issues related to energy markets, trends and policies. Its mission is “to accelerate the transition to a diverse, sustainable and profitable energy economy.”

The Conference Board’s July report, titled “Rising Tide,” estimated that if the government boosted LNG development to export 56 million tonnes of liquefied natural gas a year the industry would create 100,000 jobs based on an imaginary growth scenario.

“B.C. is becoming the focal point for a new Canadian industry — liquefied natural gas,” claimed the report, which failed to mention that 13 LNG projects have already been cancelled or suspended in B.C. and other parts of Canada due to bad economics, global oversupply and high extraction costs based on hydraulic fracturing.

At the moment, Shell’s LNG Canada is the only active project in B.C.

…click on the above link to read the rest of the article…

Shell’s Colossal Miscalculation in 2011 of Today’s LNG Price: Largest-Ever $12-$17-Billion “Floating Facility” Shut Down, Months After Shipping First LNG. Done in by Long Price Collapse

August 22, 2020

Shell’s Colossal Miscalculation in 2011 of Today’s LNG Price: Largest-Ever $12-$17-Billion “Floating Facility” Shut Down, Months After Shipping First LNG. Done in by Long Price Collapse

Built to profit from sky-high LNG Prices in Japan. Sunk by surging US LNG Exports, multi-year collapse in LNG prices, global LNG glut.

The Great East Japan Earthquake and subsequent tsunami in March 2011 triggered a series of events at the Fukushima power plant that led to catastrophic meltdowns in three of its six reactors, which led Japan to take the remaining of its 54 operating reactors offline, as a new regulatory and safety regime was established for reactors to come back on line. This caused a mad scramble to switch to other forms of power generation, including power plants fired by natural gas, which Japan has to import as liquefied natural gas (LNG), which triggered a blistering spike in LNG prices that caused all kinds of enormous long-term investments to be commenced around the world, including in the US and in Australia, in order to export super-lucrative LNG into booming Asian demand.

But in 2014, the price of LNG started sinking, and in 2015, it plunged, and those investments became huge money pits – including perhaps the largest of them all, Shell’s floating LNG-factory, the Prelude FLNG, at a length of 1,600 feet, the largest floating facility ever built, and at an undisclosed cost estimated to have been in the range between $12 billion and $17 billion, now languishing off the coast of Australia (the red hull is the Prelude, the smaller ship in front of it is a huge LNG tanker; image by Shell):

In April 2014, the average spot price of LNG at arrival in Japan was $18.30 per million Btu, according to Japan’s Ministry of Economy, Trade, and Industry (METI). This is as far as its data series goes back.

…click on the above link to read the rest of the article…

By Many Calculations, LNG Is a Fail for BC: Report

July 9, 2020

By Many Calculations, LNG Is a Fail for BC: Report

The math for liquefied natural gas is bad on emissions, revenues, jobs, even offsetting coal in China, finds a new study.

Go figure. BC NDP Premier John Horgan announcing in 2018 a $40-billion investment by the consortium LNG Canada in its Kitimat terminal for processing and export. Photo: BC Government.

David Hughes, one of the nation’s foremost energy analysts, has a simple message for the governments of British Columbia and Canada when it comes to advocating for LNG projects.

“Do the math.”

Hughes has parsed the numbers and they don’t add up on methane emissions, climate change targets, resource royalties, job benefits or even basic economics.

“The math is clear,” says Hughes, whose latest 57-page report on LNG exports highlights a long pipeline of damning figures.

Emissions targets: Won’t LNG help hit them? The numbers say noThe Tyee is supported by readers like you Join us and grow independent media in Canada

The province’s CleanBC plan, for example, demands an 80-per-cent reduction in greenhouse gas emissions by 2050 from 2007 levels.

But Hughes, who was a scientific researcher for 32 years at the Geological Survey of Canada, checked the math on emissions based on energy production forecasts made by the Canada Energy Regulator.

His math is conservative. It excluded any LNG exports. It assumes current major reductions in methane leaks from gas extraction might be plugged. And it further assumes the electrification of some upstream projects. Still, Hughes found that “emissions from oil and gas production would exceed B.C.’s 2050 target by 54 per cent.”

(A group of scientists writing in Nature found the same thing on a global scale last year: just using existing fossil fuel infrastructure takes the world into climate change hell.)

…click on the above link to read the rest of the article…

The LNG Market Is “Imploding”

April 28, 2020

The LNG Market Is “Imploding”

LNG tanker

While everyone is understandably watching the meltdown in the crude oil market, the global market for natural gas is also cratering.

At least 20 cargoes of U.S. liquefied natural gas (LNG) have been cancelled by buyers in Asia and Europe, according to Reuters. The global pandemic and the unfolding economic crisis have slashed demand for gas worldwide. Cheniere Energy, one of the main exporters of U.S. LNG, has seen an estimated 10 cargoes cancelled by buyers halfway around the world, Reuters said.

The price for LNG in Asia was already crashing before the pandemic, owing to a substantial increase in supply last year. Prices for LNG in Asia for June delivery have recently traded at $2/MMBtu, only slightly higher than Henry Hub prices in the U.S.

As recently as October, LNG prices in Asia traded at just under $7/MMBtu.

The problem for American gas exporters is that after factoring in the cost of liquefaction and transportation, gas breakeven prices for delivering to Asia are around $5.56/MMBtu, according to Reuters. But prices are trading at less than half of those levels.

Gas exports tend to be conducted under rigid contracts, but cargoes are now facing cancellation.

“The financial prospects for [LNG] ? once one of the globe’s hottest energy commodities – seem to be imploding before our eyes,” Clark Williams-Derry wrote in a new report for the Institute for Energy Economics and Financial Analysis (IEEFA). He noted that LNG prices in the fall of 2018 were at around $12/MMBtu.

The oil majors have made large bets on LNG in recent years. Royal Dutch Shell spent more than $50 billion to buy BG Group in 2015. The move back then was made with an eye on surging demand for natural gas. “We will now be able to shape a simpler, leaner, more competitive company, focusing on our core expertise in deep water and LNG,” Shell’s CEO Ben van Beurden said after closing on the acquisition of BG Group more than four years ago.

The deal remade Shell into one of the largest traders of LNG on the planet. Several other oil majors – Total SA, ExxonMobil and Chevron, for instance – have also made massive bets on LNG.

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