U.S. LNG providers hope to win share of expiring supply contracts


(Bloomberg; Nov. 2) - The $90 billion-a-year liquefied natural gas market will be reshaped in 2018 as several large, long-term contracts start to expire. Growing supplies from the U.S., higher demand in Europe and Asia, and geopolitical tension surrounding Russia and Qatar, the world’s top suppliers, promise to shift long-time trading patterns. For decades the majority of LNG bought and sold around the world was governed by long-term contracts of up to 20 years. A fifth of those will expire from 2018 to 2020.


Over the next decade, contracts governing 80 percent of all global LNG trade will be rewritten. For now, the LNG market is in the midst of an enormous supply glut, in part because of the advent of U.S. exports the past two years. That glut is likely to persist until at least 2020, keeping prices low. Most LNG contracts expiring next year involve buyers in Europe, where countries are trying to reduce their reliance on Russian pipeline gas. Europe’s quest for more LNG could offer an opening for U.S. exporters.


Meanwhile, the world’s top LNG exporter, Qatar, is looking to expand its market share. It recently announced plans to boost LNG production by 30 percent over the next several years. One of the key advantages for the U.S. is its vast shale reserves, along with a pipeline network that allows exporters to bring gas from all over the country to export facilities being developed along the Gulf Coast, ensuring a steady supply. U.S. LNG providers hope to sign big deals in 2018, which could shave billions of dollars off the trade deficit with Japan, South Korea and China. “(It’s) going to be a pivotal year,” said Kathleen Eisbrenner, CEO of NextDecade, which proposes a terminal in Texas.

Novatek says China will help raise money for Arctic LNG project


(UPI; Nov. 1) - Russian independent gas producer Novatek said Nov. 1 it reached an agreement with a Chinese bank to help proceed toward its second liquefied natural gas project in Russia’s Arctic. Novatek said it signed a memorandum of understanding with the China Development Bank to cooperate on steering capital toward LNG. "Our strategy envisages a rapid growth of LNG production using international financing sources," Leonid Mikhelson, chairman of the Novatek board, said in a statement.


Novatek, the largest privately owned gas producer in Russia, leads the $27 billion Yamal LNG project, the first in Russia’s Arctic. Its initial cargo is expected before the end of the year. Along with partners French major Total and China National Petroleum Corp. (CNPC), Novatek is looking toward gas markets in the Asia-Pacific. The Yamal LNG project will have the capacity to produce about 17.5 million tonnes of LNG a year.


Novatek said it has signed a strategic cooperation agreement with CNPC that outlines implementation of its second gas project, named Arctic LNG-2, including development of infrastructure and trading mechanisms. "We believe our strategic cooperation agreement will further enhance our mutual relationship as well as open up new opportunities for both companies … with the enormous opportunities in the Chinese market," Mikhelson said.

U.S. LNG hopefuls, including Alaska, will head to China with Trump


(Reuters; Oct. 27) - U.S. gas exporters and traders are aiming to grab a bigger chunk of the growing business of selling gas to China, the world’s third-largest buyer, when they join President Donald Trump and Commerce Secretary Wilbur Ross in China Nov. 8-10. But the talk may all be hot air if the U.S. suppliers can’t compete with bargain prices and long-term deals of rivals Australia, Qatar and Malaysia. A list seen by Reuters shows that 10 of the firms that will travel with Ross and Trump are involved in energy and gas.


Among them are Cheniere Energy, owner of the first U.S. Gulf Coast LNG export terminal, and several LNG hopefuls promoting their projects, including the state-owned Alaska Gasline Development Corp., which told Reuters it had no comment. The list underscores the U.S. ambition to sell more of its excess gas abroad as the shale revolution overwhelms the North American market. China’s appetite has soared as it embarks on an audacious bid to heat millions of homes across the north by gas for the first time this winter and switch tens of thousands of industrial boilers to the cleaner fuel.


“We’re on the mission to talk to Chinese companies to get something signed up,” said Frederick Jones, CEO of Delfin Midstream, which wants to anchor gas-liquefaction and storage vessels 50 miles off the coast of Louisiana. Delfin has no customers, but hopes to “showcase” the company to state-owned and large private companies in China.


A Chinese oil trading executive expects the delegation to yield several short-term supply deals. Uncertain when the global LNG market will bottom out, Chinese buyers are cautiously avoiding lining up new long-term contracts, but rather are looking at signing five-year or even shorter-term deals based on spot prices, sources said.

Japanese utilities sign 3-year LNG supply deal with Malaysia


(Reuters; Oct. 25) - Malaysian state energy company Petronas has signed a three-year liquefied natural gas supply agreement with JERA Co., with smaller volumes and for a shorter period than its previous deal with the biggest LNG buyer in Japan. JERA, the fuel-purchasing joint-venture between Tokyo Electric and Chubu Electric, will buy 2.5 million tonnes per year from Petronas starting in April 2018, the companies said Oct. 25.


JERA is currently in the middle of a 15-year contract with Petronas that expires in March for 4.8 million tonnes per year. The new deal’s shorter duration and smaller volume, along with changes to the destination clause that restricts where the cargoes could be resold by JERA, highlight the turbulence in the LNG market the past few years. Buyers have gained the upper hand as growth in new supplies, mainly from Australia and the U.S., has exceeded demand and depressed prices to less than half their 2014 peak.


Petronas, the world’s third-biggest LNG exporter, is looking to sell its rising output after start-up of Train 9 at its Bintulu export terminal and also its first floating LNG production unit. Petronas officials said in May they were open to shorter-term LNG contracts and smaller cargo sizes to entice buyers. “New demand terms and conditions are becoming a norm,” said Ahmad Adly Alias, vice president of Petronas’ LNG Trading & Marketing. Neither Petronas nor JERA disclosed pricing terms of the latest deal.

South Korea reverses policy, will restart work on two nuclear reactors


(Reuters; Oct. 20) – The South Korean government said it will bow to public support for nuclear power and will resume construction of two new reactors after a public opinion survey found a majority of people support the reactors — contrary to a government policy to steer the country away from nuclear-generated electricity. President Moon Jae-in came to power in May after calling for reducing South Korea’s nuclear and coal-fired power generation in a push to use more natural gas and renewables.


Those plans were dealt a blow Oct. 20 when a public opinion survey found almost 60 percent in favor of resuming the stalled construction of two 1,400-megawatt nuclear reactors. Building the reactors could cut into liquefied natural gas demand of the world’s second-largest LNG buyer. “Full implementation of Moon’s election promises could have resulted in around 10 million tonnes (a year) of extra LNG demand by 2030. This now seems unlikely,” said Kiah Wei Giam, of energy consultancy Wood Mackenzie.


Stability of power supply was cited as a primary reason for the choice in survey responses, said the government-organized committee to study the nuclear projects. “We respect the will of the committee,” said a presidential spokesman. The size of the win in favor of the projects meant the government likely had no choice but to go with the committee’s recommendation.