© 2014 Interfax LtdInterfax Information Services Group www.interfaxenergy.com
India’s LNG imports will continue to rise,
Gazprom will ship gas directly to the Republika Srpska region.
Gazprom to supply Bosnia’s Serb region with direct imports
Alexei Miller (left) and Kyrgyz President Almazbek Atambayev. (Gazprom)
Gazprom to cut north Kyrgyz gas prices from Octobe...
PTTEP plans $3.3 billion outlay on Myanmar prospects
Vietnam and India renew cooperation agreement
Thailand’s PTT Explorat...
China will offer more shale gas blocks
for exploration and development and will
unveil details soon, industry offici...
Updates from the world’s largest energy consumer
LNG spot trading on the Shanghai Petroleum Excha...
Pipeline issues supportive of Henry Hub futures
Henry Hub front-month futures received support from pipeline issues
New England’s $3 billion capacity
expansion plans
Pipeline operators Spectra Energy
and Northeast Utilities annou...
ExxonMobil seeking Vaca Muerta partner
ExxonMobil has told Interfax
it is seeking a partner to share
the risks of...
of 9

NatGasDaily_170914 srinivasulu talk (1)

Published on: Mar 3, 2016

Transcripts - NatGasDaily_170914 srinivasulu talk (1)

  • 1. © 2014 Interfax LtdInterfax Information Services Group www.interfaxenergy.com India’s LNG imports will continue to rise, but the share of LNG in the country’s energy mix will depend on whether there is the “regulatory push” needed to close the gap between foreign and domestic prices, Vemula Srinivasulu, the former executive director of Andhra Pradesh Gas Infrastructure Corp., said on Wednesday. The newly elected government’s plans for the most widely awaited policy – an increase in domestic gas prices – is expected by the end of September. However, it will likely differ from the formula introduced by the previous government last year, Srinivasulu told Interfax on the sidelines of the LNG Global Congress in London. “The last government introduced the Rangarajan formula, which was a weighted average of global and domestic imports and the Henry Hub and NBP, but it was questioned by many political parties,” he said. Srinivasulu added the secretaries for finance, power and fertilisers are reviewing the formula, “and will submit it within a week”. India’s LNG imports slipped from 12.33 mt in 2012 to 11.8 mt in 2013, because buyers expected to see more production from the country’s deepwater Krishna Godavari D6 (KG-D6) Block, which has suffered from technical complications and is being redeveloped, said Srinivasulu. The country’s two newest terminals – Dabhol and Kochi – have not yet reached their capacities. Dabhol is waiting for the startup of a long-term contract for LNG from the United States’s Sabine Pass in 2016-2017, and Kochi had to wait for the completion of a pipeline to Bangalore. Meanwhile, the Dahej and Hazira terminals received 90% of the country’s imports in the fiscal year 2013-2014. The four facilities were built in western India because the eastern states expected to receive gas from KG-D6, located in the Bay of Bengal. However, as KG-D6’s production has been disappointing, plans have emerged for five FSRUs and two onshore terminals on the east coast. But the scale of India’s LNG imports will also depend on the government’s position towards subsidies, Srinivasulu said, pointing to cooking gas subsidies in particular. “The government has to make a call on cooking gas,” he said. “It is imminent, because at the moment the richest person in India is taking a subsidy on cooking gas. It is not warranted.” Contact the editor at: sara.stefanini@interfax.co.uk The Hazira and Dahej terminals received 90% of India’s LNG imports in FY 2013-2014. (Hazira LNG and Port) Indian LNG imports need a ‘regulatory push’ Gazprom to supply Bosnia’s Serb region with direct imports China preparing to unveil third shale gas auction Gazprom to cut north Kyrgyz gas prices from October Vietnam and India renew cooperation agreement New England’s $3 billion capacity expansion plans ExxonMobil seeking Vaca Muerta partner ‘Sense of unfairness’ drives Lithuanian LNG project PTTEP plans $3.3 billion outlay on Myanmar prospects Pipeline issues supportive of Henry Hub futures Rosneft looking for funding after investment plan approval China Number Crunch Supply & Demand Exploration & Production Plus... Page 2 Page 5 3 4 8 9 2 4 7 3 6 Serbia Croatia Bosnia and Herzegovina Montenegro Adriatic Sea Sarajevo South Stream Republika Srpska Interfax *Indicative map only - not to scale Sara Stefanini Asia Pacific editor Inside Natural Gas Daily Natural gas news, analysis and intelligence Volume 4 Issue 180 Wednesday, 17 September 2014 Interfax Information Services Group www.interfaxenergy.com
  • 2. Gazprom will ship gas directly to the Republika Srpska region. Gazprom to supply Bosnia’s Serb region with direct imports ‘Sense of unfairness’ drives Lithuanian LNG project The Republika Srpska – the Serb entity of Bosnia & Herzegovina – will import its gas directly from Gazprom, bypassing Sarajevo and Bosnia’s state- owned importer BH-Gas, under the terms of a deal reached in Moscow on Tuesday during South Stream talks. Gazprom’s Chief Executive Alexei Miller and Srpska President Milorad Dodik signed off on the main conditions for gas shipments through Serbian company GAS RES. Imports currently come through Bosnian companies Energoinvest and BH-Gas. The deal will begin in summer 2015 and last until South Stream is completed – a spur from which is likely to be built into Srpska from the proposed mainline pipeline An acute sense of unfairness in Lithuania over the country’s gas supply deal with Russia led the Lithuanian government to fast-track its Klaipeda LNG terminal, according to the chief executive of project developer Klaipedos Nafta. Addressing delegates on the first morning of Informa’s LNG Global Congress conference in London, Klaipedos Nafta head Rokas Masiulis said the terminal was known as the ‘bulldozer’ project, it was so keenly prioritised by government. The terminal is due for commissioning in December, Supply & Demand | Bosnia & Herzegovina LNG | lithuania Joshua Posaner Central & Eastern Europe editor, Berlin Tom Hoskyns Western Europe editor, London running through Serbia. An intergovernmental agreement between Russia and Republika Srpska is under development, Gazprom said. Just days ago, the lower house in Sarajevo approved a draft gas law that will introduce third-party access rules, unbundling and a new set of regulatory measures to bring the gas market in line with EU directives. Gazprom has been critical of similar measures in EU states, which threaten to undermine its market access and ability to manage assets along the whole supply chain. The full development plan is also likely to include the build- out of gas-fired power stations in the region, under the terms of a memorandum of understanding signed in 2012. A deal with Zarubezhneft to convert the Brod refiner to run on gas will also help to with services to begin in early 2015 – just three years after FEED. “The sense of unfairness was the first driver when we decided to build this terminal,” said Masiulis. “Can you imagine how we are close to the Yamal peninsula and are sitting on a pipeline coming from Russia, but are paying 30% more than, for example, Germany?” he continued. Nationalistic pride is apparent in key elements of the project: the FSRU itself was named ‘Independence’. “This is a symbolic name – you can understand that one vessel can change a country’s energy future,” said Masiulis. Meanwhile, support for the project was evident from the very top of government, Masiulis added. “If, for example, one institution was too slow in issuing a permit, I could go to the prime minister, give him the phone number of person who was not issuing the permit, the prime minister would then call him immediately, and the permit would be given the next day,” he said. Litgas – an independent energy company that was broken off from Klaipedos Nafta to comply with the EU’s Third Energy Package – began discussions with potential LNG suppliers earlier in 2014. According to Masiulis, Gazprom EUROPE Serbia Croatia Bosnia and Herzegovina Montenegro Adriatic Sea Sarajevo South Stream Republika Srpska Interfax *Indicative map only - not to scale increase consumption. Bosnia is a relatively small gas consumer, importing just 190 million cubic metres of gas in 2013 – less than half that imported by neighbouring EU member Slovenia. The South Stream pipeline project is facing a number of challenges, not least the suspension of construction imposed by the Bulgarian government following concerns from the EU and United States over the project’s compatibility with EU rules and American sanctions. Under the terms of the 1995 Dayton agreement, Bosnia & Herzegovina is split into two entities, with multi- ethnic governance. Some EU officials are keen to form a unitary state, but Russia is against rewriting the terms of the Dayton agreement. Contact the editor at: josh.posaner@interfax.co.uk agreed to reduce prices by approximately 23% just days after Litgas said contracts would be forthcoming. This reduction in price pays for the investment in the terminal four times over, he said. As has been previously reported, Masiulis said the terminal would be also be used to export gas to neighbouring countries. However, progress on this front has been slow. “It is hard to say how much export there will be. Discussions are not as fast as we would like… with small countries like this it’s more likely we argue than discuss,” he said. Contact the editor at: tom.hoskyns@interfax.co.uk www.interfaxenergy.com Natural Gas Daily | 17 September 2014 | 2
  • 3. Alexei Miller (left) and Kyrgyz President Almazbek Atambayev. (Gazprom) Gazprom to cut north Kyrgyz gas prices from October Rosneft looking for funding after investment plan approval Gazprom Kyrgyzstan will lower its gas prices for consumers in the north of the country from 1 October, the company’s press service told Interfax. Following Gazprom Chief Executive Alexei Miller’s visit to Kyrgyzstan, the decision was made to lower the price of gas on the country’s border with Kazakhstan by 28.6%, to $165 per thousand cubic metres (Mcm: $4.49/MMBtu), down from $224/Mcm. According to preliminary calculations, the price of gas for end users will be around KGS Rosneft’s investment programme has been approved by the government and the company will consider receiving funds from the National Welfare Fund (NWF), Deputy Prime Minister Arkady Dvorkovich told journalists. “Rosneft’s investment programme was looked at during a meeting with the prime minister and has been approved in full. There are nuances concerning carrying out specific top-priority projects, but [the programme] was approved overall,” he said. “Now Rosneft is really considering whether to propose something for financing, including from the NWF, but there must first be an application,” Dvorkovich said, adding that Supply & Demand | Kyrgyzstan companies & Finance | russia Russia’s Ministry of Energy has not seen evidence of Ukraine accessing gas intended for transit, Russian Energy Minister Alexander Novak told journalists. Polish pipeline operator Gaz- System notified Ukrainian state oil and gas company Naftogaz Ukrainy last week of a temporary cessation in gas deliveries because of an unexpected drop in supplies from Russia. The news implies a temporary shortage of gas as a result of Gazprom’s efforts to fill its underground storage sites, Artem Konchin, an analyst at Moscow brokerage Otkritie, said in a note, adding the shortage sends a “disturbing signal” to Europe. FSU in brief Natalya Lyubeznova Zhyldyzbek Ibraliev Zhyldyz Bekbaeva Kyrgyzstan correspondents, Bishkek Tom Washington FSU editor Interfax staff 12.95 ($0.24) per cubic metre starting 1 October, compared with the current KGS 16.35/cm. Gazprom Kyrgyzstan is negotiating a new tariff with the relevant government department. It was announced during Miller’s visit that the drop in gas prices only applies to the north of Kyrgyzstan, where gas is shipped from Kazakhstan. The question of supplying gas to the south of the country remains open. Uzbekistan stopped shipping gas to the region in mid-April, and talks on restoring shipments have been unsuccessful. “Gazprom Kyrgyzstan is making every effort to address the issues as soon as possible to ensure uninterrupted gas for Rosneft had not applied. Dvorkovich noted the government considered Rosneft’s investment programme to be “reasonable” overall, and the company has the right to receive funds from the NWF. “We will consider [Rosneft’s application] seriously,” he said. Rosneft had earlier asked the government for RUB 1.5 trillion ($39 billion) to offset the effect of sanctions. The amount Rosneft will ask for is unclear. Russian daily Kommersant reported between RUB 500 billion and RUB 1 trillion is under discussion. Uralsib oil and gas analyst Alexei Kokin said the company does not have that much to invest in, but eastern projects will probably be prioritised. “They will probably try to extract as much money as they can from the state and focus on Eastern Siberia, as the Arctic is probably ‘frozen’ for FSU (excluding the Baltic states) the time being,” he told Interfax. Rosneft has requested access to Gazprom’s planned gas pipeline infrastructure in Eastern Siberia, which observers say could facilitate pipeline exports. Only Gazprom may export gas by pipeline at present. “We believe [funding from the NWF] might not be conducive to financial discipline and that it increases M&A risks,” analysts at VTB Capital said in a note. “At the current capex rate (around RUB 600 billion per year), we do not see assistance from the NWF as critically important – even including debt repayment and excluding future Chinese pre-payments.” Contact the editor at: tom.washington@interfax.co.uk the south of the republic,” the company said. Additionally, the population of Kyrgyzstan’s southern city of Osh is switching to LPG, while home owners are installing gas cylinders. Kyrgyzstan’s presidential press service told Interfax on Wednesday Gazprom had decided to ship gas to the Bishkek thermal power plant. Volumes will be supplied at the same $165/Mcm price, although there will be an extra charge for shipping costs. Contact editorial at: editorial.news@interfax.co.uk www.interfaxenergy.com Natural Gas Daily | 17 September 2014 | 3
  • 4. PTTEP plans $3.3 billion outlay on Myanmar prospects Vietnam and India renew cooperation agreement Thailand’s PTT Exploration and Production (PTTEP) plans to spend $3.3 billion exploring for oil and gas in neighbouring Myanmar over the next five years, as domestic gas reserves in the Gulf of Thailand dwindle. The money is expected to be spent on PTTEP’s seven exploration projects in the country, including Myanmar M11, Myanmar M3, MOGE 3, Myanmar PSC G and EP 2, and Myanmar MD-7 and MD-8, PTTEP President and Chief Executive Tevin Vongvanich said in Yangon on Tuesday. The planned investment in the country will account for 20% of the $16 billion PTTEP has earmarked for spending on its domestic and international projects from 2014-2018. Vietnam and India have renewed an agreement aimed at increasing cooperation between the countries’ largest oil and gas explorers, prompting criticism from China – whose claims to the South China Sea overlap exploration blocks owned by India offshore Vietnam. ONGC Videsh – the overseas arm of India’s Oil and Natural Gas Corp. (ONGC) – signed a letter of intent (LOI) with PetroVietnam in Hanoi on Monday, one of a number of deals reached during a visit by Indian President Pranab Mukherjee. “The LOI provides for Companies & Finance | thailand Exploration & Production | vietnam Robert Sullivan Asia Pacific correspondent, Hong Kong Robert Sullivan Asia Pacific correspondent, Hong Kong Gas reserves have been identified at the offshore Myanmar M11, M3, MD-7 and MD-8 projects, while the onshore MOGE 3, Myanmar PSC G and EP 2 projects are all in earlier stages of exploration. PTTEP has been operating in Myanmar for 25 years as a partner in the offshore Yetagun and Yadana gas projects, from which it also imports gas by pipeline. PTTEP’s share of gas production from the two projects to date is more than 35.7 billion cubic metres, according to the company. PTTEP also launched its offshore Zawtika gas project in Myanmar this year, which began deliveries of 1.7 million cubic metres per day (MMcm/d) to Burmese customers in March. Delays in constructing an onshore operation centre and a metering station resulted in a four-month delay to the startup of gas deliveries from Zawtika to PTTEP’s parent company PTT in Thailand, but PTTEP confirmed on Tuesday that the field had successfully been ramped up to its full capacity of 8.5 MMcm/d – of which 6.8 MMcm/d is piped to Thailand. Thailand is expected to increase its imports from Myanmar over the coming years, with domestic supplies from the Gulf of Thailand projected to decline. Average daily domestic gas production in Thailand over the first seven months of the year was lower than the same period in 2013, according to figures published by Thailand’s Energy Policy and Planning Office last week. Production at PTTEP’s Bongkot field – Thailand’s largest offshore gas field – is down by more than 7.4% this year, and the company indicated in August that a drilling programme aimed at maintaining production levels at the field would be postponed from the end of 2014, as a result of output falling short of expectations. Thailand is also likely to need to increase its imports of LNG, and PTTEP indicated on Tuesday it is planning to invest $1 billion over the next six years to fund the development of an LNG export plant in Mozambique, according to a report by the Bangkok Post. PTTEP has an 8.5% stake in the offshore Rovuma Area 1 block in Mozambique, which is operated by Anadarko. The Thai explorer’s investments in the planned LNG plant are expected to begin in 2015, with the aim of starting exports in 2018 or 2019. Contact the author at: robert.sullivan@interfax-news.com expansion of exploration activities by ONGC Videsh in Vietnam by considering participation in two or three additional blocks, subject to technical and commercial viability and requisite approvals,” ONGC said in a statement on Tuesday. PetroVietnam may also consider participation in some of ONGC Videsh’s exploration blocks as part of the agreement, the statement indicated. The companies previously signed a three-year cooperation agreement in October 2011. The agreement was renewed just days before a visit to India by Chinese President Hu Jintao, prompting a warning from China’s Ministry of Foreign Affairs (MOFA) on Tuesday. “We hold no objection to legitimate and lawful agreement between Vietnam and a third country,” said MOFA spokesperson Hong Lei, according to a report by the Press Trust of India. “But one thing is to be clear. If such an agreement concerns waters administered by China or if such a cooperation project is not approved by the Chinese government, then we will be concerned about such an agreement and we will not support it.” China has previously warned ONGC Videsh about its exploration activities in offshore Blocks 127 and 128, which it says fall within its maritime claim to the South China Sea. Although ONGC Videsh has relinquished its stake in Block 127, ASIA PACIFIC it is still exploring Block 128. The company also owns a 45% stake in Block 06.1 in the Nam Con Son Basin, which is producing gas. ONGC Videsh did not specify which blocks it may participate in as part of the new cooperation agreement, but the company was offered the opportunity by PetroVietnam as part of a memorandum of understanding signed in November last year to take an interest in five exploration blocks, including Blocks 17, 41 and 43, as well as two blocks owned by PetroVietnam Exploration and Production. ONGC Videsh was also offered a further two exploration blocks in Vietnam in April this year. Contact the author at: robert.sullivan@interfax-news.com www.interfaxenergy.com Natural Gas Daily | 17 September 2014 | 4
  • 5. CHINA China will offer more shale gas blocks for exploration and development and will unveil details soon, industry officials said on Thursday, as the country steps up its efforts to develop its unconventional gas resources. Preparation has started on the third auction of shale gas blocks, said Che Changbo, deputy director of the geological exploration department at the Ministry of Land and Resources (MLR). The ministry has settled on which blocks to offer and a plan for the auction has been drafted, Che told a news briefing in Beijing on Wednesday. The auction will be held at an “appropriate time”, he said. The MLR awarded 21 blocks in the first and second auctions in 2011 and 2012, with 17 going to companies with no background in oil and gas. These companies have invested more than RMB 2 billion ($325 million) in exploration, Peng said, but progress has been disappointing. This has prompted the MLR to downgrade shale output targets for the near future. “Shale gas production… is estimated to rise to 15 billion cubic metres in 2017 and exceed 30 bcm in 2020,” said Peng Qiming, director of the geological exploration department. “With appropriate measures in place, production may reach 40-60 bcm in 2020, accounting for one fifth of total gas production in China,” said Peng. China preparing to unveil third shale gas auction Beijing is ploughing ahead with a third tender for shale gas acreage in China. The blocks have been selected and details are expected to be unveiled soon. Li Xin reports from Beijing. The Chinese central government had previously set an industry goal of producing 60-100 bcm/y by 2020, a figure analysts said was highly ambitious as there are numerous technical, geological and regulatory challenges to overcome. One of the major problems is the scarcity of water in the areas where China’s shale gas resources are located. More than 60% of China’s shale resources are in areas facing high water stress or arid conditions, according to a report released last week by the Washington-based World Resources Institute. The National Energy Administration appeared to acknowledge shale gas production will fall far short of expectations in the near term after it quietly scaled down the 2020 target to 30 bcm/y in August. The ministry said China has produced 680 million cubic metres (MMcm) of shale gas so far, with 611 MMcm coming from Sinopec’s Fuling field in Chongqing, and is on course to pump 1.5 bcm of shale gas this year and 6.5 bcm in 2015. As of July, China had allocated 54 shale gas exploration rights covering an area of 17 million hectares, according to Peng. The country had also invested RMB 20 billion in shale gas exploration and development. Around 400 wells have been drilled over the same period – 130 of them horizontal. Shale gas developers have also shot 20,000 km of 2D seismic and 150,000 hectares of 3D seismic surveys. Shale game PetroChina, Sinopec and Shaanxi Yanchang Petroleum Group have made breakthroughs at their shale gas blocks. PetroChina is pumping shale gas at its Changning, Weiyuan and Zhaotong blocks in the southwest Sichuan Basin, while Yanchang Petroleum is exploring the Ordos Basin in midwest China. But it is Sinopec that is leading the shale gas race. The company’s Fuling field entered commercial production earlier this year, and Sinopec aims to build 10 bcm/y of production capacity by 2017. The three companies have built 1.5 bcm/y of production capacity across their projects and had completed 93.7 km of pipelines dedicated to pumping shale gas as of July, according to Peng. Sinopec has drilled 79 horizontal shale gas wells in Fuling since 2012 and has put 27 into production, Peng said. The company has built nearly 1 bcm/y of production capacity at the field, which has proven reserves of 106.75 bcm. Output from a single well is hitting 100,000 cubic metres per day. Sinopec plans to invest RMB 21.5 billion to drill 253 wells from 2013 to 2015, and China’s leading shale gas developer expects to pump more than 1 bcm this year and around 3.5 bcm next year. PetroChina intends to spend RMB 11.2 billion in the next two years to drill 154 wells, with the aim of producing 2.5 bcm in 2015. The state oil giant has come under pressure from the government to make more progress on shale gas. China also made advances in developing domestic exploration and development technology and equipment, according to Peng. He said Chinese companies have grasped the preliminary technology behind shale gas well drilling and hydraulic fracturing, and their improving prowess has helped lower the cost of a single horizontal well from RMB 100 million to RMB 50-70 million. Contact the author at: juliet.lee@interfax.co.cn The Fuling shale gas field has contributed 611 MMcm of China’s total 680 MMcm of shale gas production. (Sinopec) www.interfaxenergy.com Natural Gas Daily | 17 September 2014 | 5
  • 6. CHINA NUMBER CRUNCH Updates from the world’s largest energy consumer tons LNG spot trading on the Shanghai Petroleum Exchange Transacted volume Transaction valueAvailable volume Source: SPEX RMB/ton 0 20 40 60 80 100 4,900 5,000 5,100 5,200 5,300 5,400 12 Sep11 Sep10 Sep9 Sep 40 40 40 40 40 40 80 80 The SPEX had 200 tons of trucked LNG available last week – a smaller volume than in previous weeks, as it was closed on Monday 8 September for a public holiday. The volumes all sold at RMB 5,200 per ton. Tang Tian Shanghai 0.0 0.2 0.4 0.6 0.8 1.0 1.2 SouthwestSouthEastNorth LNG shipping rates via diesel-fuelled tanker truck, 6-12 September LNG shipping rates via LNG-fuelled tanker truck, 6-12 September 1,000-2,000 km, highest price <1,000 km, highest price 1,000-2,000 km, lowest price >2,000 km, highest price >2,000 km, lowest price <1,000 km, lowest price 1,000-2,000 km, highest price <1,000 km, highest price 1,000-2,000 km, lowest price >2,000 km, highest price >2,000 km, lowest price <1,000 km, lowest price RMB/ton/km Source: Sublime China Information 0.0 0.2 0.4 0.6 0.8 1.0 1.2 EastNorth RMB/ton/km Deliveries by diesel truck cost RMB 0.70-1.05/km per ton moved within 1,000 km. For 1,000- 2,000 km, prices were RMB 0.65-0.90/km and were RMB 0.60‑0.75/km for further than 2,000 km. Rates for transporting LNG via LNG-fuelled tanker ranged from RMB 0.80- 1.05/km per ton inside 1,000 km, RMB 0.68-0.75/ km for 1,000-2000 km, and RMB 0.62-0.68/km for beyond 2,000 km. Inner Mongolia Tianjin Xinjiang Shandong Hebei Henan Shanxi Shaanxi Sichuan Ningxia Anhui Jiangsu Chongqing Ex-works LNG prices by region, 6-12 September Lowest price Highest price *All figures in RMB/ton Sublime China Information/Interfax Yunnan Jilin Qinghai 4,000 3,900 4,400 3,950 4,600 4,400 4,900 4,700 4,600 4,350 4,250 4,050 4,150 4,050 Gansu 4,250 4,050 4,300 3,900 3,600 3,200 5,500 5,300 4,750 4,500 4,750 4,500 5,300 5,050 4,900 5,200 4,550 4,700 Chinese wholesale LNG prices at plants during 6-12 September decreased by 0.15% from the previous week to RMB 4,561 per ton ($14.39/MMBtu). Prices of LNG sold from eight regions fell by an average of 1.65% week on week, while others remained the same. Nineteen plants in nine provinces reduced their asking prices, while four plants in Chongqing, Sichuan and Shaanxi increased theirs. The largest price increase was in Chongqing, at 8.70%. www.interfaxenergy.com Natural Gas Daily | 17 September 2014 | 6
  • 7. Pipeline issues supportive of Henry Hub futures Henry Hub front-month futures received support from pipeline issues affecting supplies last week. However, bearish factors are still capping gains and providing technical resistance at the $4/MMBtu level. Transcontinental Gas Pipeline announced on 16 September that a gas leak had cut all supplies to several locations on its Southeast Louisiana Lateral pipeline. The affected route is part of the gas pipeline system supplying the Gulf Coast and 12 southeast and Atlantic seaboard states. The company said it expected repairs to last 7-10 days. Meanwhile, an explosion on a gas-gathering pipeline operated by Chevron on 13 September – which killed one worker – affected supplies into the Henry Hub pricing point in Louisiana. The effect was minimised by rerouting most of the affected supplies to an alternative system. The affected pipeline is part of the Henry Hub gas-gathering system, which runs from offshore Louisiana to onshore. Consequently, the front-month futures price closed at $4/MMBtu on 16 September, which was a 3.6% increase from 12 September. Bearish factors dictating prices There is strong technical resistance for Henry Hub front-month futures at $4/MMBtu, which is backed by fundamentals. The front-month futures price has failed to move above that in the past week as a result. Gas injection into storage sites in the United States is continuing at a record pace. The latest data from the US Energy Information Administration (EIA) shows a net injection of 2.6 billion cubic metres was made into US storage sites in the week ending 5 September, bringing total gas stocks in the country to 79.3 bcm. However, stock levels are still down by 13.7% year on year and 14.2% below the five-year average. A net injection of 56.1 bcm was made in the US in the first 23 weeks of the 2014 gas-injection season. This is 26.4% higher on an annual basis, and the highest level of net gas injection during this period since the EIA started publishing storage data. Double-digit net injection growth rates were also seen in the East Consuming Region (ECR), West Consuming Region (WCR), and the Producing Region of the US. Low levels of nuclear power plant outages also limited price gains. The nuclear outage level has averaged 3.03 GW so far in September, which is 62% down on an annual basis and 60% below the five-year average. The average nuclear outage has increased in September from 2.69 GW in August, but it is unlikely to reach levels seen in September 2013. The weather outlook is finely balanced for Henry Hub futures. Forecasts suggest below-average temperatures in the eastern half of the country in the coming 6-10 days, whereas the western half is expected to see above-average temperatures. Gas injection is also gathering pace in Canada. A net injection of 538 million cubic metres was made into Canadian storage sites in the week ending 5 September, bringing total gas stocks in the country to 14.3 bcm. However, total stocks are still 21% down year on year. The pace of storage replenishment continues to be higher in the Canadian ECR than the WCR. The Canadian ECR had 5.8 bcm of gas in stocks in the week ending 5 September, which was 20% higher on an annual basis. However, the Canadian WCR had 8.5 bcm of gas in stocks, which was 36% down year on year. The contrast between the storage situations in the Canadian ECR and the WCR has kept the Canadian East-West spread narrow. The spread has averaged $0.24/MMBtu in September so far, which is far below the average of $2.04/MMBtu seen in September 2013. NORTH AMERICAN gas markets Gas market insight from Global Gas Analytics Abhishek Kumar energy and modelling analyst Abhishek Kumar is energy and modelling analyst with Global Gas Analytics, a monthly analytical publication by Interfax providing fundamental analysis and forecasts of international gas markets. For more information about Global Gas Analytics, please email abhishek.kumar@interfax.co.uk Henry Hub front-month futures and moving average $/MMBtu Source: NYMEX Henry Hub front-month futures Henry Hub 50-DMA Henry Hub 20-DMA Technical resistance 3.6 3.8 4.0 4.2 4.4 4.6 15 Sep8 Sep1 Sep25 Aug18 Aug11 Aug4 Aug28 Jul21 Jul14 Jul US net injection in the first 23 weeks of the injection season Injections, bcm Storage, bcm Source: EIAECR injections WCR injections 0 12 24 36 48 60 0 20 40 60 80 100 2014201320122011201020092008 PR injections Total storage Canadian gas storage and prices bcm $/MMBtu Sources: Enerdata, regional pipeline operatorsDawn hub price East Canada storage capacity Gas stocks in East Canada AECO hub price West Canada storage capacity Gas stocks in West Canada 0 4 8 12 16 20 0 4 8 12 16 20 Sep 14Jul 14May 14Mar 14Jan 14Nov 13Sep 13 www.interfaxenergy.com Natural Gas Daily | 17 September 2014 | 7
  • 8. AMERICAS New England’s $3 billion capacity expansion plans Pipeline operators Spectra Energy and Northeast Utilities announced plans this week to invest $3 billion in the Access Northeast project. The scheme would increase the capacity of two major pipelines and deliver an additional 1 billion cubic feet (28 million cubic metres) of gas per day into the six New England states. The region pays the highest gas and electricity prices in the United States. Access Northeast will expand the Algonquin pipeline, stretching from New Jersey to Boston, and the Maritimes and Northeast pipeline, that delivers Canadian gas to New England. Expansion plans will be submitted to the Federal Energy Regulatory Commission (FERC) in 2015, and completion is estimated for November 2018. Regional gas sources The Boston region receives Canadian gas via the Maritimes and Northwest Pipeline, which runs through Maine and New Hampshire. Gas supply for most of New England is sourced from the Gulf of Mexico and is delivered via the Tennessee Gas and Algonquin pipelines. The new expansions will allow gas from the Marcellus shale in Pennsylvania to be delivered into the region. Although the Marcellus shale has made gas readily available to Pennsylvania and some areas in New York state, the New England states have suffered from bottlenecks and pipeline constraints, so are reliant on LNG imports during the winter when pipeline capacity cannot meet seasonal demand. “From 1 January to 18 February 2014, the day-ahead spot gas price at the Algonquin Citygate hub serving Boston averaged $22.53/MMBtu, according to data from Intercontinental Exchange (ICE). This price is a record high for these dates since the ICE data series began in 2001, and 50% above the same period in 2013, when cold weather drove New England prices to their highest level pipelines, storage & power | united states Therese Robinson North America editor, Boston since 2004,” the Energy Information Administration reported. “Over the past 15 years, gas-fired generation has grown from serving 15% of New England’s annual electric requirements to serving approximately half,” Thomas May, chief executive of Northeast Utilities, said. “In the bitterly cold winter of Q1 2014, gas demand for heating customers rose significantly, leaving much less gas available for electric generation. Older coal and oil plants filled in the gap, forcing prices to skyrocket and at a cost to the environment.” LNG imports The region receives LNG imports from Canada’s Canaport LNG via the Maritimes and Northeast pipeline; and from Trinidad & Tobago and Yemen into the Everett terminal in Boston Harbour. Excelerate Energy’s two offshore buoy facilities offshore Massachusetts – Neptune and Northeast Gateway – also receive LNG from regas vessels, but neither have received LNG cargoes in recent years, as spot cargoes have been sold into more competitively price markets. Spectra Energy’s previously proposed Algonquin Incremental Market (AIM) and Atlantic Bridge projects will complement the Access Northeast expansion plans. Spectra’s AIM project will expand the Algonquin pipeline by 14% through Connecticut, New York, Rhode Island and Massachusetts, by adding 64 km of new pipeline and compressor units. Once approved by FERC, the completion date is estimated for the winter of 2016-2017. The Atlantic Bridge Project will connect gas supplies in the Algonquin Gas Transmission and Maritimes and Northeast pipeline systems from New York to Maine, which is due to be completed in November 2017. Another pipeline company, Kinder Morgan Energy Partners, has proposed a new pipeline to deliver Marcellus gas from Pennsylvania to New York and western Massachusetts. However, the project has been delayed as local communities oppose the proposed route. Contact the editor at: therese.robinson@interfax.co.uk Today on interfaxenergy.com Most read LNG Europe needs benchmark for LNG-for-transport market Shipping companies and gas suppliers appear ready to get involved in Europe’s nascent LNG-for-transport market once there is clarity on how the fuel will be priced. China and Tajikistan begin construction of fourth CACP line Sinopec close to starting up first LNG terminal Unions criticised as labour drags on LNG projects Europe needs benchmark for LNG-for-transport market Trinidad and Tobago braces for the big chill Wildcat Blog Wildcat’s Pick of the Week Wildcat gives you a headstart on the coming week and a round-up of what mattered last week. www.interfaxenergy.com Natural Gas Daily | 17 September 2014 | 8
  • 9. AMERICAS ExxonMobil seeking Vaca Muerta partner ExxonMobil has told Interfax it is seeking a partner to share the risks of exploring Argentina’s Vaca Muerta shale play. “We are seeking an additional partner to assume a portion of our 85% interest in the Bajo del Choique and La Invernada onshore blocks,” a Dallas-based spokesman told Interfax on Tuesday. “This is a common industry technique to share technical and financial risks during the exploration phase.” Gas y Petroleo de Neuquén (GyP), the province’s oil and gas company, holds the remaining 15% in the blocks. Bajo del Choique is Exxon’s only producing asset in Argentina and its gas output was 28,000 cubic metres per day in June, according to producers’ association IAPG. ExxonMobil Exploration Argentina, the local subsidiary of the supermajor, produces only 0.02% of the country’s gas. “The performance of the exploration & production | argentina Chris Noon Latin America editor, Buenos Aires Bajo del Choique X-2 well is encouraging; however, we have more work to do to fully under- stand the Vaca Muerta formation. Our extensive experience in un- conventional resource production shows that multiple wells per block, extended well testing and a detailed reservoir evaluation are typically required to predict the long-term recovery of new unconventional resources,” said the spokesman. “While we are optimistic, we are in the early stages of our assessment that would underpin any significant investment decisions,” he added. ExxonMobil Exploration Argentina owns around 900,000 acres (364,217 hectares) in Vaca Muerta, and has drilled seven wells to date. Investment climate YPF Chief Executive Miguel Galuc- cio told La Nación newspaper on Sunday some companies were uncomfortable doing business in Argentina. “I am in contact with, for example, people like [Exxon Chief Executive] Rex Tillerson. I know the importance that legal and fiscal stability, clear rules and transparency have for [executives such as Tillerson],” said Galuccio. The YPF executive said a new hydrocarbon law would reassure investors, and claimed Argentine President Cristina Fernández de Kirchner had given him personal assurances on Argentina’s investment climate. Local press reported late on Tuesday that Argentina’s oil-producing provinces and the federal government had agreed to revise the country’s energy laws to include shale. Governors of 10 oil provinces will reportedly send the bill to Congress this week for approval. Interfax was not able to confirm the news before publication. Galuccio also said the Argentine state-run company has cut drilling costs in Vaca Muerta to below $7 million per well. This means unconventional drilling in Argentina is now only slightly more expensive than the Eagle Ford shale formation in the United States – a model Buenos Aires is seeking to copy. GyP was created by Neuquén in 2008 after years of conflict between Argentina’s provinces and Buenos Aires over the regulation of their oil and gas. The so-called ‘Short Law’ of 2007 gave the provinces what they wanted – definitive ownership of their hydrocarbons, but several states sought more control over the main source of their revenue, as well as basic regulatory involvement. This resulted in the creation of Argentina’s province- owned companies (POCs), with Mendoza following Neuquén’s example in 2013 with Empresa Mendocina de Energía. The POCs have occasionally irritated YPF. Galuccio clashed with GyP in May when Neuquén provincial authorities organised a roadshow in Houston to auction shale areas through the POC. Galuccio reportedly wanted the auctions to be handled by Buenos Aires. Contact the editor at: chris.noon@interfax.co.uk Natural Gas Daily is published daily except during the last week of December by Interfax Ltd. ISSN 2048-4534. Copyright ©2014 Interfax Ltd. All rights reserved. No part of this report may be reproduced or transmitted in any form, whether electronic, mechanical or any other means without the prior permission of Interfax. In any case of reproduction, a reference to Interfax must be made. All the information and comment contained in this report is believed to be correct at the time of publication. Interfax accepts no responsibility or liability for its completeness or accuracy. Editorial Chief editor Therese Robinson therese.robinson@interfax.co.uk Deputy editor James Batty james.batty@interfax.co.uk East Asia editor James Byrne james.byrne@interfax.co.uk Middle East & Africa editor Leigh Elston leigh.elston@interfax.co.uk Western Europe editor Tom Hoskyns tom.hoskyns@interfax.co.uk Interfax Europe Ltd. 19-21 Great Tower Street, London EC3R 5AQ, United Kingdom +44 (0) 20 3004 6200 interfaxenergy.com customer.service@interfax.co.uk Latin America editor Christopher Noon chris.noon@interfax.co.uk Central & Eastern Europe editor Joshua Posaner josh.posaner@interfax.co.uk China editor Colin Shek colin.shek@interfax.cn Asia Pacific editor Sara Stefanini sara.stefanini@interfax.co.uk EU policy & regulation editor Andreas Walstad andreas.walstad@interfax.co.uk FSU editor Tom Washington tom.washington@interfax.co.uk Brussels correspondent Annemarie Botzki anne.botzki@interfax.co.uk Research analyst Andrew Walker andrew.walker@interfax.co.uk INTERNATIONAL CORRESPONDENTS Almaty Elena Preobrazhenskaya ■ Baku Anar Azizov, Nigar Abbasova ■ Beijing Li Xin ■ Cairo Rachel Williamson ■ Hong Kong Robert Sullivan ■ Kiev Alexey Egorov, Roman Ivanchenko ■ London Verity Radcliffe ■ Moscow Anderi Biryukov, Alexey Novikov, Svetlana Savateeva, Yulia Yulina ■ Nairobi Jessica Hatcher ■ New Delhi Siddharth Srivastava ■ Shanghai Tang Tian, Zhang Yiping ■ Washington Margaret Ryan Production Chief sub-editor Rhys Timson Sub-editor Doug Kitson Sub-editor Rob Loveday Website & art editor Joseph Williams Sales Subscriptions customer.service@interfax.co.uk Managing director Henry Pettit Global head of gas product sales James Morton james.morton@interfax.co.uk +44 (0) 203 004 6204 Benelux, Middle East and Africa John Bulmer john.bulmer@interfax.co.uk +44 (0) 203 004 6202 USA and Scandinavia Matt Shelton matt.shelton@interfax.co.uk +44 (0) 203 004 6203 UK, Switzerland and Southern Europe Per Abad per.abad@interfax.co.uk +44 (0) 203 004 6205 Iberia and Latin America Anderson Santos anderson.santos@interfax.co.uk +44 (0) 203 004 6214 www.interfaxenergy.com Natural Gas Daily | 17 September 2014 | 9

Related Documents