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LNG DAILY Volume 12 / Issue 213 / November 4, 2015 Platts Dec JKM stable ahead of Russian tender award KEY DRIVERS / MARKET HIGHLIGHTS JKM TM7.5000.000 PLATTS DAILY LNG MARKERS ($/MMBtu) Nov 4 December bids stable in the low- to mid-$7s/MMBtu, though some offers move above $8/MMBtu level Several months Japanese buyers heard deferring volumes until later winter Tightness for H2 December providing near-term price support Middle East bids at $7.20/MMBtu Cal 2016 JKM swap trades four times in 48 hours DES SHIPPING MARKET HIGHLIGHTS Esshu Maru headed for Huelva to lift reload NEWS HEADLINES Platts Dec JKM stable ahead of Russian tender award.......................... 2 Gas Natural expects to obtain first Sabine Pass LNG in 2016................. 6 Spain’s Gas Natural sees 7% gas sales volume rise in 2016................... 7 Golar agrees on Ghana FSRU contract with West African Gas.............. 7 ANALYSIS: Oil and gas takeover race heats up in Australia....................8 Engie impacted by lower commodity prices, reduced LNG activity..................................................................................8 Lithuania’s LNG terminal brings price bargaining power........................8 again is pressed to speed action on Elba LNG.............................. 9 Downeast asks FERC to suspend review of Maine LNG export project.............................................................................................10 FERC Global LNG pricing to 2020 dependent on many factors: Wood Mac......................................................................................11 Yenisei River heads to Indian Ocean after loading at GLNG..................12 Market Commentary.................................................................................. 2 Comparisons..................................................................................... 3 Recent Tenders and Strips........................................................................ 4 Shipping Prices........................................................................................... 6 News............................................................................................................ 6 Price www.platts.com DES Japan/Korea Marker (JKM) JKM (Dec) H1 Dec H2 Dec H1 Jan H2 Jan www.twitter.com/PlattsGas 7.500 7.500 7.500 7.500 7.500 0.000 0.000 0.000 0.000 0.000 DES Japan/Korea (JKM) Swaps Jan Feb Mar EAM (Dec) H2 Nov H1 Dec H2 Dec — — — — — — — — 7.6000.000 7.6000.000 7.3000.000 FOB East Atlantic Marker (EAM) 6.650 6.550 6.650 6.650 0.000 0.000 0.000 0.000 — — — — 6.210 6.210 6.210 6.210 -0.010 -0.010 -0.010 -0.010 ▼ ▼ ▼ ▼ 5.950 5.950 5.950 5.950 -0.020 -0.020 -0.020 -0.020 ▼ ▼ ▼ ▼ 7.300 0.000 — Change 0.000 0.000 0.040 — — DES Southwest Europe Marker (SWE) SWE (Dec) H1 Dec H2 Dec H1 Jan DES Northwest Europe Marker (NWE) NWE (Dec) H1 Dec H2 Dec H1 Jan DES West India DES West India (Dec) SHIPPING RATES: NOV 4 Asia Pacific day rate ($/day) Atlantic day rate ($/day) CONTENTS Change 30,000 35,000 LNG NETBACK PRICES ($/MMBtu) Nov 04 FOB Australia 6.950 FOB Middle East 7.000 DES Brazil Netforward 7.260 ▲ NATURAL GAS LNG DAILY NOVEMBER 4, 2015 MARKET COMMENTARY PLATTS ASIA LNG ASSESSMENT RATIONALE Platts Dec JKM stable ahead of Russian tender award London—The Platts JKM™ for December-delivery cargoes was stable at $7.50/MMBtu Wednesday, as market participants awaited more information from Russia’s Sakhalin tender, which closes Thursday, with validity until Friday. The Northwest Europe Marker for December was down 2 cents to close at $5.95/MMBtu, assessed at a netback to the equivalent JKM period. The Southwest Europe Marker for the same period shed 1 cent, assessed at $6.21/MMBtu. The FOB East Atlantic Marker (EAM) for December was steady at $6.65/MMBtu. Two cargoes from Sakhalin are offered for December, two for January and one for February in the tender. Market participants said they expected the results to set price expectations for December and January. “January cargo negotiations have not started yet, but it could be that after Sakhalin tender results [are announced], sellers may start to market their cargoes,” a North Asian trader said. For the December period, bids were heard unchanged from Tuesday in the low to mid-$7s/MMBtu, while offers for the period were heard in the high-$7s/MMBtu, though some sellers were also heard offering cargoes above the $8/MMBtu level DES Northeast Asia. DES offers of Iberian origination were also heard for the same prompt period, with some sources reporting that these offers were slightly above the $8.00/MMBtu mark. Most of the remaining December demand was coming from traders and portfolio sellers looking to optimize their positions, several sources The Platts JKM™ for December was assessed at $7.50/MMBtu Wednesday, unchanged from Tuesday on stable offers and bids following recent deals heard concluded at around $7.50/MMBtu. Offers were heard to be in the high $7s/MMBtu while bids were heard to be in the low to mid-$7s/MMBtu. Both H1 and H2 December were assessed at $7.50/MMBtu. No market data were excluded from the November 4 assessment. The above rationale applies to the following market data codes: AAOVQ00, AAPSU00, AAPSV00, AAPSW00, AAPXA00 The Platts JKM™ price assessments and assessment rationale are published at market-on-close (MOC) and reflect market values prevailing at the close of the Asian markets, defined as 16:30 Singapore time. The table on page 2 of LNG Daily may include trades and/or bids and offers collected after the close of the Asian trading day. NORTHWEST EUROPE ASSESSMENT The Northwest Europe LNG price was assessed today at a netback to JKM, as the differential between 96% NBP front month and JKM is now above the shipping cost between Belgium and Japan. said, with few cargoes being offered for the period. While demand from traders and optimization plays provided support to the market, actual end-user demand continued to be mixed. Several Japanese buyers were heard to be deferring volumes due to warmer weather forecasts and decreased demand at the start of winter. South Korean demand was also heard to be weaker due to warmer weather. REPORTED ATLANTIC BIDS, OFFERS AND TRADES ($/MMBtu) Date Seller Best Bids/Offers Nov 04 Loading Buyer Basis Loading Window Offer/Bid Notes Delivery period Notes None reported. Most recent trades No trades reported. REPORTED NORTH ASIAN BIDS, OFFERS AND TRADES ($/MMBtu) Date Buyer Destination Seller Source Basis Best Bids/Offers Nov 04 N Asia Trader Atlantic DES Nov 04 N Asia Trader Asia DES Nov 04 Trader N Asia DES Nov 04 N Asia Trader DES Nov 04 N Asia Trader DES Nov 04 Trader N Asia DES Nov 04 N Asia DES Nov 04 N Asia DES Nov 04 N Asia Portfolio DES Nov 04 N Asia DES Nov 04 N Asia Trader DES Nov 04 Trader Middle East DES December December December December December December December December December December December December Bid/Offer high 7 offer mid to high 7 offer low to mid 7 bid high 7 offer above 7.50 offer 7.40 bid above 8 offer 7.20 bid 8 offer 7.30 bid 7.70 offer 7.20 bid Last 5 trades By Nov 3 Unknown Asia or ME Unknown DES By Nov 3 Unknown East Asia Unknown DES By Oct 16 Unknown Japan Unknown DES By Oct 16 Unknown Japan Unknown DES December December December December Price Around $7.50 Around $7.50 Above $7/MMBtu At or above $7/MMBtu Sep 30 (End Nov) $6.70/ MMBtu Unknown Unkonwn Copyright © 2015 McGraw Hill Financial BHP Billiton NWS 2 FOB LNG DAILY NOVEMBER 4, 2015 ASIA/MIDDLE EAST ($/MMBtu): NOV 4 DES Japan/Korea Marker (JKM) JKM (Dec) Asian Dated Brent JKM vs. Henry Hub futures JKM vs. NBP futures JKM vs. Asian Dated Brent JKM vs. SWE JKM vs. NWE EUROPE ($/MMBtu): NOV 4 7.500 8.31 5.228 1.497 -0.810 1.290 1.550 DES Japan/Korea (JKM) swaps Jan7.600 Feb7.600 Mar7.300 FOB Middle East FOB Middle East 7.000 DES West India DES West India (Dec) 7.300 FOB Australia (netback) JKM (Dec) (-) Freight FOB Australia 7.500 0.55 6.95 Key gas price benchmarks Japan JCC LNG (Aug) Japan JCC LNG (Sep) 9.15 Final 9.62 Estimated Competing fuel prices JCC crude oil (Aug) ($/b) JCC crude oil (Sep) ($/b) HSFO 3.5% sulfur 180 CST FOB Singapore Qinhuangdao coal Minas crude oil Naphtha CFR Japan 59.04 Final 51.22 Estimated 6.45 2.55 7.247 10.267 NOTES: Japan JCC value shows latest available CIF price published by the Ministry of Finance, converted to US dollars per MMBtu. All other values reflect Platts most recent one-month forward assessments for each product in each region, converted to US dollars per MMBtu. JKM Marker, SWE LNG and NWE LNG average the assessments of the two half-months comprising the first full month of forward delivery. Asian LNG assessments assessed at Singapore market close 0830 GMT, European LNG assessment assessed at London market close 1630 UK time. NYMEX Henry Hub futures and ICE NBP futures values taken at Singapore market close and London market close. ICE NBP futures converted from Pence/Therm to $/ MMBtu. Asian Dated Brent crude oil assessed at Asian market close 0830 GMT and converted from $/barrel to $/MMBtu. Detailed assessment methodology is found on www.platts.com. FOB East Atlantic Marker (EAM) EAM (Dec) Dated Brent EAM vs. Henry Hub futures EAM vs. NBP futures EAM vs. Dated Brent EAM vs. SWE EAM vs. JKM EAM vs ARA fuel oil 6.650 8.148 4.358 0.650 -1.498 0.440 -0.850 1.000 DES Southwest Europe Marker (SWE) SWE (Dec) Dated Brent SWE vs. Henry Hub futures SWE vs. NBP futures SWE vs. Dated Brent SWE vs. NWE SWE vs. JKM 6.210 8.148 3.918 0.210 -1.938 0.260 -1.290 DES Northwest Europe Marker (NWE) NWE (Dec) Dated Brent NWE vs. Henry Hub futures NWE vs. NBP futures NWE vs. Dated Brent NWE vs. SWE NWE vs. JKM NWE as a % of NBP 5.950 8.148 3.658 -0.050 -2.198 -0.260 -1.550 99.16 Competing fuel prices Northwest Europe fuel oil ARA coal NORTH AMERICA ($/MMBtu): NOV 4 Competing fuel prices US Gulf Coast 3%S fuel oil New York Harbor 1%S fuel oil 5.62 5.82 FUTURES ($/MMBtu): NOV 4 NYMEX HH Singapore close ICE NBP Singapore close NYMEX HH London close ICE NBP London close NYMEX HH US close (Dec) (Dec) (Dec 15) (Dec 15) (Dec 15) 2.272 6.003 2.292 6.000 2.262 (Jan) (Jan) (Jan 16) (Jan 16) (Jan 16) 2.474 6.078 2.478 6.072 2.445 COMPETITIVE FUELS EUROPE ($/MMBtu) COMPETITIVE FUELS ASIA ($/MMBtu) 24 24 Naphtha CFR Japan Minas FOB Indonesia Fuel oil 180 FOB Singapore JKM LNG 18 12 6 6 Jan-15 Mar-15 May-15 Jul-15 Nov-15 0 Nov-14 Source: Platts Source: Platts Copyright © 2015 McGraw Hill Financial Sep-15 3 Northwest Europe fuel oil SWE LNG NWE LNG ARA coal 18 12 0 Nov-14 5.65 2.30 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 LNG DAILY NOVEMBER 4, 2015 RECENT TENDERS AND STRIPS Tender/ Issuer/ Tender Strip Location Type (Lifting)/ Delivery Period Slots/ Cargoes Opening Date Closing Date Validity November 4 Tender Sakhalin - Russia Sell Dec - Feb 5 DES Nov 06 Oct 05 Notes Results 2 Dec, 2 Jan, 1 Feb. Second source said 1 Dec, 2 Jan, 2 Feb Tender Sakhalin - Russia Sell 2016-2018 18 DES Sep 15 Oct 05 Oct 09 6 cargoes per year for l oading over Apr-Sep Unawarded as bids did not meet meet expectations: multiple sources Bids submitted at low 12% of crude oil Tender IOC - India Buy Dec 1 DES By Oct 16 Awarded October 19 Awarded in the range $7-7.30/MMBtu: source Tender Gail - India Buy Dec - Jan 4 DES To be awarded shortly. Offers submitted above $7/MMBtu Tender GSPC - India Buy Dec 1 DES Oct 23 Tender GSPC - India Buy Nov 1 DES Sep 30 Oct 02 Oct 03 Tender KPC - Kuwait Buy Dec 12-13 1 DES Tender PNG - Papua Sell New Guinea End Dec - Early Jan 1 DES Oct 26 2 for December, 2 for January A reissue of a previous unawarded tender Awarded in the low $7s/MMBtu Awarded in the low $7s/MMBtu Oct 29 Reportedly awarded Oct 29 Awarded. Buyer unclear. Tender PSO - Pakistan Buy Dec 5-7, 15-17 2 DES Sep 16 Oct 16 Oct 26 Heard awarded to Gunvor above 15% Brent: source Tender PSO - Pakistan Buy Nov 25-27 1 DES Sep 23 Oct 14 Oct 14 Heard awarded to Gunvor above 15% Brent: source Tender Awarded in the low-mid $7.00s/MMBtu. Shell and Kyushu heard as winners. Donggi Senoro - Sell Indonesia Nov 10 - 1 or 2 DES Oct 23 Oct 27 Dec 10 EOI Gail - India Buy Nov 2 DES by Oct 9 Oct 12 One cargo heard awarded, price unclear: source EOI Gail - India Buy Dec 2 DES By Oct 16 Oct 23 Offers submitted above $7/MMBtu: source. Award to be made shortly Tender Gail - India Buy Oct-Dec 4 DES Oct 01 Oct 06 Oct 09 All four cargoes awarded, price unclear: source. Tender TTLNG - Trinidad Sell Oct ‘15 - Sep ‘17 3 FOB/year Sep 30 Seeking one late-Oct, two Nov and one Dec Oct 20 Tender Bontang - Sell (End Nov 3 FOB Oct 12 Oct 13 Indonesia and Dec) Cancelled Issued by Pertamina. Deadline Awarded to BG and Shell in the range extended on short bidding $6.65 - $6.90/MMBtu: sources window. One for the end Nov and two for Dec Tender Sakhalin - Russia Sell Oct-Dec 5 DES Aug 14 Aug 19 Aug 21 1 for Oct, 3 for Nov, 1 for Dec 4 or 5 awarded mid-high $7s/MMBtu to offakers, long-term buyers. Marubeni, Tohoku Electric and Tokyo Gas bought volumes. Prompt cargoes in the high $7s/MMBtu: sources Tender Awarded in the high $6s/MMBtu to BG: sources PNG LNG - Papua Sell New Guinea late 1 DES Oct 15 Oct 19 Nov To be loaded aboard Southern Cross Tender Dusup - Dubai Buy Feb 2016- 4 - 6 DES by Oct 16 By Oct 20 Jan 2017 Heard awarded to either Shell or BG Award at 11.5% Brent or 11.8%-11.9% Brent, depending on source Tender IOC - India Buy Oct 9, Nov 7 2 DES Sep 16 Sep 21 Heard awarded to Trafigura at either high $6s/MMBtu or low $7s/MMBtu Tender PTT - Thailand Buy H1 & H2 Nov 2 Des Sep 24 Sep 29 ‘ ‘ Awarded just above $6.50 to two different parties. One of them awarded at $6.69/MMBtu, second one awarded to portfolio seller: source Tender PTT - Thailand Buy Oct 1 DES H1 Aug H1 Aug H1 Aug Awarded and to be delivered aboard the Trinity Glory October 21 Tender PSO - Pakistan Buy Dec 25-27 1 DES Oct 15 Nov 06 Nov 6 Tender PSO - Pakistan Buy Oct 6-8/16-18 2 DES Aug 26 Sep 11 Sep 11 Unconfirmed reports that the tender was not awarded Tender PSO - Pakistan Buy Jul - Oct 4 DES Jun 15 Jun 29 4 cargoes, 143,000 cu m Bidders: EDF, Excelerate, Glencore, GNF, Gunvor, Marubeni, Trafigura, Vitol, PetroChina All bids disqualified, except Gunvor’s / 3 cargoes for Aug, Sep, Oct awarded to Gunvor, Brent-linked, at around $8/ MMBtu: sources. First cargo delivered aboard Trinity Arrow Aug 28. Second cargo delivered in late September. Tender Egas - Egypt Buy Oct ‘15 - Dec ‘16 45 DES Mid Jul Aug 02 Oct 15 Validity extended by two. weeks 55 cargoes awarded to Trafigura (16), Gas Natural (13), Shell (11), Noble (9) Petrochina (3), EDF (2) and Vitol (1): sources Tender NEPCO - Jordan Buy 2016 - 2019 19 cargoes Jul 23 Sep 02 Sep 30 More than 16 offers bid per year DES formats for whole or part of the requirement Shell awarded supply for 2016-2017 at between high-11% to low- 12% indexation to Brent. NEPCO to reissue tender for 2018-2019 requirements. Copyright © 2015 McGraw Hill Financial 4 LNG DAILY NOVEMBER 4, 2015 RECENT TENDERS AND STRIPS Tender/ Issuer/ Tender Strip Location Type Tender (Lifting)/ Delivery Period Slots/ Cargoes Opening Date Closing Date Validity Komipo - Buy Oct 10-25 1 partial DES Sep 18 Sep 25 South Korea Tender Tangguh - Sell Nov - Dec 5 FOB Sep 21 Sep 25 Indonesia Notes Results The deadline was extended to Sep 30 Confirmed unawarded on limited sell interest The tender originally offered Four Nov cargoes and 1 Dec cargo tree Nov cargoes and two awarded at $6.80-$6.90/MMBtu Dec cargoes DES N Asia or India Tender TTLNG - Trinidad Sell Late Dec 1 FOB by Oct 13 by end Oct Strip CPC - Taiwan Buy May-Oct ‘15 Tender KPC - Kuwait Buy 1 DES Oct 05 A reissuance from a previous tender closing Sep 30 Three cargoes delivered Sold by ConocoPhillips from Kenai LNG to Yung An and Taichung Oct 12 Tender KPC - Kuwait Buy 1 DES Mid Sep Tender Egas - Egypt Buy Oct 1 FOB or DES Sep 28 Unconfirmed report that tender was awarded at $6.8/MMBtu - $6.9/MMBtu: source Seeking commissining cargo Awarded to Trafigura. To be delivered in for BW Singapore FSRU the next few days. Tender NWS - Australia Sell (Late Oct - 2+ DES Sep 21 Oct 05 Oct 09 Multiple cargoes offered. Unconfirmed reports an award was Early Nov) or FOB Valid for a couple of days, made at around $6.60/MMBtu FOB with award expected by Oct 9. to BG and Trafigura Tender CNOOC - China Sell Oct-Nov 2 FOB Sep 02 Sep 08 Sep 11 Cargo loading October 19-23 on an FOB basis. Cargo loading November 18-19 on a FOB basis Tender Gladstone LNG - Sell Oct-Dec 5 DES or FOB Aug 24 Sep 14 Sep 21 For loading from the Australia Gladstone LNG project Tender Gail - India Buy Oct-Dec 3 DES Sep 19 Sep 22 LNG Daily is published daily by Platts, a division of McGraw Hill Financial, registered office: Two Penn Plaza, 25th Floor, New York, N.Y. 10121-2298. Officers of the Corporation: Harold McGraw III, Chairman; Doug Peterson, President and Chief Executive Officer; David Goldenberg, Acting General Counsel; Jack F. Callahan Jr., Executive Vice President and Chief Financial Officer; Elizabeth O’Melia, Senior Vice President, Treasury Operations. Volume 12 / Issue 213 / November 4, 2015 Houston J. Robinson Phone: +1-713-655-2215 Email: lng@platts.com Singapore Stephanie Wilson, Max Gostelow, Abache Abreu Phone: +65-6530-6551 Global Editorial Director, LNG Shelley Kerr Tokyo Eriko Amaha Phone: +81 3 4550 8842 London Desmond Wong, Luke Stobbart, Phone: + 44-0-20-7176-6119 Advertising Tel: +1-720-264-6631 Global Editorial Director, Power Sarah Cottle Chief Content Officer Martin Fraenkel Platts President Imogen Dillon Hatcher Manager, Advertisement Sales Kacey Comstock To reach Platts: E-mail:support@platts.com; North America: Tel:800PLATTS-8; Latin America: Tel:+54-11-4121-4810; Europe & Middle East: Tel:+44-20-7176-6111; Asia Pacific: Tel:+65-6530-6430 Copyright © 2015 McGraw Hill Financial 5 Volumes heard awarded to Total, Trafigura, Gazprom, and Cheniere Prices heard in the high $5s/MMBtu because of spec and loading uncertainty Issued by Gail Global, Unawarded on high offers Singapore, One cargo per month over Oct-Dec Tender GSPC - India Buy Nov 1 DES by Sep 18 Sep 21 Sep 22 LNG DAILY BG cargo loading over October 19-23; BP cargo loading November 18-19. 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Platts is a trademark of McGraw Hill Financial Copyright © 2015 by Platts, McGraw Hill Financial LNG DAILY NOVEMBER 4, 2015 Looking further out, the January JKM was assessed at $7.50/MMBtu for both H1 and H2, but there was some concern that supply from new projects could put downward pressure on prices. “December is tight, but my impression is that the market will be oversupplied in January so the price will likely fall,” a source with a North Asian buyer said. A trader based in Singapore agreed, adding that the ramp-up of APLNG and GLNG in Australia, coupled with Angola, Gorgon and Sabine Pass starting up in the new year was leading to bearish sentiment for January and February. Elsewhere, demand for volumes into the Middle East continued to be heard, with bids reported in the low-$7.00/MMBtu range for December. In shipping, the 195,659 cu m (119 million cu m or 4.21 Bcf of gas) Esshu Maru is currently on course to arrive at Huelva by the end of the month after delivering a cargo to the port of Salvador de Bahia in Brazil. The vessel is understood to be lifting reload volumes from the Spanish port for Petrobras. In the paper market, the Cal 16 JKM swap was seen to have traded four times in the past 48 hours. Cal 16 traded twice on November 3, at five lots each time for $6.60/MMBtu. On November 4, 15 lots of Cal 16 traded at $6.65/MMBtu, and then again later in the day at $6.70/MMBtu for 30 lots. — Max Gostelow, Desmond Wong SHIPPING PRICES SHIPPING RATES: NOV 4 Asia Pacific day rate ($/day) Atlantic day rate ($/day) PLF1 Middle East Japan/Korea ($/MMBtu) PLF2 Middle East NWE ($/MMBtu) PLF3 Trinidad NWE ($/MMBtu) SHIPPING RATES ($1000s/DAY) 85 Asia Pacific Atlantic 75 65 55 45 35 25 Nov-14 NEWS 30,000 35,000 0.79 1.00 0.53 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Source: Platts Gas Natural expects to obtain first Sabine Pass LNG in 2016 SHIPPING CALCULATOR: NOV 4 Barcelona—Spain’s Gas Natural Fenosa expects to obtain some early quantities of LNG from the US Sabine Pass LNG terminal during 2016, according to company CEO Rafael Villaseca. The company, which has a 4.8 Bcm/year contract starting in 2017, said Wednesday it expects to place some volume ahead of that date, without saying how much. Villaseca said the company has already made agreements to sell 3 Bcm of the annual 4.8 Bcm it has agreed to buy from the plant’s Australia- Middle EastJapan/KoreaIndia Ship size (mt) Trip length (days) Carrier day rate ($/day) Day rate cost ($/MMBtu) Boil-off cost Bunker fuel ex-wharf 380 CST ($/mt) Fuel oil cost ($/MMBtu) Cost of voyage ($/MMBtu) 66,000 8 30,000 0.16 0.25 395.50 0.14 0.55 66,000 3 30,000 0.07 0.18 246.50 0.03 0.29 FREIGHT ROUTE COSTS: NOV 4 ($/MMBtu) South China/ Japan/Korea Taiwan West India Middle East Australia Trinidad Nigeria Algeria Belgium Peru Russia Spain Norway 0.79 0.55 1.95 1.34 1.48 1.63 1.15 0.30 1.53 1.81 0.70 0.50 1.85 1.20 1.39 1.50 1.30 0.38 1.39 1.63 0.29 0.59 1.41 0.92 0.97 1.09 1.43 0.80 1.02 1.26 South West Europe 0.89 1.36 0.53 0.52 0.19 0.27 1.18 1.49 — 0.39 North West Europe 1.00 1.49 0.53 0.56 0.31 — 1.21 1.56 0.27 0.26 North East US Argentina Brazil 1.20 1.43 0.33 0.65 0.49 0.44 1.16 1.75 0.41 0.48 0.97 1.12 0.62 0.61 0.74 0.80 0.54 1.25 0.74 0.93 1.10 1.31 0.45 0.52 0.65 0.72 0.77 1.68 0.61 0.88 All values calculated based on prevailing spot market values during the day for LNG, bunker fuel and ship chartering. No route cost is calculated for Zeebrugge to NW Europe, or Spain to SW Europe. Other routes appear blank on days when a public holiday in one or another location means underlying values are not published. Detailed assessment methodology, including assumed route times and underlying values, is found on www.platts.com Copyright © 2015 McGraw Hill Financial 6 LNG DAILY NOVEMBER 4, 2015 operator Cheniere Energy. Villaseca said Gas Natural would buy US gas at an average of $6.33/MMBtu on a FOB basis for 2016. The company said it expects to sell 120 TWh of LNG globally in 2016, with 80% of that volume already covered. — Gianluca Baratti Spain’s Gas Natural sees 7% gas sales volume rise in 2016 Barcelona—Spain’s largest gas company Gas Natural Fenosa said it sees a 7% increase in gas sales volume during 2016, boosted by early quantities of gas delivered from the US Sabine Pass LNG export terminal. The company said Wednesday that it expects to sell 335 TWh of gas during the year, with a large portion of the volume already forward sold. By sector, Gas Natural said it has already 100% covered its residential sales for 35 TWh, as well as covering 100% of 20 TWh of sales to gas-fired plants, besides 85% of an expected 160 TWh to industrial clients and 80% of its forecast 120 TWh of LNG sales. The company currently makes around 38% of its sales within Spain and 62% globally, with around 56% of its LNG volume procured on a FOB basis. Company CEO Rafael Villaseca said Wednesday that the volume has been boosted because the company expects to obtain some early quantities of contracted LNG from the US Sabine Pass LNG terminal during 2016. Gas Natural has a 20-year, 3.5 million mt/year (163 Bcf/yr or 4.63 Bcm/yr of gas) contract starting in 2017 but expects to place some volume ahead of that date, without saying how much. The company has already made sale agreements for 3 Bcm of the annual 4.8 Bcm volume it has agreed to buy from the plant’s operator Cheniere Energy, Villaseca said, adding that Gas Natural would buy US gas at an average of $6.33/MMBtu on a FOB basis for 2016. The company, which already has a second 2 Bcm/yr contract with Cheniere for gas from the Corpus Christi terminal will also target adding more LNG supply that could come on in the US by 2020, Villaseca added. Indeed, the company is expecting delivery of five new LNG tankers by 2018 with between two and four more by 2020, he said, all of which would give the company more flexibility. The company has a fleet of 11 tankers, but did not say when the first of the five new tankers might be delivered. On the demand side, the company sees global LNG demand rising 8% a year through to 2020 to 483 Bcm/yr as gas demand rises for power generation worldwide and new countries become LNG importers. PLATTS GAS IS ON TWITTER FOR UP-TO-THE-MINUTE GAS NEWS AND INFORMATION FROM PLATTS Follow us on twitter.com/PlattsGas Copyright © 2015 McGraw Hill Financial 7 At the same time, developed economies are likely to phase out coal and nuclear plants, giving rise to the possibility of gas-fired plants as the primary back-up to renewables, Villaseca said. Risks mitigated Villaseca said that although the current trading climate posed some risks, the company has enough operational flexibility to mitigate most of the risks. Gas Natural said that its income from gas sales was down 13% year on year to Eur811 million ($886 million) in the first nine months of the year largely due to the drop in raw material prices. The stability of regulated business and growth in Latin America have left the company likely to hit its 2015 targets, but midstream margins are likely to be squeezed in the next year, the company said. This would be partly mitigated by using the flexible and diversified portfolio of contracts, Villaseca said, noting that long-term indexed contracts with Trinidad and Tobago, Algeria and Norway had been revised in 2015 while contracts with Qatar and Oman are currently under discussion. The company currently has 25 Bcm of long-term purchase contracts, with a further 10 Bcm to be added by 2021 from the US, Russia and Azerbaijan. In Egypt, the company sees a potential medium-term solution for restarting its 50% owned, 5 Bcm/yr liquefaction plant at Damietta, which has been halted since 2012 after the Egyptian government stopped supplying feedstock. The options being considered involve a possible tie-in with Israel’s offshore Tamar project or other Mediterranean plays such as Egypt’s Zohr, Cyprus’s Aphrodite or Israel’s Leviathan. — Gianluca Baratti Golar agrees on Ghana FSRU contract with West African Gas London—Golar LNG said in a statement Wednesday that it is to provide the Golar Tundra floating storage and regasification unit for West African Gas to support its LNG import operations in Ghana. The contract will be for an initial period of five years with the option for WAG to extend it for a further five years. WAG is developing an LNG import project at the port of Tema on the coast of Ghana, with a planned startup date in the second quarter of next year. The 170,000 cu m (103.5 million cu m or 3.66 Bcf of gas) newbuild Golar Tundra will be delivered from Samsung in November. The FSRU will go through minor modifications in Singapore before being delivered to WAG. The vessel is Ghana’s first FSRU. “Ghana represents an exciting new business opportunity for Golar. West Africa is becoming an increasingly important region for our business and we are proud to be jointly developing Sub Saharan Africa’s first FSRU in partnership with WAGL,” said Golar LNG CEO Gary Smith. “This landmark achievement is the first of its kind in Sub Saharan Africa and strategically positions Ghana to be an Energy Hub,” said WAG Managing Director Umar Ajiva. WAG is jointly owned by subsidiaries of Nigerian National Petroleum with 60% and Sahara Energy Resource with 40%. — Wyatt Wong LNG DAILY NOVEMBER 4, 2015 ANALYSIS: Oil and gas takeover race heats up in Australia Sydney—After more than a year of depressed crude prices, oil and gas companies are making Australia a takeover hotspot, seeking to reap rewards from cheaply priced assets when markets ultimately rebound. If some of the deals—the major ones centered around Santos and Oil Search—go through, they are expected to shake up the region’s oil and gas sector, giving some participants a stronger foothold in the country. “Every major downturn in oil price over the past 50 years has been accompanied by an M&A cycle,” Bernstein Research analyst Neil Beveridge said. “While it may still be too early to call this the start of an M&A cycle, any increase in M&A activity will suggest that the industry believes that the bottom of the cycle is approaching.” Beveridge noted that activity levels would pick up further in 2016. LNG is one area where there has been a significant increase in M&A activity this year, with more than $100 billion, or half the oil and gas sector’s total in proposed deals. From a record high level of close to $19/MMBtu in early 2014, LNG prices have plunged more than 60% on the back of growing supply in the Pacific and weak demand from traditional Asian buyers. The Platts LNG netback FOB Australia, which rose to a record $18.86/ MMBtu on February 14, 2014, fell to the low $6s/MMBtu in February this year, and was $6.95/MMBtu on November 3. Despite the near-term cyclical downturn, interest in LNG had increased as buyers look for assets with long-term growth potential, Beveridge said. “We see LNG as one of the more attractive growth sub-segments in the industry over the coming 30 years with industry growth of 6-7% as demand shifts to lower-carbon fuels,” he added. Pockets of opportunity Activity picked up in September when Woodside launched an A$11.6 billion ($8.4 billion) takeover bid for Papua New Guinea-focused Oil Search. Woodside’s interest in Oil Search centers on its plum LNG assets, particularly its 29% stake in the PNG LNG project, operated by ExxonMobil. The proposal highlights the attraction of PNG assets that sit at the lower end of the cost curve, according to Bernstein. PNG LNG started up several months ahead of schedule and has been operating at a rate of 7.4 million mt/year (346 Bcf/yr or 9.78Bcm/yr of gas) during the third quarter, well above its nameplate capacity of 6.9 million mt/yr. Oil Search operates all of PNG’s producing oil fields, but the addition of PNG LNG will change its output profile. Production from the project is set to boost Oil Search’s output in 2015 to between 27 million and 29 million boe, from 19.27 million boe in 2014 and 6.74 million boe in 2013. Woodside’s overtures have so far been rejected by Oil Search, whose Managing Director Peter Botten has said the offer was not up to expectations. Woodside CEO Peter Coleman has said he had little appetite to raise the bid. Separately, Santos has become the subject of a takeover bid. Investment fund Scepter Partners, which has links to the royal families of Brunei and the United Arab Emirates, on October 20 surprised the market by lobbing a A$7.14 billion offer at Santos. Like Oil Search, Santos has rejected the offer, but the company is in a Copyright © 2015 McGraw Hill Financial 8 relatively weaker position, having seen its share price fall in the wake of the oil price crash, from more than A$15 in early September 2014 to below A$4 on September 30 this year. — Christine Forster, Abache Abreu Engie impacted by lower commodity prices, reduced LNG activity London—French energy group Engie said Wednesday its nine-month operating performance was hit by falling commodity prices, which, among other things, led to lower realized prices and reduced arbitrage opportunities for its LNG activities. As a result of the more challenging operating environment, Engie said it expected its net income for 2015 to come in at the lower end of a previously adjusted range of Eur2.75 billion-3 billion ($3 billion-$3.25 billion). Total group revenues in the first nine months amounted to $53.5 billion, down 1.5% from the same period last year, Engie—formerly known as GDF Suez—said in an earnings statement. “This decrease is notably due to the drop in commodity prices and the unavailability of Doel 3 and Tihange 2 nuclear plants, despite a more favorable temperature compared to 2014,” Engie said. The group was hit particularly badly in its global gas and LNG division, where revenues in the first nine months were down 38% year on year to Eur3.2 billion. “This significant decrease is explained by the drop in oil and gas prices on the European and Asian markets, largely reducing arbitrage opportunities for the LNG activity, and by the disruption in supply from Egypt since January 2015 as well as from Yemen since April,” Engie said. The Yemen LNG plant, with which Engie has a long-term LNG purchase agreement, has been offline since mid-April amid increasing security concerns around the facility. No cargoes have been exported from the facility since mid-April. Egypt has diverted its gas production for domestic use given increasing shortages. — Stuart Elliott Lithuania’s LNG terminal brings price bargaining power London—Before Lithuania began importing LNG at the end of 2014, the move had already proven to be beneficial for the small Baltic country— it enabled Vilnius to win a much better price from Gazprom for its Russian gas supplies. And with its new LNG import facility holding plenty of spare capacity, Lithuania hopes to be able to become a bigger regional supplier of gas, reaching its Baltic neighbors and Poland in the coming years, the head of Lithuania’s state-controlled energy holding company told Platts Tuesday. In a wide-reaching interview, Lietuvos Energija CEO Dalius Misiunas said the decision to build an LNG import facility had fundamentally changed market dynamics in Lithuania and the wider Baltic region. Up until the start of LNG imports, Lithuania and its neighbors had been effectively 100% dependent on Russian gas supplies- and that lack of optionality meant Russia could push the price up as high as it liked. “LNG gives us additional security of supply and also gives us independence of supply—it basically reduced the dependence on a LNG DAILY NOVEMBER 4, 2015 single source, which in turn impacted prices,” Misiunas told Platts. “The same year we started LNG supplies we had a reduction in the Gazprom price, which brought us back to the European market level.” Since 2003, the price Lithuania paid for Russian gas went up from $85/1,000 cu m to some $500/1,000 cu m just a few years ago. “That was a real threat to our economy,” Misiunas said. “The price now—we basically pay a similar price to what the Germans are paying, the European level.” Platts assessed the German Gaspool day-ahead gas price Tuesday at $5.754/MMBtu—or the equivalent of $207.80/1,000 cu m. the beginning of the year we have supplied some gas from Lithuania to Estonia. We are now talking to the Latvians about supplying gas to them. Our goal is to activate the market as much as possible. Our LNG facility can support the whole region.” In addition, Misiunas said Lithuanian-imported LNG could also go to Poland via a planned gas interconnector. “If the price is good, if it works economically, the structure will support supplies to Poland once the interconnector is finished,” he said, adding that the current plan was to complete the line in 2020. LNG sources, demand concerns Russina gas auctions By introducing competition to Russian gas, Lithuania won some muchneeded bargaining power. The discount it won for its Russian gas imports was “substantial,” Misiunas said, at around 22%-23%. And it was retroactively applied, bringing the overall price down further. But what of the future? Misiunas said it was possible Gazprom could switch its sales mechanism to the Baltic region and hold auctions to sell its gas. “We are observing the situation around what Gazprom’s strategy will be for next year. They have done some pilot auctions and they have just announced recently that they could use an auction system for Baltic supplies as well. It depends on how that will develop and what mechanism they will choose for their supplies to the region,” he said. Gazprom has to face up to the fact that countries are no longer as dependent on Russian gas as they were in the past and that it increasingly faces competition from LNG in Europe. “My belief is that we will have more competition on the market,” Misiunas said. “The cost of Russian gas is much lower than the current sales price—the breakeven price. They have sufficient flexibility to compete. That is a decision [for them] on how they see their future markets and how far they want to go with the competition,” he said. In 2015, LNG will represent 25% of Lithuania’s total gas consumption which is expected to be 2.0-2.1 Bcm. So Russia still supplies 75% of Lithuania’s gas. Economic rationale Indeed, there have been some question marks about the economic viability of the LNG import terminal in Lithuania given that it is currently vastly underused and Russian gas is still cheaper. But Misiunas said it was not just about economics. “This project is a security of supply project. Then if you evaluate all the factors—including the reduction in the Russian gas price—then you can see the economic reason behind it,” he said. “What we have today is security of supply at a higher level, we have two different sources of gas and the infrastructure to cover all our demand from each of those sources. And we have negotiating power on both sides. “When you compare it with where we were two years ago, it’s a completely different story.” The facility has a current maximum import capacity of 4 Bcm/year, but a total of only 0.5 Bcm is expected to be delivered this year. The spare capacity means Lithuania could import more LNG for onward supply to its neighbors. “This is part of our plans—we want this market to develop. Since Copyright © 2015 McGraw Hill Financial 9 At present, Lithuania imports LNG from a single supplier—Norway’s Statoil—which was selected in a tender process in August 2014. But Lietuvos Energija also has a number of master trade agreements (MTAs) with different LNG suppliers to enable it to buy spot cargoes. One MTA is with the US. “We are definitely looking into the US market at the moment, we have been in talks with most of the export terminal developers, and we are evaluating US export potential,” Misiunas said. But, he said, Lithuania would not eye LNG imports from the US’ first phase of export projects. “Later projects—those coming online in 2019-2022—this could have potential.” But while Lietuvos Energija has plans for a diverse LNG import portfolio, there is one lingering doubt about the region’s future prospects—falling demand. “Unfortunately consumption is going down in Lithuania, and has been going down rapidly in the past few years,” Misiunas said. “And next year, consumption will be a further 10%-15% lower. It’s not good news for the gas industry.” The main drivers of demand decline for gas is the increased use of biomass in heat generation and the removal of subsidies for gas-fired power generation. The startup at the end of this year of an electricity interconnector from Sweden has reduced the need for domestic power production. So, while Lithuania is enjoying its newly enhanced gas supply security, there is little point in having a diversified import portfolio if you don’t have the demand. But with other LNG import plans in the region, including Gasum’s planned Finngulf facility, being abandoned or slowed, Lietuvos Energija will be pinning its hopes on supplying the wider Baltic region. — Stuart Elliott FERC again is pressed to speed action on Elba LNG Washington—Four Kinder Morgan units are asking FERC to speed issuance of its environmental assessment for the Elba Liquefaction Project near Savannah, Georgia, as well as related expansions, saying the overall review process has dragged on for over two years. Otherwise, the companies warn that industrial customers for the related pipeline compression project and expansion projects would face delayed in-service dates and could miss regulatory deadlines to reduce their boiler emissions. LNG DAILY NOVEMBER 4, 2015 While acknowledging FERC’s limited resources, the companies— Elba Liquefaction, Elba Express, Southern LNG and Southern Natural Gas—pressed the commission to prioritize acting on the projects, in a letter filed November 3 (CP14-103, CP14-115, CP14-493). The companies earlier asked FERC to expedite its review on the projects, for instance writing in May to urge release of the EA by June 1. The projects at issue include the Elba Liquefaction Protect, proposed by Elba Liquefaction and Southern LNG, to add liquefaction and export capacity to SLNG’s existing LNG terminal at Elba Island, Georgia. To supply gas to the project, Elba Express would add compression along its Elba Express Pipeline facility, under the so-called EEC Modification Project Southern Natural also proposed the SNG Zone 3 Expansion project involving new compression, a short segment of pipe and other modifications to add 235 MMcf/d of transportation capacity from a receipt point at an interconnection between Elba Express and Transcontinental Gas Pipe Line to delivery points along Southern Natural’s system. Review of the projects is intertwined because FERC has said it will include the Elba Liquefaction Project and EEC Modification in one EA, and also said it cannot act on the SNG Zone 3 expansion until it acts on the EEC project. In their November 3 letter to FERC, the companies said that without prompt approval of the SNG Zone 3 Project and the EEC Modification Project, customers Rayonier Advanced Materials and International Paper may miss their regulatory deadlines. Referring to the Elba LNG and EEC Modfication projects, they wrote that the review process has extended for over two years, including 12 months of prefiling review and 17 months of review following the formal application. They want FERC to act on its EA for Elba and EEC by December 15, rather than the February 5, 2016, date FERC had listed in a schedule published October 15. They also suggested that once the EA is done, FERC act separately on the EEC Modification project to speed its approval. Prompt approval “is now critical” for the EEC Modification, especially for six shippers that signed precedent agreements for firm capacity, including Southern Natural Gas, they said. Southern Natural has bought capacity on the EEC Modification project to provide firm service coupled with its SNG Zone 3 expansion project, they wrote. FERC staff this summer linked approval of the SNG Zone 3 project to the EEC Modification, saying SNG Zone 3 could not move forward until FERC takes action on the EEC project because SNG depended on capacity created by the EEC project. “Because of the linkage of the two projects and the delays in finalization of the EA for the EEC Modification Project, the date has passed by which it is feasible for EEC and SNG to meet its customers’ requested in-service date of June 1, 2016,” they wrote. The two Southern Natural customers, Rayonier Advanced Materials and International Paper, must be able to complete the conversion of their boiler fuel sources to natural gas by late 2016 and have gas capable of being delivered to the facilities, they added. Rayonier also wrote to FERC September 24 to support Southern Natural’s assertions about its need for natural gas from the SNG Zone 3 project to keep its Copyright © 2015 McGraw Hill Financial 10 dissolving pulp plant in Jesup, Georgia, in compliance with new boiler Maximum Achievable Control Technology standards. “Without access to this new volume of gas, our ability to continue our operations and its nearly $1 billion of economic impact in the region will be jeopardized,” Rayoneir wrote. Other industrials including International Paper and PCS Nitrogen Fertilizer had written in support of fast action earlier. The Municipal Gas Authority of Georgia had also written in to say the timely in-service date was needed for its small muni members to meet their retail load. As is, the schedule would put EEC and SNG five months behind on the in-service date, the Kinder Morgan companies said. The delay “could result in serious consequences for the affected shippers, including the disruption of manufacturing operations for those facilities.” But speeding the EA and other orders could give the companies a decent chance to adjust the construction schedule and allow shippers to comply with mandates, they said. The companies are seeking FERC orders authorizing the EEC and SNG Zone 3 projects by February 15, 2016. In issuing its schedule for the EA, FERC noted that primary issues raised by commenters were on the need for an environmental impact statement, sought for instance by the Sierra Club, effects on gas prices, as well as impacts on wetlands, wildlife habitat, essential fish habitat and aquatic ecosystems, air quality and noise, visual effects on nearby parks and effects on public health and safety. — Maya Weber Downeast asks FERC to suspend review of Maine LNG export project Washington—Downeast LNG has asked FERC to place the review of its LNG export facility proposed for Robbinson, Maine, on hold for four months while it considers market conditions for the project. In an October 30 filing at FERC, the company said Downeast and its investors would “undertake an economic analysis of current market conditions and the associated impact on the proposed Downeast LNG project.” Company officials did not respond to requests for comment by presstime. The effort to pause the review follows bearish assessments from analysts on the prospects for US LNG export projects still in early stages of regulatory review, and amid a difficult political climate in New England for pipeline expansions and exports. Even pipeline expansion projects to ease the region’s constrained pipeline capacity have faced substantial political pushback. The Downeast LNG project was originally pitched as an import facility but FERC was asked later for approval to export LNG. Dean Girdis, Downeast LNG president, in June 2014 had said the company was altering its plans in order to pursue a bi-directional facility with “the ability to respond to market conditions and customer needs while increasing the supply of natural gas in the state, whether we are importing or exporting.” The company’s proposal would have modified the project to allow the facility to liquefy 270 MMcf/d of gas or regasify 100 MMcf/d, based on market conditions. Downeast had said the proposal would “help alleviate gas supply constraints in the New England region by contracting for 300,000 Mcf/d of LNG DAILY NOVEMBER 4, 2015 firm gas pipeline capacity, thereby supporting the construction of new pipelines to the region and increasing market liquidity.” In August 2014, FERC had said it was starting the prefiling review for the project. Exporting LNG from the New England market could face challenges in the region. The New England market has been notorious for high price spikes during the winter—and even summer—peak demand periods, when adding an export facility to the area would likely only exacerbate the constraints and thus pricing impact. With dwindling supply from Eastern Canada offshore platforms, diverse supply options appear to be shrinking for the Boston market. Several pipeline expansions are currently underway for Algonquin Gas Transmission—the main supply pipeline for Boston, with the most recent being the Algonquin Incremental Market for an incremental 342 MMcf/d of mainline capacity for November 2016. Additionally, the Algonquin pipeline may also undergo an expansion for 132 MMcf/d in November 2017 from the Atlantic Bridge project. Since the LNG market usually ramps up during the winter months in the Northern Hemisphere, feeding both regional demand in New England while also liquefying gas in relatively the same market could require additional pipeline expansions to help supply the LNG export facility. Rick Smead, managing director of advisory services for RBN energy, noted that total global LNG liquefaction capacity right now is somewhere around 44 or 45 Bcf/d. The 46 Bcf/d of projects proposed at the Department of Energy would be “a 100% increase in global capacity in a soft market—not very likely to come true,” he said. “We believe the most likely levels are going to be between 10 and 20, probably closer to 12 or 13—which is already underway among Sabine, Freeport, Cameron, Corpus, and Cove Point. While there should certainly be some additional successes over time, it’s fair to say it will be difficult, and the farther from supply a project is, especially if it’s in a pipeline-constrained area like the Northeast, the more difficult it will be,” he said. — Maya Weber Global LNG pricing to 2020 dependent on many factors: Wood Mac Houston—Global LNG prices over the next five years are likely to depend on a myriad of factors, including trends in global coal prices, the potential shut-in of domestic gas production in China, and competition in Europe with pipeline gas from Russia, Wood Mackenzie’s head of Global Gas said November 3. Profound changes in global supply-and-demand dynamics are likely to have significant impacts on LNG price trends, Noel Tomnay said in an interview. “The demand response could be around coal/gas competition in Europe or it could be coal/gas competition in Asia if prices go sufficiently low,” he said. Or, the biggest price response could come about as the result of a fundamental change in the global supply dynamic, such as a decision by the Chinese gas producers to shut in high-cost domestic gas production. A recent Wood Mackenzie report found that China’s indigenous gas supply “includes some relatively high-cost gas in harsh environments from challenging sources, including coal-to-gas, coalbed methane, Copyright © 2015 McGraw Hill Financial 11 sour gas, tight gas and embryonic shale gas plays.” In addition, much of China’s gas resource base is located far from markets, requiring pipeline distances of up to 4,000 kilometers (2,485 miles) “to reach coastal markets with regulated transport tariffs in excess of US$3/MMBtu,” the study found. Given these factors and a slowdown in the growth of domestic demand, some Chinese national oil companies already have curtailed existing gas production, thus creating more potential demand of imported LNG. Tomnay said the five projects to export LNG from the US that are currently under construction are likely to be the only US projects to get regulatory approval, at least until the end of the current decade. With the construction of those five projects, the US is expected to have a total LNG export capacity of 60 million metric tons per annum, about 8 Bcf/d, in place in 2020. “I think there will be a second wave of US LNG export construction, but it’s possible we may not see any projects being sanctioned for a couple of years,” Tomnay said. Two Canadian export projects to be built: Tomnay As for Canadian LNG export projects, he said only two projects are likely to be built to ship gas from the west coast of British Columbia: the Pacific Northwest LNG project, being developed by Petronas; and LNG Canada, proposed by Shell, KOGAS, Mitsubishi and PetroChina. These projects are more likely to be built than some US LNG export projects, he added. “Their marketing is more advanced because the equity holders in those projects are more committed to taking those volumes,” he said. Wood Mackenzie estimates that about 30% of US LNG exports will be bound for Europe in 2020. “Some of this LNG will be baseloaded into Europe; some will be destined for Europe because higher netbacks may not be achievable elsewhere and Europe provides a proximate liquid destination for LNG from the US Gulf and East coasts,” the report says. Tomnay said he sees European prices for LNG increasingly coming into parity with Asian prices, which traditionally have been higher, especially following the Fukishima nuclear disaster in Japan. “We saw that in Q1 of this year, when we saw Asian prices lower than European prices on a spot basis. I’m sure that we’ll see that again,” he said. In the future, the gas market in Europe is going to comprise “a genuine competition between US LNG and Russian piped gas. I think US LNG is very much going to be a price taker and it’s up to Russia as to what price US LNG gets,” Tomnay said. The wild card in determining future LNG prices rests with determining the comparative price of coal, which competes with natural gas as a power generation fuel around the world. When the Amsterdam-Rotterdam-Antwerp coal prices in Europe trade in a range of between $50 and $70 per metric ton, the price at which it becomes economical to switch to gas in the UK is $6 to $7.30/ MMBtu. In Germany it is $3.70 to $5.20/MMBtu, accounting for the range in the price consumers pay for carbon, according to the Wood Mackenzie report. “All other things being equal, the high coal prices paid in Japan and South Korea imply that they should be the first Asian markets to switch from coal as LNG prices fall. However, gas is handicapped in South Korea LNG DAILY NOVEMBER 4, 2015 where import duties on LNG are high relative to coal,” the report finds. Tomnay foresees the adoption of a pricing point for LNG in both Europe and Asia, similar to the role that the Henry Hub plays as a benchmark for North America gas prices. LNG markets “are already moving to an ever larger proportion being sold on spot as a result of the oversupply and it’s an inexorable shift. In Asia as we experience an oversupply in the next five years, there’s certainly the opportunity for some stakeholders to support an Asia pricing point,” he said. Similar trends in Europe are leading to the establishment of an LNG pricing point for that continent. “Where the benchmark will be, that remains to be written. There are multiple options. It depends on the support that they get from the market, but principally from sellers and which sellers opt to support which benchmarks,” he said. US LNG exports economical: Eclipse According to a recent report by Eclipse Energy Group, an affiliate of Platts Analytics, “US capacity holders will export LNG as long as the market price is above the marginal cost of delivery i.e. 115% Henry Hub plus shipping plus a profit margin; the implication being that the tolling fee can be considered a sunk cost and US LNG an option which can be turned on and off.” Cheniere Energy is expected to begin exports from the Train 1 of its Sabine Pass terminal in Louisiana in the first quarter of 2016, closely followed by the ramp-up of Train 2 in the second quarter, bringing an overall 4.64 Bcf/d of additional supply capacity to the market. Twothirds of Train 1’s capacity is held by BG with the remainder held by Cheniere, while Train 2’s capacity is 80% booked by Gas Natural Fenosa and BG combined, according to Eclipse. “None of this capacity has been sold forward i.e. by means of medium to long-term contracts,” Eclipse points out. “As the start-up of US export coincides with the ramp-up of Australian production and stalling Asia Pacific demand growth, we believe the LNG market is likely to be well-supplied.” — Jim Magill Yenisei River heads to Indian Ocean after loading at GLNG London—The 155,000 cu m (94.4 million cu m or 3.33 Bcf of gas) Yenisei River was heading towards the Indian Ocean after loading at the newly-commissioned Santos-led Gladstone LNG facility in Queensland, eastern Australia, Platts cFlow trade flow software showed Wednesday. The vessel, understood to be under charter to Russia’s Gazprom, loaded from Gladstone October 28. The 128,000 cu m LNG Maleo delivered a second cargo from the Indonesian Donggi Senoro LNG plant into Japan’s Oita regasification terminal on Tuesday. The vessel loaded from DSLNG on October 24. This is the second cargo Japanese utility Kyushu Electric received from the facility. The buyer has a contract with SHIPPING Copyright © 2015 McGraw Hill Financial 12 the exporter for the delivery of 0.3 million mt/year. 160,000 cu m Cool Explorer was heading southeast after delivering a Dampier cargo to Japan. The vessel is heard to be under charter to energy trader Trafigura, according to a shipbrokering source, and to be headed to Gladstone LNG to lift a cargo. The 160,000 cu m Energy Atlantic is expected at the Sabine Pass LNG plant in Texas January 12. The newly built carrier left South Korea in September, and has been stationed in Singapore since October 12, before setting sail October 30. The 155,000 cu m Gaslog Salem is in transit to Puerto Rico, laden with a reload from Zeebrugge. The vessel is expected to arrive at its destination on November 10, according to cFlow data. Gas Natural Fenosa has a commitment to supply LNG to Puerto Rico on a term basis. The 160,000 cu m Grace Dahlia picked up a reload cargo from the Gate terminal in the Netherlands and was shown by tracking data to be scheduled to arrive at Port Said, Egypt by November 7. The vessel is understood to currently be under the control of Vitol. The 150,900 cu m FSRU Express left Bahia Blanca around November 1. The similarly-sized FSRU Exemplar is anchored just outside Bahia Blanca with an ETA at an unspecified port of November 27. The 160,000 cu m Petrobras-controlled Cool Runner is heading to Dahej, India with an ETA of November 11, according to cFlow data. The vessel loaded a cargo from Bonny, Nigeria around October 5 and was just off Brazil, before heading towards the Cape around 20 days ago. In the Middle East, the 170,000 cu m Shell-controlled SCF Melampus delivered into Aqaba around October 31. Shell has a fiveyear supply contract with Nepco.The 138,000 cu m Shell-controlled Bilbao Knutsen delivered into Dubai around October 29. The 150,000 cu m BG-controlled Clean Energy delivered into Kuwait around October 30. The 160,000 cu m Golar Snow delivered into Egypt around November 1, with Vitol heard to be the seller. Vitol has a commitment to supply about nine cargoes over two years into Egypt, from winning a supply tender issued by Egas and awarded earlier this year. In India, the 150,000 cu m BG-controlled Neo Energy delivered into Dahej around November 1 while the 173,400 cu m Shell-controlled Sevilla Knutsen delivered a Peruvian-sourced cargo into Hazira around the same time. The number of currently identifiable vessels conducting spot trade stands at 56, with two in the Atlantic, 11 in the Middle East, nine in Europe, 23 in Asia, one in Africa, one in Australia, four in the Mediterranean, and five in South America. Some 22 of these run on steam engines and 39 run on four-stroke engines. These vessels have been determined by Platts data to be carriers likely to engage in spot trade, but not necessarily available for charter. — Wyatt Wong The Register by December 4, 2015 and SAVE $300 14th Annual Gas Storage Outlook How Changing Market Dynamics, LNG and Power Generation, and New Storage Agreements Are Impacting the Industry platts.com/gasstorageoutlook Gain Insight from These Storage Operators, Industry Experts, Dealmakers, and Financiers: Acquest Advisors LLC AFEnergy, LLC Bear Head LNG Benjamin Schlesinger and Associates Bentek Energy Connecticut Natural Gas & Southern Connecticut Gas Consolidated Edison Company of New York Cypress Energy Capital eCORP International, LLC Energy Advisory Associates King & Spalding LLP Latitude Technologies Midstream Energy Holdings, LLC Nexus Energy Logistics North American Energy Solutions, LLC US EIA WTM Energy Software, LLC For More Info or to Register Web: Phone: Email: www.platts.com/gasstorageoutlook 800-752-8878 toll-free 212-904-3070 outside the US and Canada registrations@platts.com For speaking opportunities, contact: Nate Connors Tel: 857-383-5747 nathaniel.connors@platts.com For sponsorship/exhibit opportunities, contact: Lorne Grout Tel: 857-383-5702 lorne.grout@platts.com For media inquiries, contact: Christine Benners Tel: 857-383-5733 christine.benners@platts.com $ Register NOW for the 995 Storage Operator and LDC Discount January 11-12, 2016 • Omni Houston Hotel • Houston, Texas KEYNOTE Enhancements to EIA Gas Storage Methodology and Their Significance to the North American Gas Markets Steve Harvey, Assistant Energy Administrator, US EIA Only At Platts Gas Storage Outlook Will You Hear Discussions On: • Storage forecasts for Winter and Summer 2016 • Changes in supply and demand fundamentals — Will demand increase enough to drive up prices, volatility, and seasonal spreads? • The changing dynamic of the withdrawal/injection season — Are we moving to a double withdrawal? • Gas nomination cycles — FERC and NAESB efforts to create new rules • Hub liquidity — Is Henry Hub still relevant in the changing North American gas market? • LNG driving demand for gas storage opportunities • M&A — What is the blueprint to turn distressed assets into profit? • Phenomena of contract roll-off in different markets — What happens when operators renew? • Coping with plant retirements — Can pipeline companies offer more rapid response services? 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