Thursday, June 18, 2015

Canadian LNG NEWS, The Grim Reality Is Glut, Glut and More Glut

There has been many lazy LNG articles in Canadian newspapers as of late, the only conclusion one can come to is..

Propaganda, keep the people believing, keep the uniformed fooled, pretend all is well when alarm bells are ringing and red flags whipping violently in a full force gale..

South Korea is actively snubbing LNG, .....South Korea is pushing forward with nuclear power, year over year South Korea`s LNG imports declined by over 20%..This at a time when LNG prices have crashed combined with a massive LNG glut..So clearly, high priced LNG is not the dominating factor in South Korea`s reduced LNG use, ...the Asian price for LNG has been more than halved year over year, South Korea`s Government has made a forward looking choice..That choice is predicated on clean, green house gas emission`s free nuclear power..Cheaper, reliable, domestic, with the added benefit of not having to rely on greedy multinational energy companies..


"Yoo Sang-Hee told Platts that high prices of LNG compared to coal and nuclear push the demand for the liquefied natural gas further down in the power generation sector as more gas-fired power plants remain idle.

Operating rates of gas-fired power plants went from 61.3% in 2013 to 50.8% in 2014, and as Yoo said, it is expected that these rates will slip to 23.7% by 2019 and even lower to 16.8% in 2022."


South Korea as a lucrative future customer is not in the cards....Japan, they are returning to nuclear power and even without any nuclear power plants restarted YET Japan`s LNG imports are in decline...Volume of LNG imports are in decline and the price of the imported LNG has reached record lows...Record low prices for LNG in Japan...And those record low prices are happening even before the massive LNG glut swamps the markets over the next three years...At current prices, Canada`s proposed Greenfield LNG projects can`t break even let alone make a profit...If Canadian greenfield LNG projects lose money, or barely break even, the Canadian taxpayer, the owner of the resource won`t see a dime of return for the dumped gas, not only won`t Canadians see any financial returns, the people of Canada will be paying the owners of behemoth land-based LNG plants monies...A net loss to the people of Canada...We will simultaneously lose money while exhausting our gas and water reserves...Not a pretty picture..

The Japan LNG market....The volume of imports is in steep decline, the price decline is following the LNG glut in lockstep......The latest Japan price for imported LNG is $7,30 per MMBTU ....The one bright spot for slightly higher prices for LNG exporters was the Indian LNG spot market, which consistently remained higher the Japan`s pricing....That Indian bright spot has waned too...


 "The July market started off very strongly due to production issues at Australia’s Northwest Shelf project that resulted in some sellers raising offers quite aggressively,” said Max Gostelow, Platts pricing analyst for Asia LNG. “However, the expected demand spike never did materialize, and it quickly became apparent that supply in the region still far outstripped demand, with projects in Malaysia, Indonesia, Papua New Guinea, Russia, and even Australia’s Darwin project, having surplus cargoes.”
While buyers in Taiwan and Japan entered the spot market to buy several cargoes, most of the demand for July delivery was focused on India, which was the premium market in the Asia Pacific basin. However, by the end of the month, Indian prices had fallen to $7.300/MMBtu, the same price as the JKM, on slower demand due to India’s monsoon season, and declining prices in competing markets –such as the UK onshore National Balancing Point gas market. This marked the end of a recent trend that saw Indian prices consistently above the JKM since April 13."


Future forecasts for Chinese LNG demand are even more worrisome for LNG exporters....China and Russia have signed  NEAR $TRILLION dollar pipeline deals for pipeline direct Russian gas, that`s one major factor, the other is China`s own domestic supplies of natural gas and a renewed push towards clean emission`s free nuclear power and even renewable green energy, China is set to be the world`s largest producer of cheap green renewable energy....These events have turned China, the one country big LNG exporters were counting on to absorb excess LNG cargoes....China has gone from the last great hope to absorb the coming LNG glut to a faint hope at best...

Back to these PROPOSED Canadian Greenfield projects....And the Canadian mainstream media hype...The economic viability of these proposed land-based behemoth Greenfield projects is no longer in doubt, absolutely, positively at current prices they can`t make money, only lose money...The only way they could be built and thrive is if we the Canadian taxpayer subsidize and pay these companies to take our gas..Free gas, free electricity, free carbon offsets, free range to abuse the land and water base..

I`m not the only one ringing the alarm bells and waving red flags...Below is a very good read on a bleak LNG future..From the Australian perspective..


Cracks appear in LNG story


Senior Reporter


The timing of Australia's $160 billion push to secure the mantle of the world's biggest liquefied natural gas exporter by 2018 is growing murkier by the day.

For years the thesis underpinning Australia's rapid ascent to become a global LNG powerhouse has centred on an accepted piece of wisdom within the industry: that Asian utilities will continue to buy massive quantities of gas at a premium to other markets around the world.

Yet in the space of just a few months, cracks have appeared in the Asia demand "story", which has helped to bankroll Australia's big capital-intensive LNG projects.
The repercussions for LNG projects yet to deliver supplies to customers could yet derail Australia's massive punt on unseating Qatar as the global superpower of gas.

  Two warnings arrived on Wednesday night and both held potentially severe repercussions for Australian LNG.

BP, in its closely watched annual review, sparked the first note of gloom.
It calculates that Chinese growth in consumption of primary energy last year slowed to just 2.6 per cent, its lowest level since 1998, sparked by the country's shift towards a service-led economy rather than one based on heavy industry.

Growing fears of gas glut

Given LNG has been the fastest-growing fuel source in China, the slowing rate of consumption is leading to growing fears of a gas glut at just the wrong time for Australian producers, bringing a mass of new supply onto the market.

The fall in demand is a concern because LNG producers had assumed that a China government-sanctioned move toward cleaner energy – more gas-fired power stations and a greater use of renewables in the energy mix – would put LNG imports in the box seat.
But while there's been a big shift to renewables in China, coal is proving much more difficult to dislodge from the energy mix.

LNG is trading at about $US7.50 per million British thermal units on the spot market, about half the level of a year ago.

Despite that fall, coal remains cheaper, with JP Morgan estimating the switch point for utilities to think about moving to LNG remains below $US6 per million BTU.

The cheap price of coal means it remains the fuel of choice for Chinese customers, with about 70 per cent of the country's energy needs fuelled by the black stuff.

Several hours after the BP missive, consultancy Wood Mackenzie weighed in with a similarly bearish narrative, slashing its forecasts of growth in Chinese consumption of gas and predicting a surplus of 18 billion cubic metres (bcm) of Chinese contracted LNG from 2015 to 2017.

Other problems for producers

"Short-term drivers [for the reduction] include low oil prices and high domestic gas prices, reversal of environmental policies, competition from coal and hydro and warmer winter weather," Woodmac principal gas consultant Gavin Thompson said. "Structural factors include the switch from industrial production to the service sector as a driver of economic growth."

Falling demand is not the only problem for Australian producers.

The International Energy Agency warned earlier in June that LNG prices may remain lower for longer, raising questions about the business case for long-dated Australian projects.

"The belief that Asia will take whatever quantity of gas, at whatever price, is no longer a given," Maria van der Hoeven, the IEA's executive director, said in a statement. "The experience of the past two years has opened the gas industry's eyes to a harsh reality: in a world of very cheap coal and falling costs for renewables, it was difficult for gas to compete."

Australian LNG producers can quite fairly shrug their shoulders over some of the China numbers.
Because they pre-sell about 80 to 90 per cent of their production to utilities around Asia, they are less exposed to fluctuations in the spot market for now ,with their price terms often agreed over a 20-year term.
Many also have limited exposure to customers in China, although this will increase as new projects come online in the next few years.

Excess capacity a broader problem

But market watchers argue that excess capacity in China represents a broader problem for Asia's overall LNG market.
Reports that China is looking to sell out of long-term deals and instead look for buyers to take its contracted LNG on the international market could keep prices depressed for the next few years.
The danger is that some of the buyers of Australian LNG may simply recycle the gas back into the market until the supply situation turns back in their favour.
Others point out the problem is not limited to China.

South Korea, one of the largest consumers of LNG, is importing nearly 20 per cent less LNG compared with a year ago and is looking to adopt more short-term, cheaper deals to reflect the changing dynamic in the sector.

If the slump becomes a regional trend within Asia, Australian producers will have to scrap to maintain lucrative deals struck several years ago when oil was trading above $US100 a barrel.
The slump comes at a particularly sensitive time for Australia's LNG industry.

Three Qld plants to come

Whichever way you look, a new LNG project is slated to come online.

The UK's BG Group is Australia's latest LNG debutant with its $US20.4 billion ($26.4 billion) Queensland Curtis project starting supplies in May. The BG project, which has a long-term sales deal with China National Offshore Oil Corporation, is the first of the three big coal seam gas sourced plants being built in Queensland.

Chevron is the next cab off the rank. Its spent a whopping $80 billion of investment in two LNG projects in Western Australia – Gorgon and Wheatstone – with the $US54 billion Gorgon project scheduled to supply its first gas later this year and Wheatstone due to begin production next year.
From there, attention turns to Inpex Corporation's Ichthys project and Shell's Prelude floating LNG facility.

All up, by 2018, these projects – worth a combined $250 billion in investment – will propel Australia to 80 million tonnes a year of production – beyond Qatar's 77 million tonnes a year – to become the world's largest producer.

The change in profile of Asian demand will also inevitably have consequences for onshore greenfield LNG projects yet to reach final investment decision, along with a raft of expansions slated for later this decade.

It's hard to see how Woodside's $40 billion Browse development can receive board approval given the underlying concerns about Asian demand.

Somewhat muddled approach

All of which raises the question of whether Australia's somewhat muddled approach to becoming a global LNG power may yet come back to bite.

It's a little disingenuous to compare Australia's efforts with Qatar, given the MIddle East producer had the luxury of having one owner – Qatar Petroleum – which directed an orderly flow of LNG projects over the space of a decade.

But in retrospect, Qatar's push to start feeding LNG supplies to Asia over five years ago was a remarkably prescient move.

JP Morgan estimates the magnitude of global LNG capacity growth over the three-year period from 2014 to 2017 is a massive three times the capacity growth seen from 2011 to 2014.
Put another way, it's the biggest increase in production growth since the global LNG industry started in the 1970s.

 Australia may well manage to squeeze its next pipeline of projects through, and indeed usurp Qatar at the top of the table in just a few years.

But JP Morgan warns the shift in the market is likely to usher in a new era of low returns, asset impairments and an LNG glut in Australia's main export market.

That's a legacy few are likely to trumpet come 2018.


Add it all up, Canadian projects missed their opportunity....The Asian LNG price premium is gone,  going forward Asian LNG prices will range between $5 per MMBTU and  $8 per MMBTU...

Break-even price for Canadian projects will be between  $10 and $12 dollars...

So, the latest big announcement that Shell`s LNG project in Kitimat has been given an environmental certificate is nothing but white noise.....The behemoth land-based project is a guaranteed money loser in a world of excess gas...Only a very foolish CEO and board of directors would ever green-light the project, the same goes for Petronas..

Like the sagging roses pictured above, they are no longer in bloom...As for the proposed Canadian Greenfield projects... , the bloom and boom has turned to gloom.

The Straight Goods

Cheers Eyes Wide Open


Anonymous said...

When I first heard about the environmental approval being given to the Kitimat LNG, my first thought was that this was done due to the fact that Harper may not be re-elected and they want to get this out of the way before another government is formed.
We all know that environmental assessments are a joke in BC and Canada.

John's aghast said...

Riddle me this. I rejoice every time I read of another blow to the LNG industry. This, in spite of the fact that every blow hits the BC economy and the opportunities for good jobs below the belt. Its like cutting of your nose to spite your face.
Okay, every blow represents another nail in Chrispy Clark's coffin. But also another nail in our economy. Do I really hate her that much?
Of course, with no market every blow means the less likelihood of fractured wells, destructive pipelines and flaming barges. Less environmental destruction. But I've never been that much of an environmentalist; until now.
The thought that I can harbour that much dislike for one person's agenda that I could rejoice over that much grief to the industry really scares me.

Grant G said...

Anon 10:18 am...You are partially correct...Stephen Harper`s economic tutelage has been a disaster, Alberta in recession, Canada as a whole in near recession...Summer barbecue/election season..

Christy Clark and Harper want to keep the LNG scam going, pretend they know what they are doing..

The bottom line...Behemoth Greenfield LNG liquefaction plants are a money drain and money loser...Shell`s board of directors will not go ahead with this project with LNG in Asia hovering around $7 dollars...Hovering low with gobs of supply coming online/..Already under construction supply coming online...

The Petronas conditional FID is pure politice...Spencer Sproule, Petronas spokesperson worked for Christy Clark and the BC Liberal a few short years ago...Now he works for Petronas..

The Petronas announcement, the consortium..Indian Oil Corp..Sinopec..Japex..Petroleum Brunei...I went to each of their company websites...I went to newspapers in those countries...Not one word from the partners of the announced conditional FID..

No press releases to shareholders from any of the above Petronas partners...Seems the only place the conditional FID announcement got airplay was Canada and BC..

You see...If Sinopec..Japex...Indian Oil Corp..Brunei...If those players can buy LNG on the spot market, or buy long term gas for $7 per MMBTU why would they invest/expend $billions of up-front $dollars only to end up paying $11 to $12 dollars per MMBTU..

Boards of directors and CEOS will not waste company money ...

Greenfield operations are too risky, especially when BC`s gas is hundreds of miles away from the coast..

Everything you are hearing on LNG in Canada is pure politics.


Anonymous said...

BC LNG is northeast BC coal all over again.

Some of the players have changed, but the game is the same.

Anonymous said...

gaming the system?

North Van's Grumps said...

Well at least the BC Environment Minister has officially killed off the Jumbo Glacier deal because after a One Five year permit to get moving with the project, and being given a Second Five year permit, which was to be done before October 2014, its now seven months passed the DEADLINE. May the public expect to recover the yearly salary of the un-elected,appointed by OIC, community Councilors of Jumbo payments of $200,000, for the failed experiment with taxpayers monies? Rumour has it that the Council tried to return $180,000 but Ministers Bill Bennett and Mike de Jong said: 'NO!!! if we did that we look like FOOLS'

Anonymous said...

Gee, I was looking forward the Liberals vision of the gold covered streets and employment for all when the LNG thing got going.
Guess I won`t be chipping up those gold bricks off the roads eh Christy and the rest of the Lieberal sleazy cabal.
British Columbians that voted for these criminals should be hanging their heads.