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Global LNG

M O N T H L Y LNG MARKETS, PROJECTS AND INFRASTRUCTURE VOLUME III, ISSUE 4, APRIL 2007

Algerian problems mount Market markers


O Producers flex muscles 3
Soaring costs are threatening profitability at Algeria’s Gassi
O GdF, Gazprom in Canadian deal 4
Touil integrated LNG project, amid much acrimony
Problems in Algeria’s troubled energy investors from involvement in a new
O Shtokman compromise emerges 7
sector are escalating, with a number of 300,000 b/d refinery at Tiaret, delaying the
O Japan’s utilities set for boom 8
flagship projects facing cancellation or project. Sonatrach will now build the refin-
severe delays. ery itself. “We have made the final invest- O US majors ramp up LNG pace 9
Tensions in the stand-off between ment decision. It is just awaiting the engi-
Spain’s Repsol-YPF and Algeria over the neering, procurement and construction O Endesa mulls LNG investment 10
Spanish firm’s 4mn t/yr Gassi Touil inte- contract,” Khelil says.
grated LNG project are growing. Repsol- O Iran defies sanctions threat 11
YPF and Spanish utility Gas Natural won GTL doubts
the project in late 2004 with a bid that There have been mounting doubts over
Key price points $/mn Btu
shocked the industry. “Completely unreal- the viability of the 36,000 b/d Tinhert gas-
Jan 07 Feb 07
istic,” sources from other companies bid- to-liquids (GTL) project, but officially
Zeebrugge gas month-ahead 6.12 3.84
ding for the project and Algeria said. Algeria has been upbeat about the pro-
US Nymex month 1, Henry Hub 7.67 7.53
Since then, engineering costs have ject. That line has now changed entirely. US LNG import price 6.14 7.13
spiralled upwards, killing any prospect of “It is too expensive. We may drop it — lots Japanese Crude Cocktail 10.98 11.11
making a profit from the project. But oil of energy projects worldwide will be Japanese LNG import price 7.05 6.91
minister Chakib Khelil is standing firm. scrapped or delayed,” Khelil said at the — Markets and data pp22-32
Repsol-YPF “has to realise the project Gas Exporting Countries Forum in Doha,
Japan: JCC vs LNG $/mn Btu
according to the terms of the contract it Qatar, held on 8-9 April. Japanese LNG vs crude $/mn Btu
signed or find the means to compensate One of the three prequalified investors 13
12
both the state and [state-owned] has dropped out, and a third is “not very 11

Sonatrach”, he says. interested”, says Khelil. The three are 10


9
Japan Crude Cocktail
Gassi Touil is running two years Shell; a joint-venture consortium between 8 LNG
7
behind its contractual November 2009 Chevron and South African refiner Sasol; 6

start-up, says Khelil. Others involved in and a consortium of South Africa’s state- 5
Oct 05 Jan 06 Apr Jul Oct Jan 07

the project predict worse delays. owned PetroSA, Norway’s Statoil and Spain: LNG vs electricity $/mn Btu
Anglo-Australian BHP Billiton. Spanish LNG vs electricity $/mn Btu
Skikda delay The nascent GTL industry has been hit 25

Construction at Sonatrach’s 4.5mn t/yr hard by rising project costs. In February, 20

LNG project at Skikda is also running two ExxonMobil abandoned its 154,000 b/d 15
Month ahead electricity
10
years behind schedule, Khelil says. Palm GTL project in Qatar amid escalating LNG
5
The confidence of potential investors costs (AGL, March, p18).
0
in Algeria may have been rattled by the The major cancelled what would have Oct 05 Jan 06 Apr Jul Oct Jan 07

escalation of fighting between govern- been the world’s largest GTL plant after US LNG vs Henry Hub $/mn Btu
ment forces and Islamic insurgents, the promise of cheap gas feedstock and US LNG vs Henry Hub $/mn Btu
which culminated with the 11 April bomb- economies of scale evaporated, and the 14
Henry Hub
ing of prime minister Abd al-Aziz budget for the development soared from 12
LNG
Belkhadem’s office, claiming the lives of the original $7bn in 2004 to around 10

over 30 people. $14bn-21bn. Shell’s Pearl GTL plant in 8

As well as LNG, changes to Algeria’s Qatar has seen costs hit $18bn from its 6

4
hydrocarbon law have deterred foreign original budget of $5bn. Oct 05 Jan 06 Apr Jul Oct Jan 07

‘Gas prices should at least equal oil — that is to say $60/bl oil equals at least
$10/mn Btu gas’ — Algerian minister Chakib Khelil at ‘gas Opec’ meeting (p3)

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Argus Global LNG — Contents April 2007

Contents
Global Asia-Pacific Markets
Gas producers bid for market power 3 Japan’s utilities plan big LNG growth 8 Market overview 22
Thai project mulls import sharing 11 European pipeline markets 24
Europe/Africa Itochu joins Namibia project 18 US pipeline markets 25
UK mulls data release rule change 4 Japan, China boost co-operation 18 Competing fuels markets 26
GdF offers Gazprom access to Canada 4 Majors boost Australian acreage 19 LNG fleet news 28
Italian firms mull Calabria terminal 5 Marubeni signs Qatar deal 19 Shipping netbacks 29
BG’s Brindisi on the brink 5 Spark spreads 30
Gazprom sets sights on US 6 In brief Global LNG import volumes 31
Shtokman scenario changes again 7 Libya targets Ras Lanuf hub 18 LNG movements 32
GdF gives way on LNG strike 7 Qatar tops majors’ investment plans 18
Endesa outlines gas targets 10 LionGas terminal to fuel CCGT 18 Data and prices
UK gas grid firm declares force majeure 10 LNG key to Europe’s supply balance 19 Global LNG import prices 23
Technip frontrunner in Nigeria 13 Snohvit on schedule 19 European pipeline prices 24
Qatargas not worried by UK surplus 19 Pipeline spot markets 25
Mideast Gulf Okinawa utilities mull UK imports 19 Oil, product, coal and power prices 26
Gas producers seek greater power 3 Saibu Gas renews LNG contract 19 Shipping order book 28
Iran nurses LNG ambitions 11 Tohoku boosts LNG volumes from NWS 19 LNG netbacks 29
Qatar not worried by UK surplus 19 MapleLNG gets green light 20 International spark spreads 30
Oil link in gas contracts set to persist 20
Americas Kogas nets US Gulf LNG terminal 20
Company profile:
US majors set for LNG boom 9 US key to Gazprom growth 6
Chevron ditches Mexican plan 13 Company news Cheniere upbeat on prospects 16
Chilean LNG plan in the balance 14 BG’s Brindisi on the brink 5
Trinidad’s train X on track 15 Gazprom sets sights on US 6 Country profile:
Chile mining titans weigh floating LNG 15 GdF gives way on LNG strike 7 Japan’s utilities mull LNG power 8
Petrobras speeds up Gazprom deal 17 US majors set for LNG boom 9
Iran nurses LNG ambitions 11
Kogas nets Gulf coast terminal 20 Technip frontrunner in Nigeria 13

Commercial manager: Barbara Kalu Kleshchevnikov, Galina Kuznetsova, Alexei Morshchagin, Svetlana
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Argus Global LNG — Gas Opec April 2007

Gas producers bid for market power


The Russia-led Gas Exporting Countries Forum (GECF) aims to cleaner, it is more flexible, it is better for the environment, it
radically boost producer power in international gas markets, should get more than oil,” he added.
with leading LNG countries among them. A change from indexing from oil will be studied. “The world
Energy ministers of the world’s 14 top gas producers — has changed,” said Khelil. “Now the world has a lot of things
including Russia, Iran, Qatar and Algeria — met in Qatar on 9 that people did not talk about five years ago — solar, wind
April and decided to establish a high-level committee tasked power, bioethanol, nuclear energy.”
with studying infrastructure, producer-consumer relations, and Consultancy Cedigaz predicts that demand for LNG will
— most critically — pricing. swell from 190bn m³ in 2006 to 390bn m³ by 2015. Only a tiny
The market has a long-term contract structure, so talk of cre- proportion of this is spot at present, but this will change, accord-
ating “a gas cartel” soon is premature, and ministers conceded ing to Khelil. He is pushing for more of Algeria’s LNG trade to
as such. “The nature of global gas markets makes it impossible become spot. The amortisation of capital investment will allow
for exporters to make an impact on prices over the next 15 to 20 others to do likewise, he said.
years,” Russian energy minister Viktor Khristenko said ahead of
the meeting. But the committee, which could hold its first meet- Achilles substitute
ing as early as next month, has been charged with developing Moscow’s transformation from lukewarm member to active leader
concrete proposals to deliver to the next GECF meeting next year of the GECF is noteworthy. At the last forum meeting in Trinidad
in Moscow. “We have agreed to launch a joint study” on gas and Tobago in April 2005, Russia declined to send a single rep-
prices, Khristenko said. “Russia is prepared to spearhead this resentative from the energy ministry. In Doha, Khristenko was
kind of study.” accompanied by Russian gas monopoly Gazprom chief Alexei
The change from talking shop to effective organisation will Miller, a team of aides and a large media contingent. Moscow’s
be a big challenge. Ministers denied that the GECF would act U-turn has probably just as much to do with growing tensions with
against consumer interests. “We are strong believers that the the EU over gas supply security after cutting off gas to its neigh-
forum should create dialogue between producers and con- bours as it does to long-term changes in the gas market.
sumers,” said Qatari oil minister Abdullah al-Attiyah. “It is not Even if Moscow’s strategy change is less to become the gas
against customers.” But most in principle supported an Opec- market’s Saudi Arabia and more to send a short-term message
type organisation that could affect price through control of sup- to consumers and prepare for inevitable long-term changes in
ply. “We also think that if we move in that direction, it will the global gas market, the path the GECF has taken at Doha
strengthen the forum,” said Iran’s Kazem Vaziri. could backfire on producers.
GECF members hold a greater proportion of global gas Khelil might be right on the virtues of gas, but he omits men-
reserves than Opec members do with oil. They agreed on the tion of its Achilles heel — its substitutability. Unlike oil, gas can
need for an exponential growth in liquidity through LNG spot be replaced by other forms of energy, and an overly aggressive
trade, and that this is a long way off. But in the shorter term, producer stance could drive consumers into the arms of alter-
there is a groundswell of support for a tougher producer bar- native forms of power generation. Khelil downplayed the attrac-
gaining position. Gas prices “should be at least the heat equiv- tions of fuel oil and coal on environmental grounds, but these
alent of oil. That is to say $60/bl of oil equals at least $10/mn have a spot market that could be used as an alternative index
Btu,” said Algerian oil minister Chakib Khelil. “Since the gas is and both are cheaper than crude.

Gas producers association ‘inevitable’ — Cera


A gas producers association is sive” nature of LNG projects — such as ing”, Yergin says. But this activity falls
“inevitable”, according to Cambridge the construction of liquefaction facilities, well short of the co-ordinated crude oil
Energy Research Associates (Cera) ana- regasification terminals and LNG tankers production levels that Opec is capable
lyst Daniel Yergin. — creates a somewhat different set of of engineering.
Yergin was responding to questions dynamics than those governing the Nevertheless, officials from natural
on the potential for an Opec-style gas global oil market, Yergin says. gas consuming nations will be carefully
cartel during the US Federal Trade Substantial capital requirements for observing the emergence of any co-
Commission’s 10 April conference on LNG infrastructure inhibit the liquidity operation among gas exporters.
competition in power markets. The con- required to give the natural gas market a At the same conference, US energy
ference coincided with high-level meet- truly global character. And LNG must secretary Samuel Bodman expressed
ings between energy ministers from key compete against pipeline gas in coun- serious misgivings concerning such col-
gas-producing countries in Qatar. tries with domestic production. lusion. “In my lifetime, we have experi-
Still, the formation of an effective As the global gas market coalesces, enced the negative consequences of
association of gas exporters is likely to gas producers “will all be paying atten- meddling in the competitive marketplace
take many years. The “very capital inten- tion to what their competitors are offer- when it comes to energy,” he said.

© 2007 Argus Media Ltd www.argusmediagroup.com Page 3


Argus Global LNG — News April 2007

UK mulls data release rule change


The current practice of the UK’s sole LNG import terminal oper- Smith. Recent third-party offerings would have allowed the deliv-
ator National Grid announcing the arrival of each individual ship ery of only a partial cargo and attracted no takers. “The Grain
may not continue as the country builds more terminals, says UK shippers are under obligations, but we are not aware of any con-
regulator Ofgem’s director of markets, Steve Smith. cerns from shippers,” Smith says.
“The third-party access exemption terms demand effective
use-it-or-lose-it (UIOLI) provisions. When there is more than one Canvey appeal
terminal, it may or may not be necessary to give that level of The UK’s Canvey Island LNG terminal project has launched its
information,” says Smith. “It is up to the terminal operators to anticipated appeal against a decision by the local government
work out what these UIOLI provisions will be, and if there are to reject the proposed renovation of Calor’s existing LPG termi-
complaints from would-be users, then Ofgem will look at those nal for LNG receipt.
arrangements,” he says. The partners in the Canvey project have appealed to Castle
UK utility Centrica, which will hold capacity in the expansion Point Borough Council, which unanimously rejected the 5.4bn
of the Isle of Grain terminal near London and is promoting a m³/yr LNG proposal in September last year. The council found
redevelopment of the nearby Canvey Island terminal, says it at the time that the proposal “represents a significant potential
has no problem with data on individual ship arrivals being made threat, the fear of which would be likely to have a significant
available. Centrica argues that those wanting the information adverse impact on the wellbeing and amenity of Canvey resi-
can find other ways to obtain it. dents”, and said the project’s proponents had failed to demon-
At present, National Grid announces when a ship has strate that it was “in the national interest” (AGL, October, p10).
docked at the Isle of Grain either on the day of arrival or the next Centrica, a partner in the project, says the appeal will involve
working day. Joint shippers BP and Algeria’s Sonatrach are also a discussion of the legal standing of the September rejection with
obliged to notify the market of any available slots, a commitment the council and a planning inspector appointed by the central
other terminal operators will have to fulfil. Smith predicts that government. Particularly at issue is the council’s decision that the
new terminals will stimulate operators to try harder to attract project failed to demonstrate that it is in the national interest.
third parties, arguing that, if two terminals lie idle, they will com- Centrica, Japan’s Osaka Gas, LNG Japan — a 50:50 joint venture
pete to attract additional business to meet their capacity costs. between Japanese traders Sojitz and Sumitomo — and Calor,
No shipper has complained to Ofgem about the size of owned by Dutch LPG giant SHV, are partners in the project, which
recent slots being made available at the Isle of Grain, says will come on line in 2010 if approvals can be obtained.

GdF offers Gazprom access to Canada


French state-run firm Gaz de France but chief operating officer Jean-Marie peninsula, due to produce 7bn m³/yr by
(GdF), Canada’s GazMetro and US firm Dauger rules out participation in 2011, the source says. The field could
Enbridge have offered Gazprom access Shtokman as it is too big a project. potentially produce 115bn-140bn m³/yr.
to the proposed 5bn m³/yr (3.5mn t/yr) The French firm’s proposal may be a Next year, Gazprom plans to begin
Rabaska LNG terminal in Canada. blow for Canada’s PetroCanada, which building the 1,100km Bovanenkovo-
The terminal, which would be built in hopes to secure LNG from the Baltic Ukhta pipeline to link to Gazprom’s exist-
Levis near Quebec — 45km from the project for its planned 3.9mn t/yr LNG ing network. It has already started build-
pipeline transportation system — regasification facility in Gros-Cacouna, ing a 917km Gryazovets-Vyborg pipeline,
includes a deepwater jetty on the St Quebec. Rabaska and Gros-Cacouna which will have capacity to transport gas
Lawrence river able to receive 216,000m³ are targeting the Quebec, Ontario and for the Baltic LNG and Nord Stream pro-
LNG carriers. It has already passed pub- northeast US markets. jects, the source says.
lic hearings and is due to receive final GdF says Gros-Cacouna is not as But he warns that Russia’s potential
approval this summer. The companies good a location as Rabaska because of gas production shortfall could jeopardise
involved hope to commission the termi- shallow water and harsh climate condi- plans for LNG exports. “We should have
nal in 2010-11, and are in talks with tions. And it is unclear when started developing Bovanenkovo a long
Gazprom to secure gas volumes. PetroCanada will receive the permits time ago to avoid a decline in output,”
The Russian state-controlled firm has needed to start construction of the termi- the source says.
yet to make a decision on would-be part- nal, GdF adds. But a Gazprom source GdF is aware of possible gas short-
ners in its Baltic LNG project and its giant says he doubts that there will be enough ages in Russia after 2010. The firm has
Shtokman project — both projects gas after 2010 for the Baltic LNG terminal signed two long-term export contracts
could supply LNG to Canada. GdF is and the planned Nord Stream pipeline. with Gazprom, but is not confident that
ready to invest in the Baltic LNG project, Gas for both projects will be delivered the gas giant will be able to fulfil them.
which envisages construction of a 3.5mn from the as-yet undeveloped 4.4 trillion “Gazprom is not investing enough in its
t/yr export terminal on the Gulf of Finland, m³ Bovanenkovo field on the Yamal upstream,” Dauger says.

© 2007 Argus Media Ltd www.argusmediagroup.com Page 4


Argus Global LNG — Italy April 2007

Italian utilities invest in Calabria terminal


Italian companies Iride and Sorgenia have agreed to set up a
Natural gas and import infrastructure
joint venture to buy a 51pc stake in the 12bn m³/yr LNG termi-
nal planned in the port of Gioia Tauro in Calabria, on Italy’s Imports (bn m³/yr)
“toe”. The agreement, subject to securing all of the necessary 1 Existing Endesa:
8
Monfalcone
authorisations, will give the two companies access to regasifi- 1 Very probable

cation capacity of around 8bn m³/yr. 1 Announced


Eni: pipeline
25 6
16
Iride and Sorgenia will pay around €2.2mn ($2.97mn) for from Russia
Eni: pipeline from
the stake in the Medgas terminal, which will be located 1.5km Netherlands/Norway
8 Gas Natural:
east of Gioia Tauro port. Iride is a multi-utility recently created by Trieste
3.5
the merger of Turin and Genoa local utilities AEM Torino and Eni:
Panigaglia QP, ExxonMobil,
8
Amga. Sorgenia is the energy division of holding group CIR. Edison: Rovigo
Edison, BP: 8
Rosignano
Gas Natural:
Medgas move Rome
8
Taranto
OLT Endesa,
The terminal is owned by the Medgas group and oil products Amga Genova:
8
Livorno
firm Italpetroli. Italpetroli will leave the project while Medgas will Sonatrach, Edison, 4 BG: Brindisi
retain the remaining 49pc stake. Medgas is controlled by the Enel: new Galsi Sardinia 8
pipeline from 8-10 Crossgas,
CrossNet group of Italian business owned by the Belleli family, Algeria
24.5 Italpetroli: 12
IGI: pipeline
from Caspian
Gioia Tauro
which owns a 29pc stake in the OLT offshore LNG terminal Eni: pipeline +7
Sicily 8
being developed near Livorno (see map). from Algeria
Erg, Shell:
Priolo
The Gioia Tauro facility is the biggest of the dozen or so LNG Nuove Energie: 8 8
Porto Empedocle
terminals planned for development in Italy. The plant could Eni: pipeline
— AceaElectrabel from Libya
require investments of over €800mn, because of its size. But it
is still premature to say how much the two companies will invest
in the terminal, says an Iride spokesman.
Brindisi on the brink “The permitting process has begun and we expect to have
approval by 2008, after which construction should take another
The Italian government is set to suspend work on the 8bn three or four years,” he says. “The terminal is one of those
m³/yr LNG terminal being developed by UK gas major BG at energy infrastructure projects that the government has put on
Brindisi. It will convene a new meeting of the parties involved its priority list.”
in the permitting process either to annul the permits that BG Italy’s so-called “control room” of ministers at a meeting last
secured in 2003 or order a new environmental impact report August said it would fast-track the permitting process for seven
(VIA), the Puglia regional authorities say. terminals with authorisation requests pending, including Gioia
The environment ministry has already said that the Tauro (AGL, September, p9).
authorisations BG has are illegitimate since the VIA is miss- Environment minister Alfonso Pecoraro Scanio said recently
ing. The ministry for economic development, which must that the terminal is one of only four facilities that he believes are
sign the decree to convene the new and decisive meeting, needed to satisfy Italy’s growing demand for gas, which is
has as yet made no comment. expected to exceed 90bn m³ by 2008 — compared with 80bn
Regional and local administrations, which are calling for m³ now (AGL, February, p8).
the annulment of BG’s permits, claim that BG failed to The Gioia Tauro terminal is strategically situated to receive
involve local institutions in the permitting process as laid LNG from the Mediterranean and Atlantic basin, as well as from
down by the Italian “Seveso” law, which stipulates certain the Mideast Gulf and north Africa. Iride and Sorgenia do not as
requirements in EU member states for storage of relatively yet have contracts in place for sourcing the gas. A Sorgenia
large quantities of substances classified as dangerous, spokesman says north Africa is a likely source of supplies for
including LNG. the terminal.
Recently Italian police arrested three top managers of
BG Italia, an Italian businessman and the former mayor of Fast track
Brindisi, Giovanni Antonino, on charges of corruption. Iride has a 25.5pc stake in the smaller 4bn m³ OLT terminal at
BG has always claimed that it has the permits to con- Livorno, along with its Spanish utility partner Endesa — which
struct the terminal and has begun preliminary work on the holds a 25.5pc stake in the project. Iride will have access to
facility. The UK firm says it has already spent about €150mn 1.875bn m³ of capacity at the plant, which has already been
($202mn) of the overall €450-500mn investments planned. authorised and is expected to become operational before the
The Brindisi terminal is part of BG’s Atlantic basin strategy, end of 2009. The Belleli family has 29pc, and the fourth stake-
deemed important since it could be a key outlet for gas holder in the terminal — which is expected to cost around
reserves that the group is developing in Egypt. €500mn — is Golar, the Norwegian owner and operator of LNG
carriers, with a 20pc stake.

© 2007 Argus Media Ltd www.argusmediagroup.com Page 5


Argus Global LNG — Corporate April 2007

Gazprom’s growth strategy focuses on US


Russia’s state-controlled Gazprom sees North America as a key gas prices low for Russia and Ukraine, which account for the
prospective market for LNG. The gas giant wants to diversify its majority of its portfolio, Hattenberger says. “We do not make
price exposure and tap a growing market, said president and any money on gas sold in Russia,” Hattenberger says, or in
LNG director for Gazprom Marketing and Trading USA, John sales to Ukraine and Belarus.
Hattenberger, at the CWC LNG conference in San Antonio, Gazprom makes money only on sales to western Europe,
Texas, last month. Hattenberger says. Gazprom has sold gas to Europe for more
In addition to growing its traditional pipeline natural gas than 30 years and supplies more than 25pc of western Europe’s
markets in Russia and Europe, Gazprom is moving into LNG to gas. “We have excellent relationships with all of our customers
stimulate further growth by accessing new gas markets and in western Europe,” Hattenberger says. But market share is
capitalising on the global supply shortage. “We are now in the above a level that people are comfortable with, he says.
LNG business,” says Hattenberger. Gazprom plans to increase revenue in the 40bn ft³/d
Gazprom’s strategy is to partner major LNG players and Russian market. “We have a plan in place to increase natural
build expertise in the near term. The company wants to partici- gas prices in Russia over time,” says Hattenberger. A price that
pate in all elements of the value chain and capitalise on is too low distorts the rest of the industry, he says. Companies
reserves, market skills, and pipeline supplies to become a major then waste money building plants. Hattenberger says there will
participant in the North American natural gas market and a be increased pressure over the next 10 to 15 years for Gazprom
leader in the world LNG industry. to raise prices in Russia, and this will cause political tension.
The US is the world’s largest gas market, followed by Russia
Problem portfolio with 400bn m³/yr, and the UK with 100bn m³/yr. By 2015, Russia
LNG is a key way for Gazprom to monetise its extensive will be about half of Gazprom’s market, down from 60pc now.
reserves. Gazprom, with 1,000 trillion ft³ (28 trillion m³) of proven Gazprom has a unique perspective, Hattenberger says, as
natural gas reserves, holds 16pc of global natural gas reserves it has access to large gas reserves and influence from govern-
— while Russia 27pc. Gazprom as a company has more natu- ment shareholders. It is driven by commercial interests as well
ral gas than any other country in the world, says Hattenberger. as political ones. Gazprom is treated like a national treasure,
Expansion in the 65bn ft³/d (670bn m³/yr) US market is key says Hattenberger.
to improving the gas giant’s unique position, in which Gazprom
has access to a large amount of reserves but more than 50pc of Russian LNG to markets
its portfolio is not profitable. In 2005, Gazprom sold 315bn m³ of
Location Volume bn m³/yr Year
natural gas in Russia, 156bn m³ in Europe, and 77bn m³ in the
Sakhalin 2 14 2008
former Soviet Union excluding Russia. But prices to Ukraine and
Baltic LNG 7-10 2011
Belarus are fixed and are renegotiated yearly with increases for
Shtokman 30-45 2013-2020
inflation. Prices rise in a stair-step manner while European prices
Total 51-6
69
have risen substantially, says Hattenberger. Gazprom has kept

Gazprom seeks Sakhalin 2 immunity


Russia’s Gazprom wants a guarantee that Shell spokesman. Shell says only that Rosprirodnadzor to start drilling at the
it will not be held responsible for past the deal will be finalised “this year”. Lunskoye gas field.
environmental violations at Sakhalin 2 Budzulyak points out that Russia’s Sakhalin Energy submitted its pro-
before finalising its takeover of the project. environmental watchdog Rosprirod- posal for rectifying the violations to
The Gazprom entry deal could be nadzor inspected only part of the Rosprirodnadzor last year and was
completed by the end of April if this can Sakhalin 2 onshore pipeline route and expected to tackle the issue together
be agreed, Gazprom transportation that more violations could be found once with Gazprom. Industry sources say nei-
head Bogdan Budzulyak said on the the whole route has been inspected. ther Rosprirodnadzor nor the gas giant
sidelines of this month’s Moscow Energy Gazprom’s entry was agreed last year knows how to deal with the problems.
Forum. Gazprom was originally due to after environmental violations were Gas exports from Sakhalin 2 are due
join Sakhalin 2 at the end March. uncovered in the pipelines, forcing sus- to start next year, but the all-important
Shell — the majority shareholder in pension of construction work in what was budget for the second phase of the pro-
Sakhalin 2 operator Sakhalin Energy — seen as a campaign to secure majority ject — a major issue of contention
is downplaying the significance of the control for Gazprom (AGL, January, p5). between Sakhalin Energy and the
delay. “Negotiations are continuing. It is Sakhalin Energy stresses that work Russian authorities — has not yet been
not easy to agree on all the details when on the pipelines is now proceeding approved. The Sakhalin 2 supervisory
a new shareholder gets a controlling according to schedule. The operator has board was due to approve the budget on
stake in a $20bn budget project,” says a received long-delayed permission from 23 March, but the meeting was cancelled.

© 2007 Argus Media Ltd www.argusmediagroup.com Page 6


Argus Global LNG — News April 2007

Gas giant offers Shtokman compromise


Russia’s state-controlled Gazprom has changed its tune on giv-
Shtokman and related gas infrastructure
ing foreign companies direct stakes in the giant Shtokman gas
Snohvit
project in the Barents Sea. But Gazprom has not yet said when Barents Sea
the field will come on stream. Shtokman
The Russian gas giant is now ready to offer would-be part- NORWAY Goliat
ners stakes in an operating firm to develop the field rather than
Murmansk
just roles as contractors, head of Gazprom’s analytical depart- Proposed
LNG plant
ment, Igor Mescherin, tells Argus. But Gazprom will hold the Vitino
Pipeline
Shtokman licence itself and all exports will go through the com- Proposed
pipeline
pany’s export arm Gazpromexport.
Gas/oil field
Mescherin says Gazprom is no longer interested in an asset Terminal Arkhangelsk
swap scheme with foreign partners, as it was before last year’s
shock announcement that it did not want equity partners. It now FINLAND
wants prospective partners to show how they will help the field
come on stream, on time and on budget.
“A stake in an operating company would allow foreign firms
St Petersburg RUSSIA
to book Shtokman reserves,” says a source from one western Ust-Luga
firm taking part in recently revived talks on Shtokman. In return,
foreign companies are ready to share “financial, technical, envi- year, selling the first LNG cargo to the US in 2011.
ronmental and marketing risks”, the source adds. The gas giant will decide when Shtokman can be put on
stream once an investment plan has been approved, due by
New proposals mid-2008. The new plan will be based on revised Shtokman
Total and Norwegian oil and gas company Statoil have already reserves and is expected to combine LNG and pipeline gas
submitted new Shtokman participation proposals to Gazprom, marketing schemes. In October, Gazprom suggested that
and ConocoPhillips will do so shortly. All three companies, pipeline shipments to Europe would be preferred to LNG
along with Chevron and Norway’s Norsk Hydro, were earlier exports (AGL, October, p1) .
shortlisted as potential partners to share a 49pc stake in the
Shtokman project. Statoil and Norsk Hydro will join forces, as Exceeding expectations
they are due to merge by the end of this year. Chevron has ruled The seventh appraisal well drilled at Shtokman “exceeded our
itself out of the competition. expectations”, head of the geological division at Gazprom’s VNI-
And foreign companies still hope that Gazprom will allow IGAZ research centre, Alexander Timonin, tells Argus. The results
them to market Shtokman gas independently. “Everything are confidential, but Gazprom hoped to increase Shtokman
could change — Gazprom has to decide first when to develop reserves by 700bn m³ from the current 3.7 trillion m³. Gazprom
the field and find a suitable scheme to co-operate with foreign last year booked some reserves discovered after the seventh well
companies,” says the source from a western company. Initially, was drilled and is due to book more this year, Timonin adds.
the gas giant planned to begin Shtokman development this Gazprom booked 582bn m³ of probable reserves last year.

France forces GdF to climb down on LNG


An 18-day strike at the port of Marseille, French LNG terminals, Fos Tonkin and Lavera oil terminals, but did not touch
which blocked 60 tankers while refineries Montoir de Bretagne, or for seeking more GdF’s Fos Tonkin LNG terminal. It started
with dwindling stocks threatened to influence at other French ports. after the CGT union demanded the right
close, ended on 31 March after the The settlement came with GdF’s for port workers to handle the connection
French government obliged state- promise to reserve the equivalent of five and offloading of LNG carriers when the
controlled gas company Gaz de France full-time jobs for Marseille port employ- new 8.25bn m³/yr terminal begins to
(GdF) to give in to the dominant CGT ees at Fos Cavaou when the terminal operate. CGT was concerned about the
union’s demands for a role at GdF’s new goes into service at the end of this year. loss of jobs at the port as government-
LNG terminal at Fos Cavaou. What the port employees will do has to controlled services are increasingly
This show of union force could lessen be worked out between the union and being privatised — and it sees LNG as a
the interest of investors in new LNG ter- GdF in coming weeks. Because of secu- promising source of new activity.
minals in France, where four projects are rity problems, it could be only subsidiary This was unacceptable to GdF, which
being studied in Le Verdon, Dunkirk, Le tasks or a simple presence on the site insisted that its own specially trained
Havre and St Nazaire. It may set a prece- while GdF personnel carry out the work. employees must perform these tasks for
dent for similar demands at the two other The strike affected the Fos and security reasons.

© 2007 Argus Media Ltd www.argusmediagroup.com Page 7


Argus Global LNG — Japan April 2007

Utilities mull LNG power expansion


Japanese power utilities plan sizeable LNG-fuelled power
LNG-burning power capacity increases 2007-11
expansion in the next few years, backed by the approach of the
Kyoto protocol’s first commitment period from 2008-12. Company Consumption Plant LNG-ffired Year
2005 mn t capacity MW
The utilities’ business plans for the fiscal year 2007-08 — Tokyo Electric Power 16 Kawasaki 1-1 500 2007
which runs from April to March — show that they plan to add Kawasaki 1-2 500 2008
11,000MW of LNG-fired thermal power capacity in the next Futtsu 4-1 500 2008
Kawasaki 1-3 500 2009
decade. This is almost equal to the 12,260MW of additional Futtsu 4-2 500 2009
nuclear capacity that the government is promoting as a clean Futtsu 4-3 500 2010
energy source. LNG and nuclear together make up 80pc of the Tohoku Electric Power 3 Sendai 4 446 2010
Chubu Electric Power 8 Shin-Nagoya 8 1,458 2008
total 28,580MW of new power generation capacity planned for Kansai Electric Power 4 Sakai-ko 1-3 1,200* 2009
the next 10 years to 2016-17. Sakai-ko 4-5 800* 2010
The bulk of new LNG-fired development focuses on the next Shikoku Electric Power nil Sakaide 1 296 2010
Chugoku Electric Power 1 Mizushima 1 285 2009
few years as Japan and the power industry — the major carbon Kyushu Electric Power 2
dioxide emitter — struggle to achieve the pledged 6pc cut in the Okinawa Electric Power nil Yoshinoura 1 251 2010
country’s total greenhouse gas emissions from 1990 levels. In Yoshinoura 2 251 2011
Total 35 7,987
particular, Tokyo Electric Power (Tepco) and Chubu Electric Note: Hokkaido and Hokuriku neither have LNG-fired power output nor
Power — the two largest LNG users in the power sector — plan plans *Kansai’s Sakai-ko units will be converted from gas turbine units to
to boost their LNG power capacity from the current 26,975MW combined-cycle units

and 10,260MW respectively (see table above).


In addition to its 3,000MW increase in LNG-fired generation industry, leaving nuclear power producers searching for alter-
by 2011, Tepco plans to double Kawasaki’s LNG-fired capacity natives. Chubu has managed to restore operations after
to 3,000MW after 2017, boosting the company’s total LNG restarting the Hamaoka reactor in March this year. But Hokuriku
capacity by almost 20pc by then. After doubling Shin-Nagoya’s continues to suffer from the closure of the sole nuclear power
capacity by 2009, Chubu is planning to build a new 2,380MW, plant at Shika, which was supplying power to Kansai Electric
LNG-fired combined-cycle power plant in Niigata prefecture’s Power and Chubu.
Joetsu by 2017, upping its total LNG capacity by nearly 40pc. The 20pc jump in LNG consumption by the utilities to 6.5mn
Environmentally friendly and cost-effective LNG has also t in January and February came as the reactor closure forced
attracted the Shikoku and Okinawa power utilities. The firms Kansai and Chubu to boost LNG burning by 43pc and 18pc
depended heavily on oil-fired power generation, but have begun respectively during the two-month period. The power sector
diversifying to cleaner LNG in recent years (see p19). remains the largest LNG-user industry in Japan, consuming
Shikoku Electric Power has just begun construction of a 60pc of the record 62mn t imported in 2006.
new LNG terminal at Sakaide on the north coast of Shikoku
island. The Sakaide terminal — a joint venture with refiner Increased demand
Cosmo Oil and gas retailer Shikoku Gas, due to be commis- Meanwhile, the top three gas utilities — Tokyo, Osaka and Toho
sioned in March 2010 — will have a 180,000m³ storage tank — forecast that their LNG demand will increase by 10pc to
and a regasification facility. Shikoku is converting a former oil- 22.4mn t by 2011-12, supported by the continued industrial fuel
fired Sakaide power unit to a 296MW, LNG-fired, combined- shift to LNG (see table below). All three firms, accounting for
cycle power plant by August 2010. 75pc of Japan’s gas sales, expect more than a 3pc rise in their
As well as the start-up of Tepco’s Kawasaki plant, the power total gas sales this fiscal year.
industry’s LNG consumption may see another boost this year The steady demand growth has prompted Tokyo Gas,
because of a scandal that is hindering nuclear power operations. Japan’s largest utility, to take measures to accommodate
The utilities recently admitted to nearly 100 cases of data tam- increasing LNG imports (see p21). It has decided to add a 15th
pering and cover-ups at their nuclear power plants, including 255 t/hour regasification unit at the Sodegaura terminal in 2008-
potentially fatal nuclear chain reactions that went unreported by 09 before adding a sixth 72 t/h unit at Ohgishima the following
Hokuriku Electric Power and Tepco, as well as serious mishan- year. The company is adding its fifth 150 t/h unit at Ohgishima,
dling at reactors operated by Chubu and Tohoku Electric Power. allowing Tokyo Gas to boost LNG handling at one of its three
This has renewed public concern over Japan’s nuclear Tokyo bay terminals (AGL, January, p10).
On the back of the forecast rapid increase in LNG use,
LNG demand forecast for top three utilities ’000t Nagoya-based Toho Gas has decided to further expand its
Chita LNG terminal, co-used with Chubu Electric Power. It is
FY07 ±FY06 % FY11
awaiting the 2013 completion of sub-sea pipeline networks con-
Tokyo Gas 10,306 0.3 11,177
necting Toho’s and Chubu’s LNG infrastructure in Ise bay (AGL,
Osaka Gas 7,474 3.2 7,889
Toho Gas 3,066 3.1 3,771
January, p6). Osaka Gas also expects a jump in LNG demand
Total 20,846 1.7 22,837 ahead of the start-up of its Senboku LNG-fired power project in
2009 (AGL, May, p5).

© 2007 Argus Media Ltd www.argusmediagroup.com Page 8


Argus Global LNG — Companies April 2007

US majors step up LNG pace


Key firms LNG production in 2010 mn t/yr
The US majors are poised for sharp growth in LNG output, a Key firms’ LNG production in 2010 mn t/yr
response to growing demand from key Atlantic basin markets 25
which are turning into net gas importers. Estimated 2010 equity LNG capacity
The global market for LNG is expected to increase fourfold 20 — Shell Analysis, Poten & Partners
by 2030, says ExxonMobil, with LNG imports helping meet
demand growth in North America, Europe and Asia-Pacific. The 15
Asia-Pacific
major says existing gas production is declining in Europe and Atlantic basin
10
North America, and the growing requirement for gas imports to
both continents will promote inter-regional LNG trade and create 5
a dynamic gas market.
ExxonMobil — which has produced around 7.7mn t/yr, or 0
Chevron Conoco- BG Total BP ExxonMobil Shell
200,000 b/d of oil equivalent (boe/d), in net LNG terms since the Phillips

start of 2006 — expects to more than double production to


19.3mn t/yr or 500,000 boe/d of LNG by 2011. “Qatar and the Chevron vice-president of upstream and gas, George Kirkland.
Gorgon and Jansz projects will be the most significant suppliers The company plans to raise LNG output from 3.7mn t/yr now to
that we have included in this outlook,” says chief executive Rex 21mn t/yr by 2015. “Growing our LNG business is central to our
Tillerson. ExxonMobil is a partner in the Gorgon LNG project off- gas strategy. This will transfer Chevron into a top-tier producer
shore northwest Australia, operated by Chevron, which may by 2015,” Kirkland says.
have a capacity of around 10mn t/yr. Gas from the Jansz field The biggest surge in Chevron’s LNG capacity will come
will also feed the development. after 2010 when the Greater Gorgon project comes on stream.
Qatar is already a cornerstone for ExxonMobil, which has Soaring costs have been a challenge, and Kirkland says
had a presence in the country since 1935. Qatar’s giant North Chevron has delayed start-up dates to after 2010 as it seeks
Field will feed four more LNG trains in which ExxonMobil has a to find the right design that will contain costs. He says Chevron
stake, due to start up by 2011. ExxonMobil at the end of last has yet to decide on the exact amount to be produced from
month completed the offshore facilities supplying natural gas to each of its four Gorgon trains. “We are working on what train
its 4.7mn t/yr Rasgas train 5 LNG joint venture, where produc- sizes will provide us with the best economic return. That work
tion started last year with state-owned partner QP. Rasgas trains is likely to spill into 2008. And until we know the scale of the
6 and 7 are already under construction and will be the largest project and the shape it will take, we cannot comment on
trains ever built at 7.8mn t/yr each — they are due on stream in costs,” Kirkland says.
2008 and 2009. “Repeating a proven design is a part of Chevron has a 19pc stake in the 22mn t/yr Olokola LNG
ExxonMobil’s overall investment strategy that has paid off in project in Nigeria, where start-up has been pushed out further
cost and schedule savings in many recent projects,” to 2012. And it will jointly lead the 5mn t/yr Angola LNG project
ExxonMobil senior vice-president Stuart McGill said last month. with Angola’s state-owned Sonangol, where ExxonMobil is
relinquishing its 13.6pc stake to Sonangol. Construction of
Terminal development Angola LNG is expected to start this year. Chevron has also
Much of the LNG from the North Field will feed supply import proposed the first LNG plant in Venezuela — a 4.7mn t/yr facil-
terminals that the company is developing in Europe and the US ity. No start-up date has been given yet but conceptual engi-
Gulf coast. Chevron and ConocoPhillips are also developing or neering started in 2006.
proposing regasification facilities in Europe and the US to han-
dle the envisaged rise in gas imports. Gas production
ConocoPhillips has current production of 3.16mn t/yr from LNG projects will be underpinned by rising capacity to produce
controlling interests in its 1.2mn t/yr Alaska plant — the oldest gas. Chevron’s natural gas output reached 4.95bn ft³/d (51.1bn
LNG plant in the US — and a facility in Darwin, northern m³/yr) in 2006, with its $17.6bn purchase of Unocal in August
Australia, where it began ramping up its exports from February 2005 helping lift its percentage of gas output to oil from 32pc in
last year using gas from the Bayu-Undan field (AGL, February 2004 to 35pc last year. The major aims to boost this share to
2006, p1). nearly 40pc by 2016, says Kirkland.
Unlike the other majors, it has not issued forecasts on LNG ConocoPhillips lifted its gas production by almost 60pc to
production. But ConocoPhillips expects significant increases in 4.97bn ft³/d last year against 2005 following its $36bn acquisi-
production and one of its flagship projects will be its 30pc stake tion of US independent Burlington Resources, completed in
in the 7.8mn t/yr Qatargas 3 facility, which will deliver LNG car- March last year. This lifted the major’s total ratio of gas to oil out-
goes — mainly to the US — from 2009. It now has substantial put from 30pc in 2005 to 37pc. But ExxonMobil’s Tillerson
interests in seven LNG plants either in production or planning expects gas to stay at 37-40pc of its production until 2010.
around the world. ExxonMobil’s massive gains in production, due to gas invest-
Chevron is a small LNG producer by comparison, but it will ments in Qatar and elsewhere, will be matched by new oil pro-
have the highest growth rate among its competitors, says jects in places such as west Africa, Russia and the Caspian.

© 2007 Argus Media Ltd www.argusmediagroup.com Page 9


Argus Global LNG — News April 2007

UK grid firm declares force majeure on LNG link


UK gas system operator National Grid has declared force
NW Europe LNG and gas import infrastructure
majeure on its uncompleted Milford Haven pipeline, following a
Haltenbanken
court decision to set aside local planning approval of a pres- fields
Gas field/platform
sure reduction installation (PRI) that will limit or delay the over- Asgard
Existing gas pipeline Transport
all capacity of the pipeline project. Pipeline
Proposed gas pipeline Ormen
But the capacity reduction is likely to be very limited, Lange
LNG terminal
according to preliminary estimates from National Grid, sug- Proposed LNG terminal
gesting that the UK’s overall winter supply picture will not be Statfjord
greatly affected, especially since LNG may not flood into the
UK at current forward winter prices. Kvitebjorn Troll
NORWAY
And the High Court’s decision only sends the project back Frigg
Kollsnes
to the local council for approval, although the local government
is unlikely to reconsider the planning application until 15 May at
the earliest, according to National Grid. Karsto
St Fergus Sleipner
The overall pipeline project is designed to connect two new
LNG terminals at Milford Haven on the Welsh coast to the
National Transmission System (NTS). The Cilfrew PRI at the Draupner

centre of the force majeure declaration allows gas from one of


the new lengths of high-pressure pipeline under construction to Gateway
enter the local, lower-pressure pipeline network in south Wales. (Barrow) Teesside

The PRI is required to achieve full capacity on the broader


Amlwch
pipeline project, although early estimates suggest that only Interconnector
Easington (to Belgium)
BBL (to Netherlands)
around 40 GWh/d, or just under 3.8mn m³/d of capacity, will be
lost from a project that will be able to ship up to 950 GWh/d Milford Haven UK
UK
Bacton
when fully operational.
Canvey Island Balgzand
NETHS.
Pipeline protest Isle of Grain
Rotterdam
Parts of the project, including pipeline routes and other instal- Zeebrugge
lations along the way, have been contested by protesters,
some of which have taken action to prevent the pipeline’s com- European refiner Petroplus and the 10.7bn m³/yr South Hook
pletion. But National Grid has so far been able to work around terminal owned by Qatar’s QP, ExxonMobil and Total. NBP gas
the protesters and has completed much of the necessary prices have not looked attractive against the US market of late,
pipeline work for the first phase of the project. which could dampen the enthusiasm of UK capacity holders,
The pipeline project will connect the 6bn m³/yr Dragon ter- with front-winter prices at the UK’s hub well below those of its
minal owned by UK firm BG, Malaysia’s Petronas and US equivalent.

Spain’s Endesa plans investment


While waiting to see whether its takeover Endesa’s French affiliate, formerly Mediterranean coast, south of
by Enel-Acciona goes through and what known as Societe Nationale de Barcelona, and 20pc of the 4bn m³/yr
its future holds, Spain’s Endesa is l’Electricite et de Thermique (Snet), is Reganosa terminal under construction
calmly planning new investments in the third-largest French generator, with on Spain’s northeast Atlantic coast, due
Europe, including a 4bn m³/yr LNG ter- 2,477MW of coal-based capacity. Along on stream this year. It will have 45pc in
minal in France. with other assets in Spain and Italy, it two small terminals to be built on Spain’s
Endesa France, the company’s has been promised to Germany’s Eon in Canary islands, awaiting authorisation.
65pc-owned French affiliate, has made exchange for Eon’s promise to renounce In Italy, Endesa has a 25.5pc share
a three-year reservation on a site in its bid for the whole of Endesa. in the 4bn m³/yr Livorno offshore termi-
Verdon-sur-Mer on the Atlantic and is Endesa has experience of LNG, with nal project, which will handle gas from
investigating construction and obtaining shares in five terminal projects at various Nigeria and Qatar. It has requested per-
a long-term LNG supply. It needs the stages of development on the Atlantic mission to build an 8bn m³/yr terminal at
LNG for 2,000MW of new combined- and Mediterranean coasts, three in Monfalcone, where Italy’s Enel hoped to
cycle gas turbines that it plans to have in Spain and two in Italy. The company has site a deepwater LNG facility in the late
operation on new and existing sites in 20pc in the 6.5bn m³/yr Sagunto terminal 1990s and was refused permission by
France by 2011. in operation on Spain’s eastern the local authorities.

© 2007 Argus Media Ltd www.argusmediagroup.com Page 10


Argus Global LNG — News April 2007

Thai project mulls import sharing


Initial supplies to Thailand’s first LNG import terminal could The terminal will be located on the coast of Rayong province
originate from a joint import scheme with another northeast in southeast Thailand on reclaimed industrial port land pur-
Asian buyer if LNG is bought from Australia’s North West Shelf chased by PTT on a 30-year lease. The regasified LNG will be
(NWS) venture. used mainly for base-load power generation and as petro-
Thai terminal operator state-owned oil firm PTT is in discus- chemical feedstock.
sions with Japanese and South Korean LNG importers to
explore the possibility of sharing imports from NWS based on Feed studies
their different peak demand seasons, says energy ministry pol- The Rayong terminal is at a front-end engineering and design
icy and strategy co-ordination officer, Sarawut Kaewtathip. stage, with PTT LNG aiming to build at least two 160,000m³ stor-
Japanese and South Korean utilities routinely experience a age tanks. PTT is considering building its own fleet of five
jump in demand during their winter months of December and 135,000m³ LNG carriers to serve the terminal.
January, the same time that Thai power demand dips due to the Although PTT remains the sole operator of this terminal, the
cooler temperatures. company is open to investment enquiries from Thai and foreign
Conversely, in Thailand’s warmer months of April and May, companies. A lot of Thai companies have expressed interest in
higher power consumption sees Thailand’s LNG usage typically having a stake in the terminal, especially state-owned power util-
at its peak, while warmer weather results in reduced LNG ity Egat, says Kaewtathip.
demand for the northeast Asian consumers. Gas demand in Thailand could increase to 8.7bn ft³/d (90bn
m³/yr) by 2021 from this year’s estimated 3.5bn ft³/d. In 2006,
Iranian agreement 66.1pc of the country’s 141,948GWh of electricity output came
The possibility of importing Australian LNG supplements an from natural gas. Domestic gas production is expected to make
existing agreement that PTT signed with Iranian Pars LNG in up about 73pc of demand this year, while pipeline imports from
July last year (AGL, August, p14). Myanmar (Burma) will contribute the remaining 27pc.
The preliminary agreement involves a 3mn t/yr, 20-year sup- The predicted jump in natural gas usage is a result of the
ply contract starting in 2011. PTT LNG, the subsidiary in charge addition of up to 23 new 700MW independent power projects
of overseeing the facility, is also holding negotiations with pro- coming on line by 2021. This additional demand could see 23pc
ducers from Malaysia and Qatar. of gas coming from LNG imports, 30pc through piped gas from
The 5mn t/yr Thai LNG terminal, scheduled to be commis- Myanmar and 47pc in domestic production, according to gov-
sioned by 2011, will be expanded to 10mn t/yr if domestic ernment estimates.
demand grows as expected. Imports to the terminal are PTT’s upstream subsidiary PTTEP is developing five more
expected to begin at 2.4mn t/yr in 2012 before rising to 5mn t/yr blocks in Myanmar’s Moattama region with possibly over 60 tril-
two years later and to 10mn t/yr in 2016 if the terminal expands lion ft³ in estimated gas reserves. PTTEP is also a partner in
to its maximum capacity. Myanmar’s 110mn ft³/d offshore Yandana gas project.

Iran pushes on despite sanctions threat


Iran claims to be pushing on with Iran’s oil show in Tehran on 18-22 April will Total is unlikely to back out of the
upstream developments despite the coincide with the signing of new con- Pars project, but cost revisions could
prospect of tougher UN sanctions over tracts. Iran hopes to attract $30bn in affect Iran’s long-delayed LNG plans.
its nuclear programme. But costs, as upstream investment over the next seven Tehran claims steady progress at state-
well as political risk, now threaten high- years. The country needs to replace owned NIOC’s Iran LNG project, and in
profile gas projects. annual depletion at maturing fields of negotiations with Shell and China’s
Iranian president Mahmoud 250,000 b/d, while boosting crude capac- state-controlled producer CNOOC on
Ahmadinejad’s announcement on 9 April ity to 5mn b/d from 4mn b/d by 2012. other LNG projects. CNOOC last year
that Iran has started producing nuclear But the spectre of rising costs is began talks for the $16bn development
fuel on an industrial scale was greeted threatening negotiations with foreign of the North Pars field while China’s
with scepticism by experts outside Iran. firms over high-profile LNG projects. CNPC in January signed a $3.6bn deal
Tehran faces the possibility of further Total’s sharply increased cost estimate to develop phase 14 of Iran’s South Pars
UN sanctions when the International for developing the 10mn t/yr Pars LNG offshore gas field and build a 4.5mn t/yr
Atomic Energy Agency produces its next plant in southern Iran — which has risen LNG plant (AGL, February, p12).
report on Iran’s nuclear programme by to $12bn from $5bn — has put it at log- But prompt investment will be
the middle of May. gerheads with Tehran. needed to meet Iran LNG revenue tar-
Oil ministry officials say the threat of “The Total offer was not in line with gets of “$35bn-40bn/yr by 2014”,
more sanctions will not preclude invest- our expectations,” says Vaziri. “They are according to a senior source at state-
ment in key projects. They predict that reconsidering their position.” owned gas exporter Nigec.

© 2007 Argus Media Ltd www.argusmediagroup.com Page 11


Argus Global LNG — Trading April 2007

Global spot market may emerge


A global LNG spot market is likely to emerge, but its develop-
LNG terminal utilisation
LNG terminal utilisationrates
rates 2005
2005 % %
ment needs an overcapacity of LNG import facilities. This devel-
opment is uncertain because of political opposition and rising 80
costs, delegates said last month at the CWC LNG conference in
San Antonio, Texas. 60
Massive growth in the LNG industry has enabled modes of
business that were not possible even seven years ago, says
40
chief operating officer of Dutch LNG infrastructure group 4Gas,
Simon Bonini. These new modes are changing the way the mar-
20
ket is designed, Bonini says.
Most LNG import facilities have little spare capacity and lack
0
flexibility for spot trade. But this lack of flexibility is related to pro- France US South Korea Belgium Japan

duction requirements, not to the market, says Bonini. The origin


of the 100pc take-or-pay contract is to keep production running,
as LNG production facilities benefit from maximising output, opment of its LNG facilities. “If there is a message to the devel-
Bonini says. oper of a regasification terminal, it is to get your local commu-
The 90pc utilisation rate of import facilities is left over from nity on board,” Meyer says.
point-to-point sales, with the slack in capacity for operational
problems and weather, Bonini says. This system allows optimi- Risky business
sation around volume rather than price, which minimises flexi- In addition, there are financial obstacles and market risks in the
bility. This is not an issue in oil and products and is not under- development of a global LNG spot market. Vice-president of
stood in LNG, he says. project and export finance for HSBC Securities USA, Chris
But import capacity is the lowest cost element in the global Gerlach, says lenders understand that overcapacity is the key to
LNG delivery system. “Flexibility is coming, and it can only start taking advantage of arbitrage and enabling spot trade. But the
on the physical side,” says Bonini. upfront investment costs to build LNG terminals are prohibitive.
The LNG market is somewhat inefficient, Bonini says. “You can recoup a lot in 30 years but how do you handle the first
Buyers and sellers can benefit from balancing global supply and three years?” asks vice-president of Norway-based Aker
demand more efficiently. For example, end-user buyers have Kvaerner LNG, Greg Pepper.
uncertain demand profiles in the markets that they supply, says There is a need for operational considerations to be written
Bonini. These buyers have risks in buying for peak demand or into contracts, says Steven Sperling, head of US risk manage-
average demand. ment firm LNG Solutions Group. Financing and capacity does
The role of storage is misunderstood in LNG, says Bonini. not matter if you are unable to get your ship into port, Sperling
“Storage today really is not storage. It is buffer,” he says. There says.
is a role for true storage without regasification, he says. Meyer notes that one of the emerging trends in the LNG
industry is to move away from tying imports to a utility. Before
Cancelled projects 2004, 90pc of LNG was tied to a utility, he says. By 2010, half of
But there are problems in increasing LNG import capacity in the 38bn ft³ of imports will not be tied to a utility but will be avail-
North America. Increasing costs and political opposition have able for spot cargoes. “We see the spot trade, maybe called
led to the cancellation of some projects, and excess LNG import diversion trade, as growing,” Meyer says.
capacity is not being built. “There are not so many LNG termi- But president of US firm Sempra LNG, Darcel Hulse, warns
nals being built. There are very few,” says the president of US of over-optimism in the growth of the LNG market. “Bear in mind
firm Cheniere LNG, Keith Meyer. “There are lots of dots on the that LNG is a small fraction of the gas that is consumed in the
map that people are talking about but no real activity,” he says. world and will continue to be a small fraction of the gas that is
“Many of these are never going to see a shovel of dirt turned,” consumed in the world,” Hulse says.
Meyer says. The US will not be able to compete for LNG imports
Meyer cites problems like public opposition and increases because it will shift to coal for power generation if natural gas
in capital costs as a result of the increased level of LNG activity reaches $8-10/mn Btu, says commodity risk manager for UK
globally. A number of projects have been abandoned, Meyer hedge fund Waterphord, Graeme MacKenzie. MacKenzie says
says. “Behind each one of these is a developer who believes his fund will not buy cargoes but will invest in storage and
that the project will be built,” he says. pipeline gas. If you do not get business from Wall Street traders,
Meyer points to the recent trend in anti-LNG legislation. you do not get the liquidity needed for a spot market,
“Each of these pieces of legislation can trace its roots to a local MacKenzie says.
unsatisfied community. Community support needs to be earned But Bonini has a more optimistic outlook. Contracts and
and it needs to be earned everyday,” Meyer says. Cheniere financial barriers are a hurdle that will be overcome, says Bonini.
spent two years developing community support for the devel- “There is a strong future for a true global LNG market.”

© 2007 Argus Media Ltd www.argusmediagroup.com Page 12


Argus Global LNG — Companies April 2007

Chevron ditches Mexican LNG plans


Chevron has abandoned plans to build a $650mn LNG regasifi- tion from environmentalists. But protests worsened when envi-
cation terminal on the Baja California peninsula in northwest ronmentalists learned that Chevron would use the southern-
Mexico. It has withdrawn the three permits required to develop most of the Coronado Islands as a breakwater to protect a con-
the project, which has been on hold for some time. crete island to be built by the company, which would have been
The decision is in line with Chevron’s business needs, as the the location for the terminal.
project is no longer aligned with the company’s equity gas The first stage of Shell-Sempra’s $1.5bn Costa Azul project
resources, says spokeswoman Margaret Cooper. Chevron has is expected to start up next year. Sempra has an agreement with
decided to send gas reserves from the Greater Gorgon gas BP and Tangguh LNG to bring in LNG from Indonesia, while
fields off northwest Australia to Japan instead of to Baja Shell will take supplies from Russia’s Sakhalin Island project.
California, she says. Sempra has said that it will seek an increase in capacity of the
But Chevron has not given up its plans to build an LNG Costa Azul terminal from 1bn ft³/d (10.33bn m³/yr), operational
regasification terminal elsewhere in North America and is evalu- next year, to 2.5bn ft³/d in 2010.
ating other potential sites, Cooper says. The project became
unfeasible for Chevron once Shell and US firm Sempra Energy Manzanillo delayed again
decided to co-operate on a competing LNG terminal 16km At least five other companies planned to bring LNG to the Baja
away at Ensenada (AGL, April 2006, p16). California coastline to fire power plants on both sides of the US-
Chevron acknowledges that the first project to be com- Mexico border. In February 2004, US independent Marathon
pleted in the region would have a major market advantage. gave up its plans to build a $1.5bn terminal at Tijuana, citing a
Industry analysts say a Chevron-run facility on the Pacific coast lack of local political support. US firm El Paso, ConocoPhillips
of North America could still take on a key role in regional energy and Italian firm Eni subsidiary Moss Maritime have also dropped
markets, given that Chevron is a major player in the refining their respective projects.
business and in the fuels market in California. The public tenders to purchase LNG and to build a regasi-
fication terminal at Manzanillo, on Mexico’s Pacific coast, have
Green protest been delayed by another month. The Manzanillo project, pro-
The withdrawal of the permits put an end to a battle with US moted by state-run utility CFE, is under review by the govern-
and Mexican environmentalists, who claimed that the Chevron ment. Interested parties have been told that the next clarifica-
project would harm bird, sea mammal and plant habitats. tion meeting for the LNG purchase has been put back to 19
Chevron decided to build the project offshore near the April, and the next meeting for the regasification terminal will
Coronado Islands — rather than onshore — to avoid opposi- now be on 24 April.

Technip leads Nigeria’s Olokola race


French engineering firm Technip is lead- Shell and the NNPC-Chevron Nigeria the five existing trains of the Bonny-
ing the race to land the contract for the joint venture. based 18mn t/yr Nigeria LNG (NLNG).
construction of two export terminals for A final investment decision has yet to Chevron has tendered to build two
the 22mn t/yr Olokola LNG (OK LNG) be made on the project, whose current gas production platforms to supply the
project in Nigeria. shareholders are state-owned NNPC OK LNG facility. The first is at the existing
OK LNG, the first Nigerian LNG plant with 49.5pc, Chevron with 18.5pc, Shell Okan gas processing plant and will be a
that will be built outside the oil-rich but with 18.5pc and UK gas firm BG with the 1.4bn ft³/d (14.5bn m³/yr) plant contain-
violent Niger delta, is planned to come remaining 13.5pc. ing gas separation, dehydration, export
on stream by 2012. It will be built in the The award of the contract for the gas compression facilities in a water
Olokola Free Trade Zone which strad- export terminals will be a step forward for depth of 17m. A second, smaller plat-
dles Ogun and Ondo states in south- the scheme, which has been delayed form capable of processing 700mn ft³/d
west Nigeria. from its original start-up date of 2009. of associated gas will also be put up at
The OK LNG plant will have four LNG the Funiwa gas processing plant.
trains, each with a capacity to produce Hot contender Nigeria is aiming to boost its gas
5.5mn t/yr of LNG. Exports will be sold “Technip is a hot contender for the LNG exports to over 2mn b/d of oil equivalent
mainly in the Atlantic market. OK LNG terminal job and, barring unforeseen cir- by 2012. This is based on exports from
will initially start with two trains. cumstances, is set to be awarded the OK LNG; the 18mn t/yr NLNG project —
The gas for development of the OK contract,” an OK LNG source tells Argus. set to rise to 22mn t/yr when train 6 comes
LNG project will come from onshore and Technip is already part of a consor- on stream at year-end; the 10mn t/yr
offshore oil and gas fields operated by tium — known as TSKJ — with Italy’s Brass LNG scheme; the West African Gas
the project sponsors, including the joint Snamprogetti, Halliburton’s Kellogg Pipeline project; and the 34,000 b/d
venture between state-owned NNPC and Brown and Japan’s JGC that has built Escravos gas-to-liquids project.

© 2007 Argus Media Ltd www.argusmediagroup.com Page 13


Argus Global LNG — Chile April 2007

LNG projects dogged by problems


Chile has three formal plans to import LNG. But the main project Chile s proposed Quintero terminal
Chile’s Quintero terminal
in the central coastal city of Quintero is now expected to cost
more and take longer than the government originally estimated. Enap (industrial area)
Others (industrial area)
And two separate projects are dogged by questions of viability Urban (public area)
and competitiveness with coal. Road

A consortium led by the UK’s BG signed a shareholders Proposed


1,600m runway
LNG terminal
agreement on 9 March for the main project, setting up a joint- exclusion zone
for LNG storage
venture company called GNL Quintero. BG has a 40pc stake in
Proposed
the project. Chile’s state-run oil company Enap, Spain’s Endesa BOLIVIA jetty

and Chilean gas distributor Metrogas each hold 20pc. Definitive


CHILE
contracts for the 2.5mn t/yr project are slated to be signed in the Quintero bay
second quarter, project sources say. ARGENTINA
But the government is unlikely to meet its goal of inaugurat-
Quintero Santiago
ing the LNG terminal and regasification plant next year. Initial
operations are expected “in the first half of 2009” under a pre-
liminary “fast-track” mode, a BG spokesman says, with the ter- Chile has seen sharp fluctuations in Argentinian gas imports,
minal “fully operational by the second quarter of 2010”. forcing gas-fired industries and power generators to convert to
Government officials have repeatedly said they aim to inau- more expensive and less efficient diesel. Prior to the crisis, Chile
gurate LNG imports in 2008, but sources say 2009 is “more imported about 22mn m³/d of Argentinian gas. Chilean officials
likely” at this stage. Delay raises the risk of a shortfall in electric- now say they expect Argentinian gas exports to dry up alto-
ity supplies if there is a season of sparse rainfall that limits hydro- gether by 2010.
electric generation — particularly in 2008-09, before major new Chilean chemical company Oxiquim, meanwhile, is quietly
power plants come on stream. This potentially tight-supply laying the groundwork for separate LNG facilities adjacent to the
period coincides with the run-up to presidential elections in BG-led project in Quintero bay.
December 2009. Oxiquim received an environmental permit on 5 March from
About 55pc of power generation in Chile’s central grid regional environmental authority Corema to build a $262mn,
comes from hydropower, while 25.2pc comes from natural gas. 5mn m³/d (1.3mn t/yr) LNG facility. Sources say the project is
Most of the gas-fired plants have now been converted to diesel. not viable without the major gas buyers already committed to
Electricity demand in the central grid is growing at around 7pc/yr. the BG-led project. By filing for a permit, Oxiquim is seeking to
Official documents maintain that the project will cost negotiate the sale of its slice of the terminal in anticipation of its
$400mn. But financial sources now say the cost could almost expansion, sources say.
double. Aside from the rising costs of raw materials and equip-
ment, Santiago has indicated publicly that it is in a rush to get Room for two
the project off the ground, compromising its negotiating position Oxiquim environment and security manager Exequiel
with suppliers, critics say. The partners have bypassed compet- Maldonado tells Argus that there is room for both projects if
itive tenders in favour of direct negotiations with contractors in a future demand is taken into account. The firm has been han-
bid to speed up construction. dling LPG in Quintero bay since 1995, Maldonado says, giving
BG declined to comment on the cost of the project, but the the company the experience to carry out this separate project
firm has generally maintained a low profile in Chile and has not on its own. He says the company plans to initiate LNG imports
yet opened a local office. in as little as 18 months, offloading the fuel from floating storage
facilities. Oxiquim has an international partner and a local part-
Competing coal ner to develop its project, he adds.
The project’s high costs and delays add to a prevailing senti- Plans for an LNG terminal in Mejillones on the northern coast
ment in Chile that LNG will ultimately serve as a back-up fuel for to serve the mining industry appear to have been discarded for
existing power plants, not a fuel for new construction. now, because coal is considered more competitive. But in the
Official documents confirm that most of the new power next two to three months, state-run copper producer Codelco
plants that will be built in Chile in the medium term will use coal, and a group of private-sector mining companies will conclude
which is less expensive on the international market than LNG. studies to determine the cost and feasibility of temporarily
Despite the added costs and delays, the main Quintero pro- installing a floating regasification vessel to supply the 2009-11
ject is a must for the government. Enap needs gas to run its two period before new coal-fired plants come on stream, Codelco
main oil refineries, and Metrogas needs supplies to distribute to president Jose Pablo Arellano said on 27 March (see p15).
its residential, commercial and industrial gas customers. Northern Chile’s two main power generators, Suez and
Former president Ricardo Lagos unveiled the LNG project in GasAtacama, are expected to co-operate, but only Anglo-
May 2004, following Argentina’s decision to start redirecting Australian firm BHP Billiton has publicly committed to the pro-
piped gas exports to its booming domestic market. Since then, ject, along with Codelco.

© 2007 Argus Media Ltd www.argusmediagroup.com Page 14


Argus Global LNG — News April 2007

Trinidad’s train X on track after Loran-Manatee


Construction of the new LNG train X in Trinidad and Tobago is LNG capacity would be available to meet the commitment.
dependent on development of the Loran-Manatee gas fields Manning publicly assured Jamaica that the government was
that straddle the country’s maritime border with Venezuela, says “determined to satisfy its contractual obligations… notwithstand-
energy minister Lenny Saith. “Loran-Manatee is important if we ing statements to the contrary coming from dubious sources”.
are to go for another LNG train because it does provide a large Jamaica has now turned to Venezuela, which agreed to
enough volume to support another train,” Saith says. supply 1.5mn ft³/d of gas by 2009. No final decision has been
In an agreement signed on 20 March, prime minister Patrick made on whether the gas will be in the form of LNG, or com-
Manning and Venezuela’s president Hugo Chavez agreed that pressed natural gas (CNG), or whether natural gas will be
70pc of the reserves belonged to Venezuela, with around 2.65 piped to Jamaica. But analysts in Caracas say Venezuela can
trillion ft³ (75bn m³) belonging to Trinidad and Tobago. The fields only meet its obligation in the time schedule agreed if the LNG
contain 10 trillion ft³ of proven reserves. Chevron operates is supplied through a third party. Manning says Trinidad can be
Loran, on the Venezuelan side of the maritime border, and is a that “third party”.
partner in the Manatee field, in Trinidad, with the UK’s BG. Jamaica plans to build a $250mn LNG terminal at Port
No ownership split has yet been agreed in relation to the Esquivel on the island’s south coast. But with the terminal
Kapok-Dorado fields, which hold around 5 trillion ft³. unlikely to be completed by 2009, the government is planning to
BG is the government’s preferred choice to build the new purchase a floating LNG regasification terminal, which could be
production unit. An initial agreement has been signed with BG constructed and delivered in 18 months.
Trinidad and Tobago to carry out an 18-month feasibility study to Excluding the Loran-Manatee and Kapok-Dorado gas fields,
determine whether train X will be built. The government Trinidad and Tobago’s proven and possible reserves stand at 34
approached several companies but the most attractive proposal trillion ft³, according to official figures. The country’s natural gas
was submitted by BG, says Trinidad and Tobago junior energy production increased by 38pc in 2006 to 3.9bn ft³/d, driven
minister Penelope Beckles. mainly by higher LNG production.
The country’s sole LNG producer is Atlantic LNG, which
New possibilities exports 15mn t/yr from four production units. Owned by BG, BP,
The proposed project “will open up new possibilities for the Spain’s Repsol-YPF, Suez LNG and Trinidad’s state-owned
country’s gas — and perhaps also Venezuelan gas — to reach National Gas, Atlantic LNG has traditionally supplied 75pc of US
markets”, says BG chairman Robert Wilson. LNG imports. But shipping LNG to Europe is becoming more
Jamaica has been identified specifically by Manning as one profitable for Atlantic LNG. The consortium sold 37pc of its pro-
possible market. Train X “will ensure that Jamaica will be able to duction in Europe and Asia-Pacific last year, up from 12pc in
get LNG for its bauxite refineries and power stations”, he says. 2005, according to BP. While Atlantic LNG received $9.17/mn Btu
Trinidad in 2004 agreed to supply Jamaica with 158mn ft³/d on exports to Spain last year, just $3.71/mn Btu was paid for
(1.6bn m³/yr) of LNG. But officials recently admitted that no spare exports to the US, according to the US Department of Energy.

Chile’s mining titans weigh floating LNG option


Chile’s strategic copper mining sector is tive than coal for generating electricity in “fast-track” regasification vessel for
evaluating temporary imports of LNG the country. Quintero to accelerate gas imports
through a regasification vessel to cover The Chilean government last year before the permanent 2.5mn t/y terminal
energy demand ahead of the start-up of commissioned Codelco to lead a project and storage are constructed.
new coal-fired power plants. for importing LNG to cover a growing The government rejected the pro-
“In the short term, while there is no shortfall of natural gas shipped across posal, in part because of the Chilean mil-
additional capacity from coal, we are the Andes from Argentina. itary’s concerns over logistics. Now Suez
examining the possibility of relying on The preliminary idea was to develop seems likely to take the lead in imple-
LNG in the intervening period,” president a permanent LNG import terminal at menting its proposal in the north.
of state-run copper mining company Mejillones on the northern coast, along Other mining companies that have
Codelco, Jose Pablo Arellano, said on 27 the same lines as a planned terminal at been reviewing the LNG option in north-
March. “We are examining this possibility Quintero on the central coast (see p14). ern Chile include Anglo-Australian firm
with other mining companies. We are This proposal has now been dis- BHP Billiton, Collahuasi — a Chilean
now in the process of conducting studies carded in favour of a short-term option venture owned by Switzerland’s Xstrata
to determine the costs and timeframe. In that could see imports from floating stor- — UK-based company Anglo American,
the next two to three months, we will age in as little as 17 months. a group of Japanese companies
have conclusions.” France’s Suez, the largest power headed by Mitsui, and El Abra, owned
Arellano’s remarks reinforce the generator in northern Chile in terms of by US company PhelpsDodge, together
growing view that LNG is less competi- installed capacity, proposed in 2005 a with Codelco.

© 2007 Argus Media Ltd www.argusmediagroup.com Page 15


Argus Global LNG — US April 2007

Cheniere sees US as key swing market


US firm Cheniere Energy is convinced that the US, with its year-
US Gulf LNG terminals
round demand, will become the swing market and sponge for
world LNG, absorbing volumes not needed in Europe and Asia-
Pacific. In preparation, the Houston-based firm is building two
regasification terminals on the Gulf of Mexico — at Freeport, USA

Texas, and Sabine Pass, Louisiana — has full permits for two
1. Pelican Island (BP)
others, and is discussing long-term LNG supplies. 2. Vista del Sol (ExxonMobil)
3. Golden Pass (ExxonMobil)
“The fundamentals are that US production is falling. Gas 4. Crown Landing (BP) 4
from the deep offshore and non-conventional gas costs at least 5. Lake Charles (Trunkline)
6. Cameron LNG (Sempra)
$6/mn Btu to produce, Canada is exporting less as its own 7. Creole Trail (Cheniere)
8. Sabine Pass (Cheniere)
needs grow and US demand is rising by 2pc/yr,” executive 9. Port Arthur (Sempra)
10. Freeport (Freeport LNG)
director of Cheniere LNG Jean Abiteboul tells Argus. “Only LNG
can fill the gap.”
By 2010, US terminal capacity will be 150bn m³/yr, with the 5
3
addition of Baja California, Cameron, Golden Pass, Freeport 6 7
1 8 9
and Sabine Pass to the four existing onshore terminals and US 10
2
firm Excelerate’s offshore capacity. “The load factor could be Gu lf of Me xi co
close to 70pc,” Abiteboul says, “better than elsewhere and a ME X IC O
good reason to send available LNG to the US, especially when
you look at the forward price curve. This means a significant
spot market.” Cheniere, he adds, will be well placed to benefit. The 26bn m³/yr Corpus Christi terminal in Texas and the
33bn m³/yr Creole Trail in Louisiana have been given all the
Constructive expansion necessary permits and front-end engineering and design
The 15bn m³/yr Freeport terminal, in which Cheniere has (Feed) has been carried out for Corpus Christi. But the final
retained 30pc, will be operational in the first quarter of 2008. decision on starting construction depends on commercial and
Take-or-pay terminal use agreements have been signed with financial conditions.
ConocoPhillips for 10bn m³/yr and with chemical firm Dow for Cheniere in March said it is seeking up to 5bn m³/yr starting
5bn m³/yr for 20 years, with the possibility of an extension. in 2008 and 10bn m³/yr in 2009, and would “contemplate con-
The 26bn m³/yr phase 1 of the Sabine Pass terminal, wholly struction of the next terminal when 10bn m³/yr is achieved”. And
owned by Cheniere, will be operational in the second quarter of it “will hold 10bn m³/yr of receiving capacity for spot and short
2008. An extension, already under construction, will bring total term”. Cheniere has permits for pipelines to transport the gas
capacity to 40bn m³/yr by the second quarter of 2009. Of this from its LNG terminals to major interstate pipelines serving the
capacity, 10bn m³/yr has been reserved by Total and another country’s main consumption areas.
10bn m³/yr by Chevron. Cheniere will keep the remaining 20bn It has a charter for two LNG carriers in the 150,000m³ range
m³/yr. The company is in preliminary discussions for long-term with Japan’s K Line. And it is considering gas production “as an
supply contracts, but will initially buy spot, Abiteboul says. eventual possibility,” Abiteboul says.

Shell ditches Gulf Landing import terminal


Shell is cancelling plans to build its 1bn Environmentalists argue that this method its first LNG import terminal development
ft³/d (10.3bn m³/yr) Gulf Landing LNG kills plankton and larvae and endangers in the US Gulf coast.
import terminal, located 38 miles (61km) other aquatic species. But Shell says the The Federal Energy Regulatory
offshore from Cameron Parish, project was cancelled for economic rea- Commission expects about 12 terminals
Louisiana, in the Gulf of Mexico. The sons. There are about 15 other projects to be built in the US, the majority of which
$700mn project was scheduled to be in various stages of permitting in the US are likely to be constructed in the Gulf,
operational in 2008-09. Gulf Landing was Gulf of Mexico. And three projects are in where communities and local govern-
originally planned in 2003, and the US the construction stage. ments have been more receptive to
Maritime Administration and the US BP recently stopped work on its energy infrastructure projects.
Coast Guard approved the project for $650mn, 1.2bn ft³/d LNG terminal US authorities have approved 19
construction in 2005. planned for Pelican Island near LNG regasification terminals out of
Gulf Landing was subject to protest Galveston, Texas, citing an “assessment approximately 40 applications since 2005.
from environmentalists for its use of an of the project’s economics”. Shell has The earliest addition to the US’ existing
“open-loop system”, which uses ocean capacity positions at two terminals along LNG import fleet will be the Freeport LNG
water to warm the LNG for regasification. the US east coast, but Gulf Landing was terminal in early 2008 (see above).

© 2007 Argus Media Ltd www.argusmediagroup.com Page 16


Argus Global LNG — Corporate April 2007

Petrobras to quicken projects with Gazprom


Brazil’s state-controlled oil and gas firm Petrobras and Russian combined with Bolivian imports and domestic production, Brazil
gas monopoly Gazprom recently signed an initial agreement that will have 121mn m³/d of natural gas available by 2011. Of this
could result in Gazprom supplying LNG to Brazil. The agreement total, 30mn m³/d will be imported from Bolivia and 20mn m³/d
seeks to speed up joint ventures in LNG storage and transport will be imported through the LNG terminals. The company plans
projects, as well as joint gas pipeline projects. to more than double its domestic natural gas production to
The announcement is the latest in a series of Brazilian gov- 71mn m³/d from 31.4mn m³/d by 2011. With the increased sup-
ernment initiatives to increase the supply of natural gas to the ply, natural gas will be responsible for 11pc of the country’s
domestic market. The company decided to invest in LNG after energy production by 2011, up from 9.5pc in 2006.
suspending investments in Bolivia, as part of a plan to guaran-
tee natural gas supplies and ensure electricity generation during Industrial diversion
times of drought. A company spokesman says it is considering further expansion
The policy is intended to help bring other sources of gas on of its LNG programme to include a plant in Rio Grande do Sul
line to reduce dependence on Bolivia, which supplies roughly and another in Bahia. These plants would increase LNG capac-
half of Brazil’s natural gas demand. ity by an additional 20mn m³/d.
Petrobras announced that it would move ahead with LNG According to a recent study by the Brazilian gas distribution
projects last year after Bolivian president Evo Morales nation- association (Abegas), natural gas use for energy has roughly
alised the country’s oil and gas reserves in May last year. Brazil tripled over the past 10 years. The group says the client base
and Bolivia recently reached an agreement regarding a price using natural gas grew by 20pc since 2003 to 1.2mn users.
increase for Bolivian gas imports. Abegas says gas sales in Brazil reached 15.2bn m³ last
LNG projects are part of Petrobras’ $87.1bn 2007-11 invest- year, of which two-thirds went to consumers in the industrialised
ment plan, of which $17.6bn will be allocated to develop Brazil’s southeast. Gas distributors in Brazil sold an average 41.7mn
natural gas production. m³/d in 2006, although true consumption was higher as
Petrobras uses over 10mn m³/d in its operations.
Floating regasification The government and Petrobras are worried about the poten-
Petrobras originally announced that it would begin importing tial gas supply shortage to the market. Petrobras recently sub-
LNG by 2009, but is now targeting the second half of 2008, mitted plans to the government to begin diverting gas from
Petrobras chief executive Jose Sergio Gabrielli said in a recent industrial consumers to supply power generation plants, after
meeting with analysts. tests showed that Brazil’s thermoelectric generation capacity
The company plans to import 20mn m³/d of LNG and rent or was lower than previously thought.
buy two floating storage and regasification units — one 6mn Analysts say Petrobras may run into problems if LNG mar-
m³/d plant in the northeastern state of Ceara, and a 14mn m³/d kets continue to be tight. In addition to Gazprom, Petrobras is
unit in Rio de Janeiro. considering Venezuela, Trinidad and Tobago and Angola as
Petrobras estimates that with the two new LNG projects potential suppliers.

US approves Neptune import project


The US Maritime Administration has Massachusetts alone accounting for half has received permission to build a termi-
granted a deepwater port licence to the of the region’s consumption. nal elsewhere than on the Gulf of
Neptune offshore LNG project of Suez Without new capacity, New England Mexico,” Suez Energy International chief
Energy North America, a branch of could face a shortage of gas approach- executive Dirk Beeuwsaert tells Argus.
Franco-Belgian firm Suez. ing 14.1mn m³/d in 2010. “We are interested in the Gulf of Mexico,
The licence allows the construction The company expects to have a fully too, but we will buy terminal capacity
and operation of an LNG delivery sys- operational project by 2009 at the latest, there, rather than build.”
tem in Massachusetts Bay. Several final including construction of a lateral con- Suez is more cautious about lique-
administrative permits are expected nection to HubLine — the existing sub- faction projects that require a guaran-
before the summer. sea pipeline — specially designed ships teed gas supply for 20 to 30 years,
The facility will be located about and sufficient LNG supply. Beeuwsaert says. “But producing coun-
17km from the coast and provide Suez has firm commitments from tries now want to use their gas to
11.3mn-21.2mn m³/d of gas, enough to Hoegh LNG, Mitsui OSK Lines (MOL) develop their own industries.”
serve 1.5mn-3mn homes daily. The and Samsung Heavy Industries that the And the company is “not too inter-
Neptune project will fill a growing need in two LNG regasification vessels will be ested” in upstream commitments, which
New England, where gas demand is delivered at the targeted start-up date require big capital outlays. “Up to now,
expected to increase by 1pc-2pc/yr over (AGL, January, p17). “With its Neptune we have used our capital for electricity,
the next two decades, with project, Suez is the only company that with success.”

© 2007 Argus Media Ltd www.argusmediagroup.com Page 17


Argus Global LNG — In brief April 2007

Itochu joins Namibia LNG project China’s state-owned CNPC. The pact Libya targets Ras Lanuf hub
Japanese trading house Itochu will covers joint LNG transportation, as well as Libya wants to transform its Ras Lanuf
acquire 20pc of the Kudu natural gas field the joint management and co-use of LNG export terminal into a downstream hub for
located off the west coast of Namibia in storage facilities. Nippon Oil is a relatively oil and gas, and “a centre of oil invest-
the hope of participating in the country’s new entrant to Japan’s LNG market but is ment”, head of state-owned NOC Shukri
first LNG development project and secur- rapidly expanding its overseas upstream Ghanem tells Argus. New plans for the
ing exports to Japan. The company will production through projects such as hub could include projects by Shell, which
buy the stake for more than ¥10bn Indonesia’s Tangguh and Malaysia’s Tiga is exploring for gas to supply an LNG pro-
($85mn) from UK-based Tullow Oil. Tullow and domestic LNG terminal investment ject, at the same time as it revamps the
took over the Kudu project from original (AGL, March, p4). The two firms are to dis- ageing Marsa el-Brega LNG plant. BP is
operator Shell, which withdrew in 2002 cuss details of the co-operation in the discussing a cluster of offshore and
after failing to locate enough reserves to near future. In a separate deal, Japanese onshore fields, says Ghanem. These
justify a large LNG project. Itochu says it trading house Mitsui has signed an initial could form the basis of an integrated LNG
expects the project’s new appraisal — to agreement on spot LNG trading with project similar to Shell’s venture. Gas is a
be conducted in May this year — to show China’s state-owned CNOOC. The deal new upstream focus for Libya. Its fourth
potential reserves of more than 5 trillion between Mitsui’s UK unit and CNOOC is Epsa-4 upstream bidding round will con-
ft³ (141bn m³). If this estimate is accurate, expected to allow the two sides to enact centrate “more on gas-prone areas”, says
it would lead to the realisation of speedy LNG transactions when the need Ghanem. “We have a lot of potential in
Namibia’s first LNG project. for spot volumes arises in the future. gas. We will choose 10-15 areas and put
These agreements were signed at an them to tender” as soon as the third quar-
Japan, China boost LNG co-operation energy industry seminar held in Tokyo on ter, he says. Libya has transformed itself
Japanese and Chinese firms have signed 12 April, where Japanese energy busi- into an exploration hot spot since US
LNG co-operation pacts, taking a cue ness heads met a Chinese delegation led sanctions were lifted in 2004.
from improving diplomatic ties between by Chinese premier Wen Jiabao and the
the two countries, symbolised by the first head of China’s key economic planning LionGas terminal to fuel new CCGT
visit of a Chinese premier to Japan in body the NDRC, Ma Kai. During the visit, Dutch independent 4Gas has agreed to
almost seven years. Japan’s leading oil Japanese premier Shinzo Abe and Wen supply the new Enecogen power plant
refiner, Nippon Oil, has signed a long-term agreed to build up a strategic partnership with gas from its proposed LionGas LNG
strategic energy co-operation pact with in energy security. terminal in Rotterdam. The 840MW
Enecogen power plant is expected to
source all of its gas from the nearby LNG
Qatar tops majors’ investment plans facility once the phases of the terminal
Shell expects its projects in Qatar until owned QP’s finance manager, are operational in 2010 and 2011 respec-
2012 to be the largest single national Abdulrahman Al-Shaibi. tively. Enecogen says the plant has
destination for the company’s expendi- Qatargas 4 is due to export all of its received all the necessary permits from
ture over that period, having already 7.8mn t/yr of output to the US. Permit the Dutch authorities, with a final deci-
handed out $10bn in contracts, says the problems over US greenfield LNG termi- sion on the plant’s construction expected
company’s gas chief Linda Cook. It will nals will not create a supply bottleneck, to be taken in the second quarter of this
be investing in the 140,000 b/d Pearl Cook says. year. The Enecogen project is a joint ven-
gas-to-liquids plant and the 7.8mn t/yr “There are some questions being ture between Dutch energy firm Eneco
Qatargas 4 facility, which could poten- raised over the building of terminals,” Energie and UK generation company
tially account for 44pc of the company’s Cook tells Argus. “There is no doubt that International Power. The plant has the
plans to nearly double its operated LNG some LNG import terminals are finding it potential to meet up to 5pc of total Dutch
capacity to 17.5mn-18.2mn t/yr by the hard to get the necessary permits but I electricity demand, although the facility
end of 2010. do not think that is the bottleneck in the will not provide base-load power supply,
Shell’s planned expenditure puts it in LNG sector right now. It is more the sup- according to a spokesman. Enecogen
line with ExxonMobil’s investments in ply side actually, we are finding the and LionGas have agreed to co-operate
Qatar, with its Rasgas 5,6 and 7 and demand increase is going quite apace. in other areas, including building water
Qatargas 2 projects aiming for a com- It is the supply that has the challenge in inlet and outlet infrastructure, establish-
bined output of 35.9mn t/yr by 2009. keeping pace with that.” ing a joint connection to the gas trans-
Qatar expects to more than double Cook says increasing LNG demand port network, the direct supply of elec-
its current LNG production from 31mn will spur gas production by the majors. tricity from the plant to the LNG terminal,
t/yr to 77mn t/yr by 2010. It expects 2006 “There will have to be an increase in the the use of residual heat from the power
profits of $25bn from revenues of $32bn, production of gas as opposed to oil with plant to heat LNG and the use of the ter-
with LNG exports up to 25mn t/yr from demand going the way it is, and in par- minal by Eneco Energie. Construction of
22.9mn t/yr in 2005, says Qatar’s state- ticular for LNG, I think,” she says. the LionGas LNG terminal is scheduled
to begin in mid-2007, with the terminal

© 2007 Argus Media Ltd www.argusmediagroup.com Page 18


Argus Global LNG — In brief April 2007

Contract watch
z Japanese trading house Marubeni with two 140,000m³ LNG tanks and a more than the 357,000 t/yr agreed
has signed an initial basic agreement berth capable of receiving a 130,000m³ under the existing contract in recent
with Qatar’s state-owned QP to take a vessel. The company is seeking to years in order to accommodate rising
stake in the Qatargas 4 project, allowing import 300,000-400,000 t/yr of LNG demand in the southern Kyushu region
it to take around 1mn t/yr of LNG. QP beginning in 2010 in order to supply the (AGL, January, p6).
owns 70pc of the 7.8mn t/yr project and first two 250MW units, scheduled for
Shell owns 30pc of the project, which is start-up in November of that year and in z Japanese power utility Tohoku
scheduled to begin LNG supplies in May 2011 respectively. Two more Electric Power has signed an initial
2010. According to Marubeni, the part- 250MW units will be added by 2020. agreement to more than double its LNG
ners have yet to agree on the size of the The power utility’s plan to develop LNG import purchase from Australia’s North
stake to be taken by the Japanese firm import infrastructure has coincided West Shelf (NWS), beginning in 2010.
and details of the LNG supply terms. Okinawa Gas’ plan to switch from Tohoku has been importing up to
But QP says the LNG will be destined propane to LNG for its piped gas sales. 450,000 t/yr of LNG fob NWS under its
for Japan in one of the super large LNG Okinawa Gas plans to begin the LNG existing contract running from 2005 to
vessels known as a Q-flex. Marubeni is switch in 2013, receiving less than 2019. The contract revision will allow
already a 2.5pc shareholder in the 30,000 t/yr of LNG from Okinawa Tohoku to receive 1mn t/yr of LNG ex-
9.5mn t/yr Qatargas 1 project. Electric Power. ship in 2010-19. With the increased vol-
ume, Tohoku is aiming to replace part of
z Utilities in Okinawa are discussing z Fukuoka-based regional gas utility the 830,000 t/yr imported under its con-
joint LNG imports beginning in 2010. Saibu Gas has renewed its existing LNG tract with Indonesia that is due to expire
Okinawa Electric Power, the power util- import contract with Malaysia’s state- in 2009. This adds to the 420,000 t/yr to
ity on Japan’s southernmost prefecture owned Petronas subsidiary, Malaysia be imported from 2010 under a 20-year
of Okinawa, is constructing its first LNG- LNG, by another 15 years. Under the contract signed with Russia’s Sakhalin
fired combined-cycle power plant in new 15-year deal, Saibu will receive up 2 (AGL, January, p12). It has recently
Yoshinoura, on the southeastern coast to 390,000 t/yr of LNG ex-ship begin- signed a contract to receive 120,000 t/yr
of Okinawa’s main island (see p8). The ning in October 2013. Saibu was aiming from Indonesia’s Tangguh for 15 years,
plant will be equipped with Okinawa’s to increase the volume of the contract which is also scheduled to begin in
first LNG import terminal — installed from Malaysia as it has been importing 2010 (AGL, December, p3).

expected to have a regasification increasingly flow to the US and Asia- growing gas reserves. A record 52 bids
capacity of 9bn m³/yr in its first phase. Pacific. After 2012, the supply situation for 20 of the 22 blocks on offer were
The project’s second phase is expected changes and the market will rebalance, received, which Canberra says reinforces
to double throughput capacity at the Granli says. Australia’s upstream as being low risk
LNG terminal, but no details of the and highly prospective. The three majors
timescale are available. Snohvit on schedule have added three more permits in the
Norway’s Statoil is “optimistic” that its Exmouth plateau in the Carnarvon basin,
LNG key to balancing Europe’s supply Snohvit LNG project in the Barents Sea home to Chevron’s proposed Greater
LNG is a key “response mechanism” to will start up in the third quarter of this year, Gorgon LNG project with Shell and
managing Europe’s looming gas supply with commercial operations beginning in ExxonMobil, as well as the existing North
overhang in 2007-12, vice-president for the fourth quarter, says Statoil LNG chief West Shelf LNG development.
LNG at Norway’s Statoil, Otto Granli, told Otto Granli. The company aims to double
the Flame conference in Amsterdam last its European gas sales from 25bn m³/yr Qatargas not worried by UK surplus
month. In the longer term, Europe’s to 50bn m³/yr by 2015. Total production Qatargas is not worried that the
declining indigenous production and ris- from the Norwegian continental shelf is Qatargas-ExxonMobil 10.7bn m³/yr South
ing demand will mean a greater reliance set to rise to 120bn-130bn m³/yr in 2007- Hook LNG terminal in Wales will be over-
on gas imports, but supplies in the next 15, says Granli.
five years are relatively abundant, he Announcement
says. LNG cargoes can be diverted to Majors add to Australian acreage Argus Global LNG data are now available in a
other markets, so “LNG is an important The Australian federal government has csv format, allowing their use for analysis, mod-
contributor to a balanced market and will awarded another 12 offshore permits in elling and other business purposes. The data,
help prevent a depressed market,” says its latest release of upstream acreage, much of which is exclusive to Argus, are sent as
monthly updates.
Granli. LNG is drawn to the highest- with majors Chevron, Shell and
For more information, contact:
priced market, Granli says. With relatively ExxonMobil continuing to flock to the
info@argusmediagroup.com
low European prices, cargoes will region to try and add to their rapidly

© 2007 Argus Media Ltd www.argusmediagroup.com Page 19


— In brief
Argus Global LNG — April 2007

supplied, Qatargas marketing director Russian investment firm Sun Group. The Kogas to operate Gulf LNG terminal
Alaa Abu Jubara told an Amsterdam con- terminal will initially have three storage Gulf Coast LNG Partners, the developer
ference last month. “We are committed to tanks with a total capacity of 5.7mn ft³ of the Calhoun LNG terminal located on
bringing gas to the UK from next year,” (161,000m³) and will be able to transport the US Gulf of Mexico, announced on 23
Abu Jubara says, adding that Qatargas up to 1bn ft³/d. The terminal may expand March that Korea’s Kogas, Houston-
does not think that there will be over- its total transport capacity to 2bn ft³/d based EMS, and LG, a Korean conglom-
supply in Europe. “We did a lot of study and three more storage tanks may be erate, have agreed to become the termi-
into the supply and demand situation, added at a later stage. The facility will nal operators and assume an equity
and we think that the declining [indige- accommodate carriers of up to 8.8mn ft³. stake in the project. Kogas brings signif-
nous] production will have an impact,” MapleLNG will file for construction per- icant clout as it is the world’s largest LNG
Abu Jubara says. The South Hook termi- mits with the Novia Scotia government in importer and terminal operator. It imports
nal is designed to process 15.6mn t/yr of May. Additionally, the planned terminal over 23mn t/yr and is planning its fourth
LNG and its first train is set to come on must undergo a federal environmental domestic terminal. LG is involved with
line in early 2008. Deliveries to the termi- assessment and the Technical Review terminal engineering and construction,
nal will come from the 7.8mn t/yr first train Process of Marine Terminal Systems and and EMS has experience in managing
at the Qatargas 2 project. Transshipment Sites to assess ship pipeline systems in the Gulf region. A
safety and port security. The facility is number of terminals proposed in the US
MapleLNG gets go-ahead expected to enter service by 2010. “We east and west coasts have encountered
Canada’s MapleLNG project announced have the ability to market upstream and significant public opposition rising from
on 15 March that the Novia Scotia gov- downstream, a strategic advantage in safety and environmental concerns.
ernment has granted environmental the LNG marketplace with suppliers Developers have had more success in
approval for an LNG receiving and seeking access to the premium value the Gulf region, which has traditionally
regasification terminal planned for natural gas markets afforded in north- been more welcoming towards energy
Goldboro, Novia Scotia, adjacent to the eastern US and Canada,” says infrastructure projects (see p16). “We are
Maritimes and Northeast Pipeline, which MapleLNG general manager, Derek very excited about the Calhoun LNG ter-
serves markets in eastern Canada and Owen. According to the developers, the minal project because of its proximity
the US northeast. MapleLNG is a joint terminal is strategically placed to receive and access to significant markets,
venture between Rotterdam-based inde- LNG cargoes from locations throughout remote location inside of a petrochemi-
pendent LNG terminal developer 4Gas the Atlantic basin, including north Africa, cal port, and tremendous public sup-
and Suntera — a joint venture between Nigeria, Russia and Norway, as well as port,” says Kogas executive vice-presi-
Russian oil and gas company Itera and a from the Middle East. dent June-Sun Kil.

Oil link in LNG contracts expected to persist


Oil-linked pricing of long-term continen- erosion of the contractual link between relatively greater efficiency of gas-burn-
tal European gas contracts — including gas and oil product, going forward, the ing equipment and tougher environ-
LNG supply contracts — is likely to per- report says. But the continuing strength mental standards, the report says.
sist until regional gas markets become of oil-indexation in long-term gas An alternative to oil-linked pricing
more competitive and are no longer contracts is at odds with the report’s would be indexation to gas traded at a
dominated by incumbents, according to finding that the economic rationale single market hub such as the UK’s
a recent energy consultancy report. behind the system is weak and is likely NBP or some combination of prices at
The report published by the Oxford to weaken further. the NBP, the Dutch TTF and the
Institute for Energy Studies suggests Zeebrugge hubs, the report says.
that European gas players are comfort- Unreflective link The experience of the UK and US
able with the current system and have The report argues that the original rea- gas markets suggests that the removal
the market power to maintain the status son for the linkage between gas and oil of the formal contractual link between
quo. Accordingly, it argues that the product prices — which has centred on gas and oil product prices would not
influence of oil product prices on gas the ability of end-users to switch necessarily break the long-term price
prices is likely to decline only gradually between burning gas and oil products correlation between the fuels.
in the absence of pressure from the — is no longer reflective of the And the continued link between gas
European Commission. European market. and oil prices in the UK and US markets
But the emergence of daily balanc- The ability of oil products to be a could be a factor that may help remove
ing markets across the continent — viable alternative to gas has been some of the continental European
combined with the increasing availabil- diminished by factors such as the cost objections to the EU’s goal of formally
ity of flexible gas supplies from the UK of maintaining oil-burning equipment unlinking gas contracts in the future, the
— could provide some impetus to the and substantial oil product stocks, the report says.

© 2007 Argus Media Ltd www.argusmediagroup.com Page 20


Argus Global LNG — In brief April 2007

Company news
z Tokyo Gas has been discussing with ninth addition to its LNG fleet. According z Japan’s largest gas utility, Tokyo Gas,
port and coastal authorities the possible to Tokyo Gas, it has developed a has appointed vice-chairman Norio
future introduction of LNG vessels larger 177,000m³ LNG carrier — larger than the Ichino as the new chairman of the com-
than 200,000m³ — known as Qatarmax conventional 145,000-153,000m³ ships pany, where he will be replacing
and Qatarflex — into its three LNG — jointly with Japanese shipbuilders Hideharu Uehara. The appointment will
receiving terminals of Sodegaura, Mitsubishi Heavy Industries and take effect on 1 April. Tokyo Gas will
Ohgishima and Negishi in Tokyo bay. Kawasaki Shipbuilding. The larger carrier leave the position of vice-chairman
“We are at a stage prior to beginning the is a maximum size that can still use the vacant. Uehara will step down to a posi-
actual revamp of our terminals in order to existing berths at LNG terminals in Japan tion of director-consultant.
accommodate ships as large as and supplier countries without much
210,000m³ or 260,000m³,” a Tokyo Gas additional investment for refitting. Tokyo z Shell says it will pay $353mn to non-
spokesman says, although the company Gas plans to expand its own LNG fleet to US investors “without admitting any
still did not know when it would begin the seven by fiscal year 2010-11 — which wrongdoing” over its 2004 reserves
project. This follows an earlier move by runs from April to March — and eventu- scandal, as well as an extra $6mn in
Chubu Electric Power, the country’s ally to nine afterwards (AGL, August, costs. The company will distribute
largest importer of Qatari LNG, to pro- p19). The company is expected to place $200mn to its US investors, of which
ceed with refitting the receiving berths at orders by the end of 2007 for the two $120mn is held by the Securities and
its Kawagoe and Chita terminals by 2010 new ships, which will be used to trans- Exchange Commission, along with
(AGL, January, p5). As domestic demand port LNG primarily from Australia’s $80mn in new monies. The major has
rises to boost LNG imports, Tokyo Gas is Darwin and Russia’s Sakhalin island, as also secured the C$8.7bn ($7.6bn) buy-
also planning to build larger-than-con- well as for spot requirements under ship- out of the 22pc of outstanding shares in
ventional LNG carriers as the eighth and ping alliances (AGL, January, p10). its subsidiary Shell Canada.

LNG on the cards for PNG Spain orders new vessels unrest, but Total says damage to the plant
Impetus is building towards an LNG pro- A 50:50 consortium between Spanish is superficial and work is “continuing
duction project in Papua New Guinea producers Repsol-YPF and Gas Natural under normal conditions”. The first train of
(PNG), with ExxonMobil to lead a has ordered three new LNG carriers. The the 6.7mn t/yr plant is due on stream at
feasibility study for a venture based on its 173,000m³ diesel-electric vessels, the end of next year. Total says it “regrets
Hides gas field. ExxonMobil and its ordered with Spain’s Naviera Elcano and the incident and is co-operating with an
partners are looking at a 5mn-6.5mn t/yr Norwegian shipper Knutsen Shipping, will investigation by Yemeni authorities”.
LNG plant, targeting first cargoes by operate from 2010 on the Peru LNG pro-
2012-13. Project partner Oil Search provi- ject. The new ships will boost the joint Shell chief stays on
sionally estimates the project cost at venture’s fleet of 11 tankers to 16 vessels Shell chief Jeroen van der Veer is extend-
$6bn-7bn. The study is scheduled to be of 35,000-173,000m³, following two fur- ing his tenure until the end of June 2009,
finished by the end of this year. An LNG ther deliveries of a newly built ship this allowing the major more time to bring on a
option for the Hides field follows aban- December and another, already opera- new generation of potential leaders. Van
donment of a proposed pipeline project tional, at the beginning of 2009. der Veer will be 60 in October, but the firm
linking PNG to Australia. ended mandatory retirement ages for
Yemen LNG plant survives riot senior executives at the unification of
Eni buys into Angola LNG Total’s $3.7bn Yemen LNG plant was the Royal Dutch and Shell, avoiding the con-
Italian state-controlled oil and gas firm scene of a riot by Yemeni workers after a troversy that preceded BP chief John
Eni has signed an initial agreement to French worker at the site was alleged to Browne’s retirement announcement. Van
take a 13.6pc stake in the Angola LNG have thrown a copy of the Koran to the der Veer’s decision will provide “valuable
project, which entails the development of floor during an argument. A helicopter and continuity and leadership in Shell over the
a $4bn, 5mn t/yr liquefaction plant at several vehicles were destroyed in the next years”, chairman Jorma Ollila says.
Soyo, located 300km north of Luanda.
LNG from the plant is set to be exported Argus European Natural Gas
to the US Gulf coast, where Eni is acquir-
Argus European Natural Gas is essential reading for gas traders, providing
ing 5bn m³/yr of capacity in the
sophisticated analysis of price movements on the European wholesale
Pascagoula terminal. When the deal goes
markets. The daily report includes prices for all standard spot contracts at
to completion, the new shareholdings in
the UK’s National Balancing Point, Zeebrugge and the Netherlands’ TTF, as
Angola LNG will be state-owned producer
well as spreads between the power, gas and coal markets.
Sonangol with 22.8pc, Chevron 36.4pc,
Contact our sales department on Tel:+44 20 7780 4290, email: sales@argusmediagroup.com
Eni 13.6pc, Total 13.6pc and BP 13.6pc.

© 2007 Argus Media Ltd www.argusmediagroup.com Page 21


Argus Global LNG — Market overview April 2007

UK LNG receipts slow as Belgian contract begins


Lower prices and ample alternative supply slowed LNG deliver- Henry Hub and UK NBP $/mn Btu
Henry Hub and UK NBP $/mn Btu
ies to northwest Europe in March and April, and shipments
10
looked likely to remain subdued through the summer barring a
9
major shift in the market.
UK LNG deliveries slowed to a trickle, with just one vessel 8

arriving at the Isle of Grain and none docking at Excelerate’s new 7


Teesside terminal — which has remained idle since unloading a
6
partial commissioning cargo in February.
5
As for the Isle of Grain’s operating rules, the berthing slots Henry Hub
abandoned by primary capacity holder BP-Sonatrach were 4 UK NBP

offered to third-party shippers, although the capacity on offer 3


Apr 06 Jul Oct Jan 07
was only a fraction of a standard cargo size, and none of the
berthings were purchased by other shippers.
Since the Isle of Grain restarted commercial operations in open to the market in May.
2005, BP has regularly skipped deliveries or purchased third- The recent spate of diversions away from northwest Europe
party cargoes for shipment to the UK when opportunities else- was largely expected as prices in the US have been consistently
where were more attractive. Although Sonatrach has historically above those in either the UK or Belgian markets since European
been a more reliable shipper to the UK — supplying regular fort- prices collapsed this winter. But some questioned the lack of
nightly cargoes since November 2005 — it too has begun to deliveries, especially to the UK, during the winter’s last gasp of
divert gas away from the UK, most notably to the US, where its cold weather in late March. But even at its peak, demand was
Berge Arzew tanker has called recently. insufficient to threaten pipeline gas supplies — and the market
In Belgium, deliveries were more frequent than in the UK, coped well without additional LNG.
although diversions to the US were also reported. Supply to Elsewhere in Europe, a port strike at Marseille over the work
Zeebrugge was shored up by the commencement of a contract arrangements at the yet uncompleted Fos Cavaou terminal was
between Qatar’s Rasgas 2 and Distrigas, which delivered its first not thought to have hindered LNG shipments, although other
cargo in late March. energy tankers were backed up for days by the action.
But looking ahead, Distrigas’ new 2.75bn m³/yr Rasgas And in Spain, where demand has been light during the tran-
contract is smaller than its expired 4.5bn m³/yr Sonatrach deal, sition from winter to summer peaks, LNG receipts slowed —
and may not fully replace the once regular procession of ships allowing reserves to be cleared from what had been full storage
from Algeria’s Arzew to the Belgian port. And contractual mat- tanks at the country’s four terminals.
ters aside, Zeebrugge may sit idle for a good deal of April and The latest figures from Spain’s system operator suggest that
May, with one berthing slot still available for April and three left more gas was sent out of the country’s terminals than Îp23

Global LNG prices at a glance $/mn Btu

Europe
Jan Feb ±
France 5.40 5.55 +0.15
Belgium 11.13 10.05 -1.08
Spain 4.58 4.56 -0.02

US
Asia
Jan Feb ±
Jan Feb ±
Cove Point 7.74 8.23 +0.49
Japan 7.05 6.91 -0.14
US average 6.14 7.13 +0.99
South Korea 7.42 7.07 -0.35
Taiwan 7.85 8.01 +0.16

© 2007 Argus Media Ltd www.argusmediagroup.com Page 22


Argus Global LNG — Market overview April 2007

was received, potentially in an effort to free space in the facilities’ pipeline system than was accepted by ship, clearing out extra
storage tanks. room at the terminals ahead of a further demand fall this month.
At the start of March, LNG storage at each of Spain’s five Sendout of regasified LNG from Spanish terminals totalled
operating terminals was at least 70pc full, leaving little capacity just over 22TWh in March, some 13.8pc more than was received
to accept delivery of a large cargo. But over the course of the at the terminals over the course of the month, drawing down LNG
month, more LNG was regasified and put into the national stocks at the facilities.

LNG prices $/mn Btu


Importer/source Mar 06 Apr May Jun Jul Aug Sep Oct Nov Dec Jan 07 Feb Mar
Japan
Abu Dhabi 6.15 6.16 6.47 6.69 6.72 6.96 7.10 7.15 7.11 7.11 7.15 6.86 *5.59
Algeria 9.77 10.73
Australia 6.20 5.93 6.29 6.03 6.27 6.57 6.80 6.62 6.58 6.96 6.54 6.49 *5.76
Brunei 5.71 5.64 5.74 5.63 5.96 5.96 5.95 5.94 5.94 5.93 5.93 5.98 *5.60
Egypt 10.96
Indonesia 7.97 7.83 8.69 8.51 8.50 8.38 8.81 7.90 7.47 7.25 7.59 7.18 *7.94
Malaysia 6.26 6.17 6.36 6.20 6.34 6.52 6.95 6.65 6.82 6.80 6.56 6.35 *5.80
Nigeria 10.05 12.98
Oman 14.16 8.68 3.80 6.94 5.88 8.37 9.77 6.93 8.93 10.06 8.55 10.99 *8.23
Qatar 6.93 6.99 7.71 7.81 7.29 8.15 8.30 8.10 7.38 7.63 7.56 7.27 *5.92
Trinidad 19.73 5.73 9.60 11.17 11.10
US 6.35 6.42 6.78 6.64 6.70 7.11 7.18 6.22 6.34 6.35 6.04 5.89 *5.88
Average 7.16 6.74 7.02 7.00 6.85 7.13 7.63 7.16 7.18 7.31 7.05 6.91 *6.34

China
Australia 3.82 3.15 3.24 3.14 3.16 3.18 3.16

South Korea 8.55 7.99 9.52 10.27 10.24 10.38 12.33 8.91 9.51 10.55 *7.42 *7.07 *7.43

Taiwan
Australia 7.37 7.22 7.15
Egypt 9.71
Indonesia 10.76 10.97 11.93 12.36 12.07 12.43 12.65 11.07 9.70 9.64 *8.89 *9.47 *9.79
Malaysia 7.17 8.58 6.37 6.68 7.17 7.45 7.37 7.13 6.90 6.77 *6.80 *6.56 *6.81
Oman 13.45 13.42 9.97 10.18
Trinidad 10.01
Average 9.50 9.79 8.65 8.33 9.62 9.61 9.60 9.61 8.04 8.93 *7.85 *8.01 *8.30

Belgium
Algeria 13.41 7.30 6.48 6.81 9.79 6.61 5.13 4.06 7.35 5.94 *11.13 *10.05 *9.38

France 6.29 5.47 6.70 6.38 6.31 3.98 6.51 5.61 7.08 5.85 *5.40 *5.55 *4.76

Portugal
Nigeria 4.78 4.67 7.17 3.95 4.34 4.47 5.92 4.62 4.93 5.47 *4.47 *4.16 *3.99

Spain
Algeria 5.87 6.59 6.89 5.67 6.90 6.85 7.37 6.98 6.98 6.66 *4.80 *4.80 *4.42
Egypt 5.89 6.80 6.14 6.35 6.60 6.47 6.47 8.88
Libya 6.18 6.30 6.56 6.52 6.72 6.74 6.74 6.91 7.61 *4.76 *4.77 *4.39
Nigeria 5.33 5.33 5.33 5.33 5.33 5.33 5.33 5.33 5.33 5.33 *4.80 *4.80 *4.42
Oman 5.49 5.51 5.79 5.90 *3.64 *3.64 *3.39
Qatar 6.33 6.28 6.65 6.61 7.19 6.95 7.25 6.97 7.38 *4.75 *4.77 *4.38
Trinidad 6.24 5.54 6.11 4.86 7.00 5.99 3.79 6.16 6.54 6.12
Average 5.85 6.04 6.03 5.70 6.35 6.05 6.23 6.28 6.43 6.39 *4.56 *4.56 *4.21

UK
Algeria 9.05 7.03 6.82 6.20 6.77 6.79 6.24 5.49 7.15 5.85
Egypt 12.40 8.08 7.86 8.47 9.44
Trinidad 9.16 7.31 7.13 6.87

US
Cove Point
Algeria 7.00 6.56 6.03 6.06 5.84
Egypt 5.65 8.15 8.32 5.84
Trinidad 6.71 6.84 6.66 6.08 5.77 6.88 6.63 3.94 7.45 5.69 8.23

Elba Island
Trinidad 6.78 6.80 6.54 5.61 5.57 6.69 6.50 4.39 6.84 7.49 5.52 6.60
Egypt 6.90 6.88 5.61 5.57 6.73 6.62 3.89 6.58 8.00 5.52 6.82

Everett
Trinidad 7.53 6.84 7.30 5.82 6.23 6.67 6.02 6.85 7.61 7.42 7.11 7.54

Lake Charles
Egypt 6.65 6.62 5.36 5.34 6.25 6.58 7.72 5.29 6.35
Nigeria 6.65 6.62 5.37 5.34 6.36 6.25 3.69 6.58 6.58 5.29 6.35
Trinidad 6.67 5.49 7.05 5.84 6.25 5.93

Gulf Gateway
Trinidad 6.96

US average 7.16 6.77 6.75 5.70 5.79 6.65 5.89 5.09 7.04 7.43 6.14 7.13 *7.15

Puerto Rico 6.69 7.10 7.10 7.10 6.61 6.69 6.69 6.69 6.00
*estimate. Prices from national statistical sources and Argus estimates. All prices are ex-ship and exclude regasification

© 2007 Argus Media Ltd www.argusmediagroup.com Page 23


Argus Global LNG — European pipeline markets April 2007

Interconnector flows vs NBP/Zeebrugge basis


Curve trends higher
60 30
z Curve prices trended higher in March, despite the con-
40 20
tracts losing ground on three occasions. Curve price move-
ments were said to have been driven by speculative plays, 20 10
with the front-winter contract reckoned to have been the
0 0
focus of trade during the month. The front-winter price rose
from an intra-month low of 40.5p/th at the start of March to a -20 -10

high of 47.7p/th towards the end of the month. -40 -20


I/C flows (mn m³) (left-hand scale)
Prompt basis (p/th) (right-hand scale)
-60 -30
z Curve strength was said to have helped firm the summer Oct 05 Jan 06 Apr Jul Oct Jan 07 Apr
2007 contract in the run-up to expiry, with the contract head-
ing into delivery at over 20p/th. The summer contract’s late-
March strength was also said to have been supported by the Argus assessments of border prices March 2007
prompt, which firmed in response to a run of late-season cold
and Norwegian supply problems. Prompt prices ranged from
UK €/MWh $/’000m³ Source
18-21p/th for the month as a whole, with prices buoyed by 9.87 278.71 North Sea
restricted storage withdrawals in response to the summer
2007 contract’s premium to the prompt for most of March.

Germany €/MWh $/’000m³ Exporter Source


z The Interconnector made a number of transitions in the Ruhrgas 18.01 252.23 GFU Troll
middle of March, but finally settled on UK export mode on 21 17.90 250.70 Gazprom Russia
March. Some observers said Interconnector flows had 18.12 253.76 Gasunie Portfolio
WIEH 17.90 250.70 Gazprom Russia
ramped up at the start of April due to the recent spate of LNG
cargoes diverted away from Zeebrugge. The Methania was
originally scheduled to arrive at Zeebrugge on 1 April, but the
Belgian port announced that the cargo had been diverted France €/MWh $/’000m³ Exporter Source
Gaz de France 17.74 248.41 Gasunie Portfolio
only a few days before its planned arrival date. The day- 17.05 238.82 Gazprom Russia
ahead basis remained in the positive for much of March, 16.95 237.30 GFU Troll
swinging from plus 0.2p/th to plus 0.6p/th. 18.05 252.73 Sonatrach Algeria

z Norway’s giant Troll field was off line for about a week at the
end of March, causing Dutch prompt prices to spike during Hungary €/MWh $/’000m³ Exporter Source
the partial outage. The Dutch day-ahead climbed to Mol 17.74 248.41 Ruhrgas Portfolio
18.01 252.23 Gazprom Russia
€11.50/MWh, after having finished at €9.50/MWh shortly
before the outage.

z Norwegian gas processing plant Karsto experienced sup- Italy €/MWh $/’000m³ Exporter Source
Snam 18.50 259.10 Gasunie Portfolio
ply problems just before the Troll field went off line. Traders
17.90 250.64 Sonatrach Algeria pipe
suggested that this had also helped push the Dutch prompt 18.50 259.10 Gazprom Russia
price higher.

European pipeline border prices, long-term contracts $/mn Btu


Mar 06 Apr May Jun Jul Aug Sep Oct Nov Dec Jan 07 Feb Mar
Importer Source
UK 11.72 12.14 12.69 11.49 11.54 11.22 9.32 8.90 8.51 8.75 6.45 7.28 7.75
Germany Norway 6.86 7.01 7.13 7.55 7.61 7.75 7.74 7.74 7.65 7.57 7.32 7.10 7.01
Russia 6.82 6.97 7.08 7.51 7.56 7.70 7.70 7.69 7.60 7.52 7.28 7.06 6.97
NLS 6.90 7.06 7.17 7.60 7.65 7.80 7.79 7.78 7.70 7.61 7.37 7.15 7.05
France NLS 6.76 6.91 7.02 7.44 7.49 7.63 7.63 7.62 7.53 7.45 7.21 7.00 6.91
Russia 6.50 6.64 6.75 7.43 7.20 7.34 7.33 7.32 7.24 7.16 6.93 6.73 6.64
Norway 6.46 6.60 6.70 7.38 7.16 7.29 7.28 7.28 7.20 7.12 6.89 6.68 6.60
Algeria 6.56 6.70 6.81 7.30 7.03 7.03 7.03 7.03 7.03 7.03 7.03 7.03 7.03
Hungary Germany 6.76 6.91 7.02 7.44 7.49 7.63 7.63 7.62 7.53 7.45 7.21 7.00 6.91
Russia 6.86 7.01 7.13 7.55 7.61 7.75 7.74 7.74 7.65 7.57 7.32 7.10 7.01
Italy NLS 7.05 7.20 7.32 7.76 7.81 7.96 7.95 7.95 7.86 7.77 7.52 7.30 7.20
Algeria 7.09 6.97 7.08 7.51 7.56 7.70 7.69 7.69 7.60 7.52 7.28 7.06 6.97
Russia 7.05 7.20 7.32 7.76 7.81 7.96 7.95 7.95 7.86 7.77 7.52 7.30 7.20

© 2007 Argus Media Ltd www.argusmediagroup.com Page 24


Argus Global LNG — US April 2007

HenryHenry
Hub Hub
vs Zeebrugge
vs Zeebrugge $/mnBtuBtu
Easing temperatures sap prices
$/mn

16

Zeebrugge
z Temperatures across much of the continental US moder-
14
ated in March, easing pressures on natural gas, although
12 Henry Hub
spot gas in some regions registered a slight uptick to finish
10 the month. Benchmark Henry Hub gas fell by a modest
8 9¢/mn Btu to $7.35/mn Btu, but other hubs in the south
6
traded at a discount, bringing the regional average price
down to $6.86/mn Btu.
4

2
Oct 05 Jan 06 Apr Jul Oct Jan 07 z Nymex prompt month gas fell in mid-March, but picked
up steam towards the end of the month. April contracts set-
tled at $7.56/mn Btu before rolling off the board. The May
Zeebrugge front1stmonth
Zeebrugge differential
full-month vs NBP to NBP (p/therm)
p/therm contract traded at $7.67/mn Btu at the end of March.
8
z Generators and grid operators will be anxiously awaiting
6 more detailed forecasts of the upcoming summer months,
4 NBP = 0 after initial hurricane forecasts showed an active season
this year. Forward gas markets are showing similar curves
2
to last year in late summer, with winter contracts as much
0 as $1.50/mn Btu lower. Higher basis prices for regions such
as the northeast underline the market’s concern about
-2
another long hot summer.
-4
Oct 05 Jan 06 Apr Jul Oct Jan 07 Apr
z Maritimes and Northeast Pipeline has received approval
from the Federal Energy Regulatory Commission to double
capacity from Canada to the northeast US. The Phase 4
US gas in underground storage bn ft3
Project includes upgrades to existing facilities in Maine and
Region 30 Mar 23 Feb ± Year ago Five year %±
Massachusetts, and new compressor stations in Maine.
av. 5 yr av.
The project will boost pipeline transfer capacity from
East 702 898 -196 848 584 +20.21
418mn ft³/d to 833mn ft³/d and should be completed by
West 238 243 -5 231 196 +21.43
late 2008. The company will dedicate the increased capac-
Producing 629 592 37 58 452 +39.16
ity for LNG imported to the Canaport receiving and regasi-
Total lower 48 1,569 1,733 -1
164 1,996 1,232 +27.35
fication terminal in St John, New Brunswick.
— EIA

Spot market natural gas prices (pipeline)


Mar 06 Apr May Jun Jul Aug Sep Oct Nov Dec Jan 07 Feb Mar
Europe (p/therm )
UK NBP, 1st month 49.85 41.57 35.76 37.88 40.64 35.39 38.73 48.48 47.69 39.92 29.35 19.01 20.09
UK NBP, 2nd month 44.49 41.05 41.36 41.29 38.65 47.79 59.48 63.27 55.62 40.63 27.61 18.68 20.44
UK NBP, 3rd month 43.25 43.41 44.06 40.14 51.74 67.47 73.66 69.19 55.64 37.06 25.76 18.62 20.98
Ice, 1st month 49.77 41.51 36.13 37.97 40.54 35.84 39.75 49.14 47.70 39.87 29.33 18.98 20.06
Ice, 2nd month 44.45 41.24 41.53 41.29 39.27 48.80 60.20 63.56 55.67 40.55 27.52 18.66 20.51
Ice, 3rd month 43.37 43.53 43.96 40.68 52.58 68.01 73.99 69.26 55.71 37.01 25.77 18.62 20.97
(€/MWh )
Zeebrugge, 1st month 24.64 20.72 19.49 19.20 20.13 18.22 19.65 24.16 23.68 20.07 15.20 9.86 10.30
Zeebrugge, 2nd month 22.02 20.91 20.96 20.39 19.41 23.86 29.29 31.30 27.32 20.32 14.32 9.64 10.52
Zeebrugge, 3rd month 21.86 21.52 21.81 19.94 25.31 33.09 36.09 33.98 27.43 18.66 13.24 9.71 10.83
TTF 1st month 22.83 21.31 21.02 19.75 19.77 19.09 19.91 24.00 24.01 20.59 14.98 9.73 10.45
TTF 2nd month 21.75 21.67 21.08 20.37 19.75 22.83 28.20 31.24 27.98 20.74 14.21 9.78 10.65
TTF 3rd month 21.73 21.77 21.70 20.48 24.10 32.02 33.94 33.16 27.89 18.82 13.44 9.79 11.08

US ($/mn Btu )
Henry Hub, 1st month 6.98 6.65 5.97 5.84 8.04 5.81 4.15 6.64 8.32 5.63 7.76 7.44 7.35
NY (Transco Zone 6) 7.59 7.06 6.56 6.35 10.01 6.11 4.39 7.38 8.87 6.10 9.54 8.25 7.85
Columbia TCO 7.47 6.89 6.19 6.01 8.28 5.92 4.27 6.88 7.88 5.61 7.96 7.69 7.79
SoCal border 5.95 5.57 5.29 5.01 7.36 5.51 3.90 6.39 7.94 5.95 7.29 7.03 5.95
Nymex, 1st month 7.21 6.56 6.38 6.10 8.21 6.05 5.62 7.53 8.32 5.84 7.67 7.53 7.56
Nymex, 2nd month 7.42 6.81 6.62 6.37 8.45 8.23 7.04 7.99 8.56 6.14 7.66 7.62 7.67

© 2007 Argus Media Ltd www.argusmediagroup.com Page 25


Argus Global LNG — Competing fuels April 2007

Crude oil $/bl


Mar 06 Apr May Jun Jul Aug Sep Oct Nov Dec Jan 07 Feb Mar

Japanese Crude Cocktail 61.03 61.30 66.53 67.81 67.96 71.84 72.06 64.44 59.87 58.51 60.43 55.13 na
Tapis 66.89 74.48 75.10 71.76 77.01 79.26 69.90 63.67 60.69 63.86 59.15 64.00 66.75
Dubai (1st month) London 57.94 64.24 64.98 65.09 68.98 68.75 59.67 56.39 56.89 58.63 51.52 55.76 59.05
BFO (dated) 62.17 70.34 69.70 68.74 73.72 73.36 61.80 57.88 58.92 62.38 53.67 57.48 62.16
WTI (1st month) 62.71 69.91 70.61 70.89 74.38 73.20 64.06 59.12 59.38 62.27 54.10 59.03 60.84

International fuel oil prices $/t


Mar 06 Apr May Jun Jul Aug Sep Oct Nov Dec Jan 07 Feb Mar

HSFO 180 fob South Korea 344.26 356.78 356.24 333.53 350.75 329.24 288.56 290.21 275.26 282.16 279.20 303.71 314.63
HSFO 180 fob Singapore 337.00 349.96 348.83 329.53 347.65 329.26 287.15 287.21 272.23 278.59 271.58 296.79 309.31
LSWR fob Singapore 352.48 383.10 382.89 373.15 367.38 335.72 286.10 269.62 258.98 277.26 256.18 280.37 296.40
1pc fuel oil fob NWE 306.52 318.78 316.43 303.95 318.05 328.43 269.67 259.68 256.25 266.63 229.86 246.68 260.41
1pc fuel oil fob W Med 319.75 315.47 323.86 308.77 328.19 340.41 273.49 265.75 264.35 276.71 245.73 251.86 272.22
US Gulf coast 1pc 303.42 326.32 332.87 304.92 320.43 335.11 288.88 263.89 287.72 286.40 242.04 273.72 282.45
New York 1pc 303.39 322.37 313.35 306.62 309.87 322.68 257.33 251.99 271.00 259.83 235.81 251.83 269.85

International gasoil prices $/t


Mar 06 Apr May Jun Jul Aug Sep Oct Nov Dec Jan 07 Feb Mar

C+F Japan 615.84 679.13 692.87 689.51 678.47 678.11 599.36 555.01 542.19 551.69 534.88 564.18 578.05
Fob South Korea 534.67 608.23 629.23 637.20 639.30 638.83 562.52 528.95 517.84 511.49 490.65 522.37 541.55
German heating oil 571.61 620.88 630.86 630.60 642.37 657.91 575.99 548.45 542.77 549.33 493.93 527.79 548.93
Heating oil fob W Med 566.68 612.19 625.88 627.38 625.55 644.58 569.19 537.85 531.68 542.63 483.32 510.64 540.26
No 2 oil New York 552.28 615.61 612.55 595.68 597.45 613.79 522.09 509.57 513.32 519.93 470.20 525.05 540.29

International electricity prices €/MWh


Mar 06 Apr May Jun Jul Aug Sep Oct Nov Dec Jan 07 Feb Mar

France month-ahead 54.67 45.99 39.15 44.79 54.35 52.24 51.78 63.24 62.40 62.52 48.94 34.06 28.48
Spain pool weighted average 49.69 51.60 52.65 46.67 52.01 46.48 55.85 45.64 37.33 38.25 49.16 38.49 30.75
Spain month-ahead 46.44 48.70 51.26 53.56 49.03 56.60 55.01 51.99 45.07 46.31 48.51 41.61 33.65
PJM (off peak)($/MWh) 59.55 64.28 60.56 80.40 79.80 72.47 48.95 54.28 63.71 63.73 61.39 65.51 62.97
Entergy mth-ahead ($/MWh) 53.48 60.75 63.61 75.48 68.38 62.59 56.61 52.60 59.73 57.88 53.80 60.80 58.78

International coal prices $/t


Mar 06 Apr May Jun Jul Aug Sep Oct Nov Dec Jan 07 Feb Mar

Japan 66.61 68.25 67.58 66.56 72.76 71.67 73.42 72.79 74.42 83.45 84.61 83.70 90.31
South Korea 57.36 58.01 55.92 55.31 58.35 59.18 60.20 59.30 59.64 61.31 61.55 62.46 66.05
Indonesia 47.08 49.39 47.38 45.89 48.33 48.64 47.80 45.38 44.83 46.67 47.54 48.86 50.31
ARA 65.00 63.31 59.38 62.50 62.35 70.06 65.58 66.20 67.48 68.20 68.33 68.94 71.42
Nymex spec. (short tons) 53.99 52.53 51.09 49.66 46.39 47.52 45.37 43.06 40.63 41.73 39.44 40.63 40.63

International shipping fuel prices $/t


Mar 06 Apr May Jun Jul Aug Sep Oct Nov Dec Jan 07 Feb Mar

New York 180cst 339.24 346.82 357.45 343.09 353.34 363.37 308.63 302.57 309.18 302.70 283.68 315.45 322.09
New York 380cst 320.24 327.82 338.45 324.09 333.34 343.37 288.63 282.75 285.08 284.70 256.18 290.39 293.64
Houston 180cst 322.46 340.92 345.00 322.77 345.97 353.11 302.13 286.18 278.53 279.43 264.23 283.89 286.82
Houston 380cst 307.46 325.92 330.00 307.77 325.97 333.11 282.13 266.36 262.18 266.63 248.63 271.63 273.18
Antwerp 180 cst 315.36 340.14 344.24 318.07 333.80 331.75 293.71 283.16 277.82 275.68 246.34 273.05 289.82
Antwerp 380 cst 295.36 320.53 323.33 298.34 313.37 311.57 275.00 264.45 259.64 257.11 229.20 254.90 271.45
Singapore 180cst 343.78 354.89 355.33 337.64 351.10 332.84 297.86 294.95 276.91 282.83 285.71 313.72 320.27
Singapore 380 cst 331.65 344.53 345.24 326.41 339.29 320.32 287.29 286.38 267.14 271.05 276.45 302.56 309.95
South Korea 180cst 367.17 377.82 385.60 368.91 381.19 360.09 340.95 327.83 330.09 317.85 348.93 355.44 352.73
South Korea 380 cst 345.52 355.84 360.64 342.86 351.19 330.09 310.95 297.83 300.50 292.35 320.12 333.78 332.64
Fujaira 180cst 341.52 356.63 358.93 343.91 359.90 346.41 298.07 293.10 282.09 283.80 282.48 321.39 323.86
Fujaira 380 cst 332.50 345.84 342.62 325.68 337.19 324.09 281.17 281.86 271.91 273.70 270.50 311.56 313.68

© 2007 Argus Media Ltd www.argusmediagroup.com Page 26


Argus Global LNG — Competing fuels April 2007

Crude: Iran tensions push up prices DatedDated


BFO BFO
vs Tapis
vs Tapis $/bl $/bl
Crude prices were stable for much of March with North Sea
90
benchmark dated BFO around $60/bl. But late in the month, an
escalation of tension between Iran and the west over the capture 80
of 15 UK naval personnel in the Mideast Gulf raised fears of
regional conflict and a disruption of supply from Iran. Dated BFO 70

climbed to around $69/bl at the end of the month. An unseasonal


60
drawdown in US gasoline stocks also underpinned the gains as
Dated BFO
the peak driving season approached, leading the US to suck in 50 Tapis
gasoline-rich grades from west Africa and the Mediterranean.
But a glut of crude at the US midcontinent hub of Cushing put 40
Oct 05 Jan 06 Apr Jul Oct Jan 07 Apr
heavy pressure on the front-month WTI benchmark, pushing it to
an unprecedented discount to Ice Brent of almost $2.50/bl.

Products: Tracking oil up 180cst180cst


fuel fuel
oil fob Singapore
oil fob Singapore $/t $/t

European products prices tracked strong gains seen in crude 380

from mid-March as tensions in the Middle East mounted. Robust 360


demand for motor fuel buoyed middle distillates, with a pro- 340
longed strike by French port workers cutting refinery runs at the
320
Fos-Lavera complex in southern France, reducing the regional
supply of 50ppm. The upswing in gasoil prices was pronounced 300

in the Mediterranean, as east Mediterranean buyers pursued 280

fresh cargoes of 0.2 sulphur Russian gasoil for use as motor fuel. 260
Elsewhere, reduced snowmelt across Europe cut utilities’ access
240
to hydropower, buoying demand for low-sulphur fuel oil for power Oct 05 Jan 06 Apr Jul Oct Jan 07 Apr

plants. This helped mop up excess barrels of Russian fuel oil as


the arbitrage to Asia-Pacific swung shut.

Coal: Prices jump Coal cif South


Coal: Korea
cif South Korea $/t $/t
Delivered European coal prices jumped by nearly $6/t in March to 70
$75.41/t, on strong physical freight, traders covering short posi-
65
tions and spot buying from South African producers. Cif ARA
prices were $69.75/t in early March, after a modest rise in late 60
February. Scandinavian utilities were heard buying around
55
100,000t of spot Russian coal. In late March, a flurry of deals was
seen involving hitherto-scarce Russian and Polish material. A 50

European trader-utility bought five Panamaxes of Polish coal at


45
$73.75/t cif ARA. A week later, a physical trader bought a spot
Panamax of Polish coal at $76.50/t cif ARA. South African (fob 40
Oct 05 Jan 06 Apr Jul Oct Jan 07 Apr
Richards Bay) prices tracked a similar trajectory to climb $2/t to
$54.30/t, on buying interest from Indian end-users and traders.

European power: Prices ease amid warm weather Spain:Spain:


Month ahead
Month electricity
ahead electricity vs LNG
vs LNG $/mn$/mn
Btu Btu
European power markets drifted downwards in March amid
25
unseasonal temperatures in the UK and continental Europe for
most of the month. Healthy hydroelectric reservoir levels and 20
good run-of-river generation levels also depressed prices,
which were only expected to recover with the onset of summer 15
Month ahead
maintenance. The German base-load month ahead weakened
10
from €30.38/MWh at the start of March to €27.65/MWh by the LNG

end of the month, while the same contract in the UK fell from
5
£22.48/MWh to £20.45/MWh over the same period. But liquidity
in the power markets was limited during the month as traders 0
Oct 05 Jan 06 Apr Jul Oct Jan 07
held off from taking positions in advance of the release of
European Commission emissions data for 2006 in early April.

© 2007 Argus Media Ltd www.argusmediagroup.com Page 27


Argus Global LNG — Shipping April 2007

Shipping news
z New Norwegian LNG shipper Flex offshore LNG and “short and small” LNG ered in the secondary membranes of
LNG has ordered two novel carriers that trades. Belgium’s Exmar and fellow their cargo containment systems in 2005
can liquefy and regasify LNG on board. Norwegian firm Hoegh LNG have ves- disrupted delivery schedules (AGL,
The niche operator, founded last year to sels capable of regasifying LNG on February, p28). Gaselys, ordered third in
own and operate medium-sized flexible board — LNG regasification vessels July 2004, had been due for delivery late
— M-Flex — LNG carriers, has ordered (LNGRVs), and shuttle and regasification last year. The second to be ordered,
two such vessels at South Korea’s vessels (SRVs) respectively — but none Provalys, arrived first — a year late — last
Samsung Heavy Industries for delivery can yet liquefy gas on board too. November (AGL, December 2006, p28).
from 2010. Japanese firm Ishikawajima- The first order, the 74,000m³ Gaz de
Harima Heavy Industries designed the z France’s state-owned Gaz de France France Energy, with which Chantiers de
incorporated SPB (self-supporting, pris- has taken delivery of the third of three l’Atlantique found the problem during
matic shape, IMO type-B) containment LNG carriers from Aker Yards France, sea trials, arrived two years behind
system, licensed to Samsung. Flex LNG ending a long-running saga. The schedule in December (AGL, February,
does not envisage the vessels compet- 154,500m³ Gaselys was the least p28). GdF is chartering Gaselys for 20
ing with conventional LNG carriers, delayed of the three vessels ordered years from owner NYK Armateur, a sub-
rather operating in niche markets unsuit- from the former Chantiers de l’Atlantique sidiary of Japan’s NYK Lines with 60pc
able for conventional tonnage such as shipyard, after porosity problems discov- and GdF with 40pc.

LNG shipping fleet Mar 2007 LNG order book Mar 2007
Owner No. of Age of fleet m³ Av. m³
vessels Av. Min. Max. Owner No. of m³
MISC 22 11 27 1 2,617,425 118,974 vessels
Mitsui OSK Line 15 10 23 1 1,905,456 127,030 Qatar Gas Transport Company 25 6,064,500
Bonny Gas Transport 13 14 31 1 1,739,315 133,793 NYK Line 10 1,484,600
Golar LNG 12 14 32 1 1,613,532 134,461 J5 Consortium 8 1,698,000
Bergesen-Worldwide 11 8 34 0 1,354,179 123,107 Teekay Shipping 7 1,329,700
NYK Line 10 15 24 7 1,314,211 131,421
K Line 7 1,068,000
National Gas Shpg. 8 12 13 10 1,092,306 136,538
Burmah Gas Transport 8 29 30 28 1,010,700 126,338 MISC 7 1,050,000
Aust. LNG Ship Optg. 7 14 18 3 903,330 129,047 AP Moller 6 921,600
Brunei Shell Tankers 7 33 35 32 530,651 75,807 BG International 6 920,000
Teekay Shipping 6 3 5 0 860,794 143,466 China LNG Ship Management 5 731,300
K Line 6 11 24 1 802,840 133,807 OSG/QGTC 4 864,000
Hyundai Merchant 6 9 13 7 790,182 131,697 Pronav Ship Management 4 840,000
SNTM-Hyproc 6 30 36 26 677,904 112,984 BP 4 620,000
Exmar 5 3 5 1 690,513 138,103
Bergesen-Worldwide 4 611,400
SK Shipping 5 9 13 7 680,214 136,043
Leif Hoegh 5 20 34 1 595,428 119,086 Mitsui OSK Line 4 611,400
Oman Shipping 4 2 2 1 580,000 145,000 Exmar 4 603,600
BG International 4 2 3 1 573,209 143,302 Sovcomflot-NYK 4 581,800
Hanjin Shpg 4 9 12 7 545,347 136,337 Knutsen 3 469,447
Shell Tank. (S’pore) 4 17 29 5 521,930 130,483 Dynacom Tankers Management 3 450,000
SnamProgetti 4 24 38 9 212,700 53,175 Tokyo LNG Tanker 3 317,100
Maran Maritime Gas 3 2 2 1 436,500 145,500
Bluesky LNG 2 320,000
NYK/MOL/K Line 3 2 2 2 435,260 145,087
Knutsen 3 2 3 1 414,826 138,275 Chevron 2 309,600
BP Shipping 3 4 5 4 414,000 138,000 Tokyo Electric 2 290,400
Gaz de France 3 1 1 0 381,130 127,043 Hoegh LNG/MOL 2 290,000
Tokyo LNG Tanker 2 3 4 2 295,223 147,612 Korea Line 2 290,000
AP Moller 2 2 3 1 283,400 141,700 STX Pan Ocean 2 290,000
Shell Group 2 4 4 3 278,752 139,376 Sonatrach 2 151,000
Korea Line 2 8 8 7 273,273 136,637 Elcano 1 170,000
MOL/NYK/K Line/SCI 2 3 3 3 272,088 136,044
Trinity LNG Carrier 1 154,200
Tokyo Electric 2 3 4 1 272,006 136,003
Marathon Oil 2 14 14 14 179,760 89,880 Tsakos Energy Navigation 1 150,000
Taiwan Maritime Tran 2 22 42 1 171,200 85,600 Golar LNG 1 145,700
Humpuss Trans 2 14 17 11 155,874 77,937 Maran Maritime Gas 1 145,700
Sovcomflot 2 38 38 38 143,000 71,500 Cygnus LNG Shipping 1 145,400
Messigaz 2 35 36 34 90,081 45,041 Hyundai Merchant 1 145,000
Chemikalien Seetrans 2 32 32 32 71,000 35,500 Iino Kaiun Kaisha 1 145,000
NYK Line 1 0 0 0 149,700 149,700
MOL/NYK/K Line/Mitsui 1 145,000
Algeria Nippon Gas 1 3 3 3 147,845 147,845
Osaka Gas 1 1 1 1 145,000 145,000 Maple LNG Transport 1 19,100
IS Carriers 1 4 4 4 138,306 138,306 Grand total 142 24,542,547
Elcano 1 4 4 4 138,000 138,000
Energy Spring 1 6 6 6 137,248 137,248
Brunei Gas 1 5 5 5 135,000 135,000 LNG vessel time charter rates $/d
DistriGas 1 29 29 29 131,260 131,260
Methane Transport 1 30 30 30 129,299 129,299 Duration
Tractebel LNG 1 28 28 28 126,540 126,540 Long term 65,000
Auxiliar Maritima 1 37 37 37 40,000 40,000 Spot 70,000
Total 222 12 0 42 27,597,737 124,314

© 2007 Argus Media Ltd www.argusmediagroup.com Page 28


Argus Global LNG — Shipping April 2007

Netbacks for 138,000m³ tanker March 2007

Sailing days (one way)

Gas delivered, minus

Transport and regas


Stores and lubes $

Total shipping and

Delivered value of

costs $/mn Btu


Capital costs $

Delivered price
maintenance $

off ’000m³

Netback $/mn
Bunker fuel $

Insurance $
Manning $

Repairs &

storage $

$/mn Btu
cargo $
boil-o

Btu
Route

Qatar-Japan 14.0 1,433,371 129,115 72,261 10,602 24,955 726,003 2,396,307 125,321 16,173,362 0.89 5.92 5.03
Qatar-S Korea 14.7 1,504,776 134,946 75,524 11,081 26,082 762,303 2,514,712 125,174 20,274,938 0.94 7.43 6.49
Qatar-Spain 11.2 1,147,751 105,791 59,207 8,687 20,447 580,803 1,922,686 125,906 12,022,047 0.71 4.38 3.67
Abu Dhabi-Japan 14.0 1,433,371 129,115 72,261 10,602 24,955 726,003 2,396,307 125,321 15,271,807 0.89 5.59 4.70
Algeria-Belgium 3.4 310,405 40,817 22,844 3,352 7,889 176,317 561,624 127,539 26,079,593 0.21 9.38 9.17
Algeria-France 1.1 103,857 21,658 12,121 1,778 4,186 57,046 200,646 128,020 13,284,361 0.07 4.76 4.69
Algeria-S Korea 20.0 1,801,145 179,095 100,233 14,706 34,615 1,037,146 3,166,940 124,065 20,095,304 1.19 7.43 6.24
Algeria-Spain 0.8 76,916 19,159 10,723 1,573 3,703 41,489 153,562 128,083 12,341,527 0.06 4.42 4.36
Algeria-US 10.9 983,932 103,292 57,809 8,482 19,964 565,246 1,738,725 125,969 19,634,815 0.64 7.15 6.51
Australia-Japan 7.9 801,457 78,302 43,823 6,430 15,134 409,674 1,354,820 126,597 15,896,523 0.50 5.76 5.26
Australia-S Korea 8.5 861,959 83,300 46,620 6,840 16,100 440,789 1,455,608 126,471 20,485,074 0.54 7.43 6.89
Brunei-Japan 4.9 498,948 53,312 29,837 4,378 10,304 254,103 850,881 127,225 15,531,588 0.31 5.60 5.29
Brunei-S Korea 5.7 579,617 59,976 33,566 4,925 11,592 295,589 985,265 127,057 20,579,975 0.36 7.43 7.07
Indonesia-Japan 7.2 730,872 72,471 40,559 5,951 14,007 373,374 1,237,234 126,743 21,938,269 0.46 7.94 7.48
Indonesia-S Korea 6.9 700,621 69,972 39,161 5,746 13,524 357,817 1,186,840 126,806 20,539,303 0.44 7.43 6.99
Libya-Spain 2.3 211,621 31,654 17,716 2,599 6,118 119,274 388,982 127,769 12,227,723 0.14 4.39 4.25
Malaysia-S Korea 4.7 478,781 51,646 28,904 4,241 9,982 243,732 817,285 127,267 20,613,868 0.30 7.43 7.13
Nigeria-France 8.8 795,345 85,799 48,019 7,045 16,583 456,346 1,409,136 126,409 13,117,168 0.52 4.76 4.24
Nigeria-Spain 8.4 759,423 82,467 46,154 6,772 15,939 435,603 1,346,358 126,492 12,188,292 0.50 4.42 3.92
Nigeria-US 13.4 1,208,441 124,117 69,464 10,192 23,989 694,889 2,131,092 125,446 19,553,276 0.79 7.15 6.36
Oman-Japan 13.0 1,331,364 120,785 67,599 9,918 23,345 674,146 2,227,156 125,530 22,521,795 0.83 8.23 7.40
Oman-S Korea 12.5 1,280,360 116,620 65,268 9,576 22,540 648,217 2,142,581 125,634 20,349,502 0.80 7.43 6.63
Oman-Spain 12.3 1,259,959 114,954 64,336 9,439 22,218 637,846 2,108,751 125,676 9,287,724 0.78 3.39 2.61
Oman-US 9.3 953,937 89,964 50,350 7,387 17,388 482,274 1,601,300 126,304 19,687,001 0.59 7.15 6.56
Trinidad-US 4.8 435,153 52,479 29,371 4,309 10,143 248,917 780,372 127,246 19,833,772 0.29 7.15 6.86
Alaska-Japan 7.4 668,113 74,137 41,492 6,088 14,329 383,746 1,187,904 126,702 16,241,111 0.44 5.88 5.44
Algeria-UK 4.0 364,287 45,815 25,641 3,762 8,855 207,432 655,792 127,413 16,248,980 0.24 5.85 5.61

Model assumes a 138,000m³ LNG carrier at 98pc utilisation travelling at 19


knots. One day in port for loading and two for discharge. Boil-off rates of
Shipping data supplied by Drewry Shipping Consultants
0.15pc/d when loaded, 0.1pc/d in ballast. 5pc of cargo returned as cargo heel
Email: goel@drewry.co.uk
on ballast leg. Bunker and MDO prices from Argus, assuming consumption of
Web: www.drewry.co.uk
160t/d bunkers at sea plus 3t/d MDO in port. Cost of capital assumed at 5.5pc.
Ship assumed to have 15 days/yr downtime.

LNG vessel fleet development LNG fleet


LNG on
fleetthe riserise
on the No. of vessels
Fleet Historic Future Estimated Scrapping Fleet
400
start deliveries scheduled deliveries end
Year deliveries*
350
2000 115 12 127
2001 127 1 128
300
2002 128 10 138
2003 138 14 152
2004 152 21 173 250
2005 173 18 191
2006 191 27 218 200
2007 218 4 32 254
2008 254 54 2 306 150
2009 306 41 5 3 349
2010 349 15 15 2 377 100
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
*as per order book

© 2007 Argus Media Ltd www.argusmediagroup.com Page 29


Argus Global LNG — Spark spreads April 2007

International spark spreads March 2007


Region/fuel Price Price Electricity Spark spreads at varying conversion rates ( $/MWh )
$/MWh $/MWh
30pc 34pc 38pc 49.13pc 55pc
Asia-P
Pacific
Japan
LNG ($/mn Btu) 6.34 21.56 72.57 0.79 9.18 15.84 28.70 33.38
Coal, cif Japan ($/t) 90.31 12.94 72.57 29.47 34.51 38.51 46.23 49.04
HSFO 180, cif Japan ($/t) 319.66 26.70 72.57 -16.34 -5.95 2.31 18.23 24.03

South Korea
LNG ($/mn Btu) 7.43 25.26 65.70 -18.42 -8.59 -0.78 14.29 19.77
Coal, cif Korea ($/t) 66.05 9.47 65.70 34.18 37.87 40.79 46.44 48.49
HSFO 180, fob Korea ($/t) 314.63 26.28 65.70 -21.81 -11.59 -3.45 12.21 17.92

Europe
Belgium
LNG ($/mn Btu) 9.38 31.89 40.53 -65.67 -53.27 -43.40 -24.39 -17.46
Zeebrugge gas month ahead ($/mn Btu) 4.00 13.60 40.53 -4.76 0.53 4.74 12.85 15.80
Coal ($/t) 71.42 10.24 40.53 6.44 10.43 13.59 19.69 21.92
1pc fuel oil fob NWE ($/t) 260.41 21.75 40.53 -31.90 -23.44 -16.71 -3.75 0.98

France
LNG ($/mn Btu) 4.76 16.18 37.69 -16.20 -9.91 -4.90 4.75 8.27
Pipeline natural gas, Russia ($/mn Btu) 6.64 22.58 37.69 -37.49 -28.70 -21.72 -8.26 -3.36
Coal ($/t) 71.42 10.24 37.69 3.61 7.59 10.76 16.86 19.08
1pc fuel oil fob W Med ($/t) 272.22 22.74 37.69 -38.02 -29.18 -22.14 -8.59 -3.65

Italy
LNG ($/mn Btu) 4.21 14.31 62.46 14.80 20.36 24.79 33.33 36.44
Pipeline natural gas, Russia ($/mn Btu) 7.20 24.48 62.46 -19.06 -9.53 -1.96 12.64 17.95
Coal ($/t) 71.42 10.24 62.46 28.38 32.36 35.53 41.63 43.85
1pc fuel oil fob W Med ($/t) 272.22 22.74 62.46 -13.25 -4.41 2.63 16.18 21.12

Spain
LNG ($/mn Btu) 4.21 14.36 44.54 -3.29 2.29 6.74 15.30 18.42
Pipeline natural gas, Algeria ($/mn Btu) 6.95 23.63 44.54 -34.15 -24.96 -17.64 -3.56 1.58
Coal ($/t) 71.42 10.24 44.54 10.46 14.44 17.61 23.71 25.93
1pc fuel oil fob W Med ($/t) 272.22 22.74 44.54 -31.18 -22.33 -15.30 -1.74 3.20

Americas
US Gulf coast
LNG ($/mn Btu) 7.15 24.40 58.78 -22.46 -12.97 -5.42 9.12 14.42
Natural gas, Henry Hub Nymex ($/mn Btu) 7.35 24.99 58.78 -24.44 -14.72 -6.98 7.92 13.34
Coal ($/st) 40.63 5.82 58.78 39.39 41.66 43.46 46.93 48.19
HSFO ($/t) 260.64 21.77 58.78 -13.72 -5.25 1.49 14.47 19.20

US northeast
LNG ($/mn Btu) 7.15 24.40 59.99 -21.25 -11.76 -4.21 10.33 15.63
Natural gas, Transco Z6 NY ($/mn Btu) 7.85 26.69 59.99 -28.89 -18.51 -10.25 5.66 11.46
Coal ($/st) 40.63 5.82 59.99 40.60 42.86 44.67 48.14 49.40
HSFO ($/t) 269.35 22.50 59.99 -14.93 -6.18 0.78 14.20 19.08

Note: Spark spreads compare the cost of generating power at various heating efficiencies with the cost of buying power from the grid. A positive spread
indicates it is economical to buy fuel, while a negative spread indicates it is economical to buy power off the grid. Prices are taken from Argus oil, gas,
coal and electricity daily market reports, the IEA, company sources and national statistical bodies.
The model does not take account of local taxes or transport costs.

Conversion factors (left hand column units are multiplied by the factor shown to convert to units in the top row)
million barrels tons cubic cubic m³ tons tons
British of oil of oil feet metres LNG LNG LNG
thermal equivalent equivalent (ft³) (m³) (specific (specific
units gas gas gravity gravity
Equals 0.425) 0.475)

1 million Btu (1mn Btu) 1 0.172 0.0235 1000 28.3 0.0459 0.0195 0.0218
1 barrel of oil equivalent (boe) 5.8 1 0.136 5800 164.2 0.266 0.113 0.126
1 ton of oil equivalent (toe) 42.5 7.33 1 42.5 1200 1.95 0.828 0.925
1 ft³ gas 0.001 0.000172 0.0000235 1 0.0283 0.0000458 0.0000195 0.0000218
1 m³ gas 0.0353 0.000608 0.00083 35.3 1 0.00162 0.000688 0.000769
1 m³ LNG 21.8 3.76 0.513 21824 618 1 0.425 0.475
1 ton LNG (specific gravity 0.425) 51.3 8.85 1.207 51350 1450 2.353 1
1 ton LNG (specific gravity 0.475) 45.9 7.91 1.081 45950 1300 2.105 1

© 2007 Argus Media Ltd www.argusmediagroup.com Page 30


Argus Global LNG — LNG movements April 2007

Import volumes ’000t


Importer/source Mar 06 Apr May Jun Jul Aug Sep Oct Nov Dec Jan 07 Feb
Japan
Abu Dhabi 552 236 374 428 448 547 426 548 487 303 548 490
Algeria - - - - - 66 - 61 57 - - -
Australia 1,101 697 1,243 1,065 1,239 1,320 811 1,125 824 1,139 1,134 1,062
Brunei 536 528 529 495 524 562 522 624 530 528 527 496
Egypt 118 57 50 164 - - - 58 59 - 60 108
Indonesia 1,395 1,051 1,227 1,107 1,054 1,156 1,228 1,267 1,106 1,157 1,220 1,100
Malaysia 871 759 823 958 1,040 1,153 960 1,112 925 987 1,273 1,231
Nigeria - - - - - - - 60 - 105 - -
Oman 127 62 124 252 187 376 187 187 308 377 371 183
Qatar 619 593 791 664 541 719 730 419 536 653 709 583
Trinidad 56 55 - - - 54 56 56 56 - - -
US 142 107 107 107 108 108 72 61 92 85 94 96
Total 5,516 4,144 5,267 5,240 5,140 6,062 4,991 5,578 4,980 5,334 5,935 5,349

South Korea 2,800 2,074 2,198 1,655 1,240 1,181 1,187 1,591 2,045 2,751

China (Guangdong)
Australia - - - 57 62 - 31 174 119 244 119

Taiwan
Algeria - - 60 60 - - - - - -
Australia - 60 60 - - 58 - - - -
Egypt - - - - - - - 126 - -
Indonesia 184 308 244 122 366 303 186 366 244 366
Malaysia 293 235 357 414 413 360 293 235 356 174
Oman 45 - 19 - - - 123 61 - -
Qatar - - 64 61 - 128 61 - - -
Trinidad - - - - - - - - - 111
Total 521 622 785 657 779 848 663 789 601 651

Belgium
Algeria 338 278 283 454 - 62 172 235 345 356
Total 338 278 283 454 - 62 172 235 345 356

France 792 881 1,001 798 801 917 707 885 1,097 1,024

Greece 48 16 16 48 48 48 32 83 48 74 104 48

Italy 252 209 229 204 145 88 160 228 195

Portugal
Nigeria 176 110 61 115 175 174 113 164 104 168

Spain
Abu Dhabi - - - 168 - - - - - -
Algeria 276 127 86 113 82 84 146 236 211 317
Egypt 542 285 401 - - - 161 295 196 77
Libya 49 69 16 50 34 33 17 - 70 16
Nigeria 449 379 465 709 409 490 548 345 279 447
Oman 132 66 - - 124 65 - - - -
Qatar 202 325 288 292 360 320 382 179 - 252
Trinidad 340 145 212 170 199 170 56 216 215 253
Total 1,989 1,395 1,468 1,502 1,208 1,160 1,310 1,271 971 1,363

Turkey
Algeria 304 295 236 125 173 58 300 244 296 373 299 294
Nigeria 53 128 56 - - 113 - 160 120 61 112 125
Total 357 423 292 125 173 171 300 403 415 434 411 418

UK
Algeria 181 119 116 112 118 96 50 56 176 120
Egypt - 110 - - - 59 116 - 121 121
Qatar - - - - - - - - 53 -
Trinidad 114 - 56 - - 57 - - 169 -
Total 294 228 172 112 118 213 166 56 519 241

US Cove Point
Algeria 59 55 - 55 59 - - - - - 49
Egypt - - - - 58 - - - 58 58 58
Trinidad 114 227 227 229 117 230 106 58 - 118 173 117

US Elba Island
Trinidad 155 160 210 154 206 155 156 153 206 223 154 245
Egypt - 102 57 114 60 173 115 50 57 50 55 56

US Everett
Trinidad 320 272 324 266 278 278 178 270 274 323 390 273

US Lake Charles
Algeria - 163 - - - - - - - - - -
Egypt - - 330 165 175 - 56 - 215 115 59 56
Nigeria - 117 60 117 120 121 118 175 112 60 104 112
Trinidad - 52 104 103 51 51 51 - - 52 - -

US total 648 1,146 1,312 1,203 1,122 1,016 780 706 921 999 1,043 859

Puerto Rico
Trinidad 50 53 - 59 17 59 - 33 59 59 54

© 2007 Argus Media Ltd www.argusmediagroup.com Page 31


Argus Global LNG — LNG movements April 2007

p p
Japanese imports mn t
1.6 US imports boom
Indonesia
1.4 Malaysia z US LNG imports for the first quarter of this year are esti-
mated to be 47pc higher than imports a year ago, the US
1.2 Energy Information Administration (EIA) said in its Short-
Term Energy Outlook released on 10 April.
1.0

z US LNG imports this year are expected to rise by around


0.8
170bn ft³ (4.8bn m³), or more than 22pc, compared with
0.6 2006 to reach 750bn ft³. Imports could rise even more and
Jul 05 Oct Jan 06 Apr Jul Oct Jan 07
reduce US natural gas prices if LNG demand slows outside
US imports mn t of the country. LNG imports are expected to surpass 1 tril-
US imports mn t lion ft³ in 2008.
1.4
Total US imports
from Trinidad z First-quarter imports jumped sharply, climbing by 47pc
1.2
on the year. And further growth is possible. The EIA notes
1.0 that high US landed prices have boosted flows of LNG to
the US and imports could “dampen domestic natural gas
0.8 prices”. Further growth is forecast for next year, when the
EIA pegs imports at more than 1 trillion ft³.
0.6

0.4 z Japan’s LNG imports fell by 10pc in February to 5.35mn


Jul 05 Oct Jan 06 Apr Jul Oct Jan 07
t, down from 5.94mn t in January. The reduction in deliver-
ies was fairly evenly spread among all of the country’s main
Japan LNG import sources Feb 2007 % importers, with Indonesian imports dipping from 1.2mn t in
Indonesia January to 1.1mn t in February.
21% ’000t
Malaysia
23% Malaysia 1,231.3
Indonesia 1,099.5 z While Egypt was by far the most expensive source of
Australia 1,061.6
Qatar 583.2
LNG in January, when its supplies of 60,000t changed
Australia
US 2%
20%
Brunei 495.8 hands at $11.42/mn Btu, imports from Oman joined it in the
Egypt 2% Abu Dhabi 489.9
Oman 183.1 above $10/mn Btu league in February. But the average price
Oman 3%
Egypt 108.3 of Japan’s imports still eased in February, to $6.91/mn Btu,
Abu Dhabi US 96.0
9% Brunei
Qatar Total 5,348.8 down from $7.05/mn Btu in January.
11%
9%

Latest estimated gas imports and exports ’000t/month


US -93.5

UK +240.9
USA
Cove Point +117.1 Belgium +355.9
Elba Island +301.3 Portugal +167.9 from USA (Alaska)
Everett +273.0 Italy +195.2 Turkey +418.3
Lake Charles +168.0 Spain +1,362.5 Greece +48.1 South Korea +2,750.9
Total +859.4
Egypt -2106.5 Qatar -1,052.3 Japan +5,348.7
Algeria -1203.8 China +62.4
Libya -2071.1 Taiwan +651.0
Puerto Rico +53.7
Oman -1576.2

Nigeria -735.8 Malaysia -977.74


Trinidad -96 Abu Dhabi -489.9
Brunei -583.7
Indonesia -16.4

+ Imports
- Exports Australia -1,186.8

— Drewry

© 2007 Argus Media Ltd www.argusmediagroup.com Page 32