Tag Archives: liquefied natural gas (LNG)

Natural Gas and Freedom

[A] tanker chartered by Cheniere Energy, an American company, left a Louisiana port this week with the first major exports of U.S. liquefied natural gas, or LNG. This shipment isn’t going to Europe, but others are expected to arrive by spring.  “Like shale gas was a game changer in the U.S., American gas exports could be a game changer for Europe,” said Maros Sefcovic, the European Union’s energy chief.

Many in Europe see U.S. entry into the market as part of a broader effort to challenge Russian domination of energy supplies and prices in this part of the world. Moscow has for years used its giant energy reserves as a strategic tool to influence former satellite countries, including Lithuania, one of the countries on the fringes of Russia that now see a chance to break away.

Some are building the capacity to handle seaborne LNG, including Poland, which opened its first import terminal in 2015. In Bulgaria, which buys about 90% of its gas from Russia, Prime Minister Boyko Borissov said last month that supplies of U.S. gas could arrive via Greek LNG facilities, “God willing.”… Deutsche Bank estimates the U.S. could catch up with Russia as Europe’s biggest gas supplier within a decade, with each nation controlling around a fifth of the market. Russia supplies about a third of Europe’s gas via pipeline….The U.S. will compete with Russia, Norway, U.K., Australia and others in Europe’s gas market. Germany, for example, gets half its gas and Italy a third from Russia.Low prices also mean natural gas could compete with coal and help Europe achieve its commitment to reducing greenhouse gas emissions .In Lithuania, officials have accused Moscow of engaging in a campaign of espionage and cyberwarfare to keep its share of the lucrative energy market….

Bulgarian officials allege Russia bankrolled a wave of street protests in 2012 that forced the government to impose a moratorium on shale gas exploration. In 2014, Anders Fogh Rasmussen, then-head of NATO, told reporters that Russia was covertly funding European environmental organizations to campaign against shale gas to help maintain dependence on Russian gas.

Until 2014, Gazprom owned 37% of Lithuania’s national gas company, Lietuvos Dujos, and dominated its boardroom, said current and former officials.“There was no negotiation about gas prices,” said Jaroslav Neverovic, Lithuania’s energy minister from 2012 to 2014. He said Gazprom would send Lietuvos Dujos a list of gas prices, which the board automatically approved..  In 2015,  [though] Lithuania began receiving Norwegian LNG, reducing Gazprom’s gas monopoly to a market share of less than 80%. In the months before the terminal opened, Gazprom lowered Lithuanian gas prices by 23% and it remained cheaper than Norwegian gas. Still, Lithuania plans to increase its purchase of Norwegian gas this year. The U.S. is next….

Klaipeda’s mayor, Mr. Grubliauskas, said during a recent interview at his office, decorated with photographs of U.S. naval drills in the port: “U.S. LNG is more than just about gas. It’s about freedom.”

Excerpts With U.S. Gas, Europe Seeks Escape From Russia’s Energy Grip, WSJ, Feb. 26, 2016

Seaborne Gas: LNG

One day in March 2017, he Rioja Knutsen tanker, filled with liquefied natural gas, was traveling from the U.S. to Portugal. Suddenly, Mexico’s power company lobbed in a higher bid for its cargo. At the Bahamas, the ship abruptly made a starboard turn and headed south.  How natural gas is bought and sold in the world’s scattered regional markets for the fuel is changing rapidly. Ships such as the Rioja Knutsen are stitching those regions together and a single global market is emerging.  This is already how nearly every other hydrocarbon, from crude oil to obscure petrochemicals, is sold. As gas joins the club, the effects will ripple through energy prices, company profits, the environment and geopolitics.

Behind the evolution is improving technology for moving gas as a liquid, which means it can go to many more places rather than simply where a pipeline runs. …The share of gas moving by sea reached 40% of total trades in 2015, and the International Energy Agency forecasts that seaborne gas will account for a bigger share of trading than pipelines by 2040.

Thirty-nine countries now import LNG, up from 17 a decade ago, according to data and analytics firm IHS Markit. Several more, among them Uruguay, Bahrain and Bangladesh, are expected to lift the total to 46 in the next couple of years.

In one sign of how gas is going global, the U.S. and China are working on a trade deal that could send vast quantities of gas pumped in Texas and Pennsylvania to factories in Shanghai and Guangdong. Improved access for U.S. exporters to China’s giant energy markets could boost overall global shipments…

As LNG import terminals open in more locations, gas pricing and trading mechanisms are developing as well. Some investors are increasingly using the gas price at a pipeline intersection in Louisiana, called the Henry Hub, as a global benchmark.  Trading in the New York Mercantile Exchange’s Henry Hub gas futures contract is becoming more global, said Peter Keavey, global head of energy at Nymex owner CME Group . In May, Standard & Poor’s and the Intercontinental Exchange launched the first futures contract based on LNG produced in the U.S.

Seaborne gas is reducing some countries’ historic dependence on pipelines that run through potentially unfriendly territory. Poland, for instance, opened its first import terminal a year ago, lessening its reliance on gas piped from Russia.

When global trade in LNG began in the 1960s, the cost of liquefying gas was so high it was a niche product, affordable only by developed countries such as Japan.  As the technology proved reliable, trade in LNG became more common, but contracts to deliver the fuel by ship were decades long and had ironclad destination clauses. Gas contracted for Tokyo couldn’t be rerouted to Seoul. Traders called gas tankers “pipelines at sea.Now, contracts are getting shorter and starting to allow gas to be diverted to where demand is greatest. Earlier this year, three large LNG buyers in Japan, China and South Korea agreed to work together to push sellers for more contract flexibility and fewer onerous restrictions.

At any given time, there are about 170 tankers filled with LNG on the world’s oceans,… At the heart of the changes is supply. Huge new discoveries in the U.S., Middle East, East Africa and Australia, along with recovery techniques such as fracking, have expanded the amount of gas available for export….One pioneer is Houston-based Cheniere Energy Inc. FBy next year, Sabine Pass and other LNG terminals are expected to turn the U.S. into a net gas exporter….In a quest for customers, Cheniere has invested in a Chilean project to build a power plant, LNG terminal, storage facility and pipeline.   Oil titans Total SA and Royal Dutch Shell PLC also are offering to build facilities to burn gas. The two and their partners are building an import terminal and pipeline for an estimated $200 million in Ivory Coast, which will feed a power plant in the West African country’s economic hub of Abidjan. Qatar, the longtime LNG leader, recently lifted a self-imposed moratorium on the development of its North Field, the single largest gas reservoir in the world. So far there is little indication Qatar’s diplomatic spat with Arab neighbors will affect the gas market.

Helping make gas more accessible is a relatively new technology—floating LNG facilities. ..The first floating terminal was christened in 2005. Today there are 25….Excelerate Energy, a Houston company that developed this technology, is working on new floating terminals in Namibia, Bangladesh, Pakistan and elsewhere. The equipment to liquefy gas can also now be put on a large vessel that can be anchored offshore.

Excerpts from Long Promised, the Global Market for Natural Gas Has Finally Arrived, Wall Street Journal, June 7, 2017