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Russia-Ukraine talks

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Nov 29 (LNGJ) – The Russian and Ukrainian energy ministries and state gas companies are still meeting in Vienna in Austria to discuss Russian natural gas supplies to Ukraine and onwards to Europe. The existing supply deal between the two nations expires on December 31. The two sides have agreed to intensify talks in the coming days, having failed to achieve results after several previous rounds.

   Russia was represented by the Minister of Energy of the Russian Federation, Alexander Novak, and Gazprom Chairman Alexey Miller. On the Ukrainian side were Minister of Energy Alexey Orzhel and executives of the Naftogaz Ukrainy company and the gas transmission system operator of Ukraine.

   “An exchange of proposals on resolving issues facing the parties took place, and agreements were reached to intensify work in a bilateral format in the coming days,” said Gazprom.


Qatar to raise LNG production by 64%

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Qatar Petroleum (QP) announced earlier this week that it will raise its LNG production capacity to 126 mill tonnes per annum by 2027. 

This amounts to an increase of 64% from the current 77 mill tonnes.

“With the additional number of trains for the expansion of LNG, we are going to produce additional amounts of LPG, condensate, ethane and helium. So in addition to LNG facilities, we will be required to build additional facilities for storing and handling LPG. There is a possibility that we may also expand our helium plants. And then for the use of additional amount of ethane, we will also enhance our petrochemical sector,” H E Saad Sherida Al Kaabi, the Minister of State for Energy Affairs, and President and QP CEO, said.

“There are so many projects to talk about but I want to focus on the gas reserves and LNG expansion project. But I want to assure that all these projects will have a very positive impact on other sectors of the economy, including the petrochemicals, construction and companies in other sectors of the economy will also benefit significantly. This will help increase the government’s revenue as well,” he added.

QP is to build four new LNG trains to boost production. Construction on the first is due to start next year, and two trains will be staggered at the end of the period.

Qatar, with a huge reserve of over 1,760 trill cu ft of natural gas (including new reserves announced this week), is reinforcing its position as the leading supplier of clean energy in the world, the Minister said.

QP recently signed an agreement with the Belgian independent natural gas transport company Fluxys Belgium to take Zeebrugge LNG’s full capacity in order to export more LNG to the European markets.

“In addition to the Zeebrugge LNG Terminal, which has a capacity to receive about 7 mill tonnes per annum of LNG, we have a terminal in Italy, we have the largest LNG terminal in the UK, and we are looking forward to announce some other projects in Europe.

“(Market) Diversity is something that we are very much looking at. And we are demonstrating it by actually doing it. We have a lot of things on the table, which will be announced at appropriate time,” the Minister said to local journalists at a meeting on Monday.


First US cargo for Ukraine arrives in Poland

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The first US LNG cargo bound for the Ukraine has arrived at the Polish receiving terminal at Swinoujscie. 

This shipment represents the start of an alternative, non-Russian gas supply for Ukrainian consumers. “US LNG is coming to Ukraine! Another step in helping Ukraine achieve energy independence,” said the US Embassy in Kiev in a twitter post. 

Ukraine is dependent upon Russian natural gas for heating and power, and it levies fees on Russian energy producers for providing pipeline capacity to Europe via Ukrainian territory. At a time of high tension between Russia and Ukraine, the gas transit agreement is up for renewal next month.

On 2nd September, the US signed an agreement with Poland and Ukraine to formalise the supply of US natural gas to Kiev. The MOU calls for the shipment of up to 6 bill cu m per year to Ukraine by 2021.

“The US is ready to help Ukraine achieve its full energy potential with American technology, resources and support,” said outgoing US Secretary of Energy, Rick Perry when announcing the deal.

The first 90 mill cu m shipment was handled by Polish Oil and Gas Company (PGNiG) and Energy Resources of Ukraine, a private firm headed by longtime foreign-market utility executive Dale Perry and Ukrainian energy trader Yaroslav Mudryy.

“We contracted this volume for the purpose of injecting and storing it for further delivery to consumers in the winter season – this way we contribute to the country’s energy safety during uncertain and especially risky winter period 2019-2020,” said Mudryy. “In this case, taking to the account well developed gas transportation system, Ukraine may not be the last destination for American LNG, it can be successfully delivered to countries like Hungary, Romania and even Moldova.”

 “Currently, the only limitation in the development of exports to Ukraine on an even larger scale is the capacity of gas pipelines in Poland in the direction of Silesia–Podkarpacie. We expect the capacity of these gas pipelines to be expanded by 2021 at the latest,” explained Piotr Wozniak, the head of PGNiG’s board.


DIF to invest in LNGC newbuildings

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Independent infrastructure fund manager, DIF Capital Partners, has signed an agreement with Geogas Maritime and Access Capital Partners, to acquire a 50% stake in a French company that will own and operate five LNGCs.

The remaining 50% will be held by NYK.

The five 174,000 cu m vessels will be built by South Korean shipyards. The first ship is expected to be delivered in April, 2020.

All five ships will fly the French flag and they will be chartered to a French and European utility under long-term contracts and will be project financed under a French lease structure.

Thomas Vieillescazes, DIF’s Head of France, said: “This is an excellent opportunity for DIF CIF I to invest in high quality assets and grow DIF’s footprint into the expanding LNG sector alongside strong and experienced counterparties. We’re also very proud to participate in a strategic project for the further development of the French LNG sector.”


‘WilForce’ re-enters service

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The Awilco LNG Group has recorded freight income for the third quarter this year of $6.7 mill, up from $3.9 mill reported for 2Q19. 

This rise was attributable to ‘WilPride’, which was delivered on an eight month contract on 9th July.

In addition, as a result of being struck by another vessel at the end of May this year, ‘WilForce’ was off-hire until repairs were completed in mid-September.

Loss of hire insurance at $65,000 per day compensated for some of the lost timecharter hire in the off-hire period, totalling $4.4 mill in 3Q19 and $1.1 mill in 2Q19.

EBITDA for the quarter was $7.4 mill.


Fleet utilisation for the quarter was 45%, compared to 56% in the previous quarter, due to ‘WilForce’s’ extensive off-hire following the collision.

Total expenses towards repairs of the machinery and collision damage to the ‘WilForce’ was $0.6 mill in 3Q19 and $5.6 mill in 2Q19. Corresponding hull & machinery insurance claims totalling $0.4 were recognised as other income in 3Q19 ($6 mill in 2Q19).

Total equity as at 30th September, 2019 was $102.6 mill, compared with $103.7 mill at the previous quarter end. Current liabilities were $274.1 mill, compared to $282.5 mill in 2Q19, of which $262.2 mill was related to the ‘WilForce’ and ‘WilPride’ financial lease liabilities and $4.7 mill provisions for repair of ‘WilForce’.

The repurchase obligations for ‘WilForce’ and ‘WilPride’ mature on 31st December this year, plus/minus 60 days in the Group’s favour.

On 2nd August, 2019 a term sheet for the refinancing of the two vessels was agreed and signed with CCB Financial Leasing. On 18th October, 2019 the facility was credit approved. This sale/leaseback facility has a 10-year tenor and is expected to enable a full take out of the company’s current sale/leaseback facilities at attractive terms.

The facility is expected to close in 4Q19/1Q20 subject to documentation and customary closing conditions.

In a later stock exchange filing, Awilco said it had agreed with other LNGC shipowners to discontinue discussions on establishing a consolidated LNG shipping structure.

The company said that it had contracted historically high earnings through the winter period. The ‘WilForce’ timecharter contract is estimated to contribute a monthly EBITDA of about $3.4 mill during the charter period to February next year.

Awilco’s two ships are expected to earn an average TCE of about $84,000 per day per vessel in 4Q19. For 1Q20 about 50 % of available days are booked at an expected TCE of about $95,000 per day per vessel.

Reduced costs, coupled with the expected strong market conditions over the next years, following a wave of new LNG production, heralds an exciting period for the company, it said


Early loan repayment hits Dynagas bottom line

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Dynagas LNG Partners suffered a net loss of $4.7 mill for the three months ended 30th September, 2019, compared to a net loss of $0.7 mill in 3Q18. 

The 3Q19 net loss included a $7.5 mill one-off non-cash write-off expense from the accelerated amortisation of the deferred loan fees, as a result of the early prepayment of the Term Loan B facility.

Adjusted net income and distributable cash flow for the quarter were $2.8 mill and $7 mill, respectively, compared to $3.3 mill and $7.5 mill, respectively, for 3Q18, which represents a net decrease of $0.5 mill in both, or 15.2% and 6.7%, respectively, mainly due to increased financing expenses.

Voyage revenues for the quarter were $34.4 mill, compared to $31.3 mill for the corresponding period of 2018, which represents an increase of $3.1 mill.

Excluding amortisation of fair value of acquired timecharters and amortisation of deferred revenue, voyage revenues quarter on quarter increased by $1.5 mill, mainly as a result of – the increase of the voyage revenues earned on the ‘Clean Energy in 3Q19, which was delivered to its eight-year charter with Gazprom Marketing and Trading Singapore in the middle of July, 2018.

Prior to the delivery to Gazprom, the vessel was trading in the spot market at a lower charter rate for the corresponding period in 3Q18.

In addition, the higher revenues earned on the ‘Yenisei River in the 3Q19, as the vessel had its scheduled drydock, special survey and no revenues earned for the corresponding period in 3Q18.

The increase in voyage revenues was partially offset by the lower revenues earned on the ‘Arctic Aurora, which in August 2018, rolled-over into its new charter with Equinor at a lower charter rate compared to its previous contract.

The Partnership reported average daily hire gross of commissions of around $62,200 per day per vessel in 3Q19, compared to about $59,800 per day per vessel in the corresponding period of 2018.

Adjusted EBITDA for 3Q19 was $23.8 mill, compared to $23.5 mill for the corresponding period of 2018. The increase of $0.3 mill, or 1.3%, was mainly due to the net effect of the increase in the revenues and increase in the vessel’s operating expenses.

As of 30th September, 2019, the Partnership reported total cash of $317.6 mill (including $300 mill of restricted cash of which $250 mill was earmarked for the repayment of the notes) and a working capital deficit of $45.8 mill – as of 31st December, 2018 the working capital deficit was $159.8 mill.

The Partnership’s outstanding debt as of the same date was $925 mill, which included $675 mill under its credit facility and the notes, which were repaid in full on 30th October, 2019.


Gasum fuels cruise ship

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Nov 28 (LNGJ) – The Nordic LNG supplier, Gasum of Finland, has carried out its first ship-to-ship bunkering involving a cruise ship. The operation took place at the Finnish Meyer Turku shipyard in the port of Turku and involved the bunkering vessel “Coralius” and Carnival Corp.’s newbuild “Costa Smeralda”. Gasum’s bunkering vessel has 5,800 cubic metres of capacity and began operating in 2017, supplying LNG fuel in the North Sea and the Skagerrak areas. “The ‘Coralius’ allows us to perform ship-to-ship bunkering to different types of vessels. We are happy that this now includes a cruise ship,” said Gasum.


K-Line LNG fuel deal

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Nov 28 (LNGJ) – Kawasaki Kisen Kaisha, the Japanese shipping company known as K-Line, said it signed a ship management agreement for the newbuild LNG bunkering vessel owned by FueLNG and set to operate in the Port of Singapore. “We signed a ship management contract for the 7,500 cubic metres capacity LNG fuel supply ship owned by FueLNG,” said K-Line. “After the ship is delivered to FueLNG in the second half of 2020, it is scheduled to begin service as the first LNG fuel supply ship in Singapore, the world’s largest fuel supply base,” added K-Line, whose own fleet contains LNG carriers, Ro-Ro ships, tankers and container vessels.


Indonesia LNG tender

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Nov 27 (LNGJ) – The Indonesian Tangguh LNG plant, operated by BP of the UK, has issued a first-quarter 2020 sell tender closing on November 28 for five cargoes to be delivered on an ex-ship (DES) basis whereby the buyer receives the cargoes shipped to an agreed port of arrival. The five cargoes on offer are scheduled to be loaded between January to March 2020. The loading dates are: January 16-20, January 25-29, February 20-24, March 6-10 and March 18-22.


Qatar Moves to Defend Market Share

World’s largest LNG producer takes bold steps towards regaining market dominance currently at risk from Australia and the United States

New Reserves at North Dome Gas Field

Following appraisal work at the North Dome Gas/Condensate Field, Qatar confirmed the results will support raising the country’s nominal production capacity from the current 77 million tonnes per annum (mtpa) to well above 100mtpa. The chief executive of state energy giant Qatar Petroleum, Saad al-Kaabi, said in a news conference in Doha on Monday that North Dome – which is part of a wider gas play shared with Iran (which calls its part South Pars) – now contains confirmed gas reserves exceeding 1,700 trillion cubic feet.

High quality, stable reserve base

Given the relatively shallow waters of the Persian Gulf, the play’s high reservoir quality and the mature infrastructure already in place, Qatar Petroleum is supremely confident to be able to start with the selection process of the main contractor to build two additional LNG mega-trains with a combined capacity of 16mtpa.

Robust expansion strategy contrasting conservative debottlenecking plan of early 2017

Qatar is thereby clearly pursuing a strategy of robust capacity expansion, contrasting the much more conservative debottlenecking project to squeeze an additional 10mpta out of existing facilities originally mulled in early 2017 (a drilling moratorium at North Dome was still in place at the time). Beyond yesterday’s initial pledge, which would swiftly raise capacity to 93mtpa by around 2024, the total additional capacity to be installed at Ras Laffan is planned to rise to 110mtpa by around 2025 and potentially 126mtpa by 2027.

Qatar established market dominance since the early 2000s

Although Qatar managed to dominate the global LNG market in the early 2000s, later consolidated by additional demand created by the Fukushima nuclear disaster and a pre-2014 global commodities boom, that enabled it to lock buyers into long-term and inflexible supply contracts (e.g. cargo diversions were not permitted), its market influence has since suffered some erosion.

However, market influence has suffered some erosion

In North America, new flexible supply entered the market with Sabine Pass in 2015 whilst in the lucrative North Asia region new Australian capacity added considerable competition, too. Concurrently, high-growth markets closer to home – namely Pakistan, India and Bangladesh – proved extremely price conscious and demanded more flexible terms and lower prices, a cue also adopted by some European buyers after legacy contracts expired.

Expansion aimed at applying pressure on competitors and curb expansions elsewhere

Qatar’s capacity expansion is likely to apply considerable pressure on competing LNG producers post-2025. Fortunately, its production costs are reputed to be among the lowest in the world, so that it can aim to reassert its market dominance that way. We expect Australia’s production to reach equivalence with Qatar’s from next year (Ras Laffan produces slightly above nameplate capacity) until the first two new trains reached their stride in 2024.

At the same time, US investors are likely to become more hesitant to continue with their own plans to expand capacity if they risk protracted oversupply as their feedstock is to considerable extent sourced from volatile shale gas production. As such, the move to expand capacity is primarily a move to defend – and potentially expand – market share. We also highlight that some of the initial capacity installed at Ras Laffan will have surpassed the 25-year mark by the time the new trains are currently scheduled to be commissioned, so that some capacity could end up being replaced by the new facilities instead of added to, depending on market conditions.

Qatar Petroleum set to be selective on investment structure, exploring all options

An interesting factor will be the investment structure for the new capacity. Oil majors already heavily invested in Ras Laffan – chief among them ExxonMobil, Shell and Total – are keen to see the expansion take place. Indeed, it was these investors who pushed for debottlenecking in 2017. In a Platt’s interview last month, al-Kaabi would not be drawn on how Qatar Petroleum intends to structure investment, affirming that any partnerships would be contingent on the value they would provide to Qatar Petroleum, including “an offtake [arrangement]”. In our view this is particularly noteworthy because it implies the potential of Qatar Petroleum beginning to sell LNG based on a similar tolling model seen in the US to reduce its exposure to risks in a market more crowded than in 1996 when Ras Laffan’s first train was commissioned.