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Novatek share buy-back

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Jan 29 (LNGJ) – Novatek, the largest independent natural gas producer in Russia and operator of the Yamal LNG export plant in northern Siberia, said that its share buy-back programme during the period from January 20-24, 2020, had resulted in 464,900 ordinary shares (including in a form of Global Depositary Receipts) being purchased in the open market. 

   Novatek is a public joint stock company and the shares are listed in Russia on the Moscow Exchange and on the London Stock Exchange in the UK under the ticker symbol “NVTK”. Companies buy back shares for a number of reasons, including as a means of increasing the value of remaining shares available by reducing the supply, or preventing other existing shareholders from taking bigger stakes.

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Cameron LNG Requests 6-year Delay to Expansion

Sempra-led joint venture put a preliminary stop to ‘Expansion Project’ of Cameron LNG and gains time to assess market development as trading conditions for US LNG toughened in 2H 2019

Reflecting the increasingly tough market for US LNG, Cameron LNG has requested to be able to delay the construction of the ‘Expansion Project’ of its LNG plant in Louisiana until May 2026 in a regulatory filing with the US Federal Energy Regulatory Commission (FERC) dated 24 January. The LNG development’s joint venture does not currently plan to make the final investment decision (FID) before mid-2021. Under the current FERC-approved plan, Cameron LNG would need to put the ‘Expansion Project’ into service by end-2020.

Cameron was once to be a 25mtpa plant

The developer – a joint venture headed by US energy firm Sempra – envisioned the facility to be expanded by two additional trains and two more storage tanks beyond the current base 3-train project to take total capacity to almost 25mtpa, although those plans now seem remote in view of last Friday’s filing.

Two trains currently in operation

The Cameron plant was first conceived as a 3-train export plant in 2014 and is currently operating on two 4.98mtpa (million tonnes per annum) trains. Under Phase 1, the plant’s first train came into full commercial operation under its tolling agreements on 29 August 2019 after major construction fished in November 2018.

Commercial operations began with 6 spot cargoes

However, the plant had already begun with the shipping of 6 spot cargoes as part of performance testing via the Marvel Crane, the BW Everett, the GasLog Sydney and the SK Resolute in May that year, our LNG Market Tracker shows. We are currently expecting the Marvel Crane to lift its fourth cargo from the plant in Hackberry, Louisiana later this week.

Train 2 in operation since December 2019, Train 3 ready by September 2020

Phase 2 of the project comprises the construction of Trains 2 and 3 to increase the site’s gas liquefaction capacity by 9.97mtpa to 14.95mtpa. Train 2 entered commercial operations on 23 December last year, with Train 3 expected to commence commercial operations by September this year.

Train 1 operating at capacity, train 2 slowly ramping up

Although exports from the plant have seen continued growth since May 2019 (Train 1 is producing at capacity according to our data), we estimate Cameron LNG will need roughly 6 months to bring Train 2 to full capacity.

Although managing a bumper year, US LNG faced headwinds in 2H 2019

Although year-on-year trading grew robustly by 78% in 2019, US LNG faced a tricky 2H as production ramp ups in Australia, weaker North Asian demand on account of Chinese tariffs and milder-than-expected weather required traders of US LNG cargoes to hunt high and low for buyers elsewhere. Accordingly, the share of the Far East as a destination of Cameron LNG cargoes has seen continued decline since October 2019 with European destinations led by Spain and Poland increasing offtake of US LNG significantly.

Several large-scale US LNG projects remain in the pipeline with their future increasingly uncertain

Several more large-scale projects waiting to be developed in the US, but Cameron LNG’s move to push back development beyond its initial plan of 3 trains means their future has become less certain. Projects such as Port Arthur LNG, Gulf LNG Liquefaction, Eagle LNG Partners and Venture Global LNG have FERC approval but lack final investment decisions. It remains to be seen whether any of these will be constructed as planned since a massive expansion in Qatar is likely to add downward pressure on global LNG prices by around 2024.

Silver lining with price-conscious buyers transitioning to gas

However, we see a silver lining in the transition towards gas as a major fuel in Pakistan and India. As price conscious buyers of LNG, the countries are known to shop around for the best prices available. Consequently, flexible US cargoes may prove to be attractive options. The two countries increased their US offtake by 167% and 110% y/y in 2019, respectively.

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Annova LNG project signs deal to line up Texas feed-gas

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The US Annova liquefied natural gas export project planned for the south bank of the Brownsville Ship Channel in Texas, and whose owners include Chicago-based power company Exelon Corp., has signed an accord to arrange feed-gas deliveries from the Agua Dulce hub in Texas.

The Annova project is expected to ship around 6.95 million tonnes per annum from its proposed liquefaction and plant planed as part of the second wave build-out for exports.

The joint venture proposes the construction of six small-scale liquefaction Trains as well as an interconnected pipeline and marine export facilities.Annova said it signed a precedent agreement with Enbridge Inc. affiliate, Valley Crossing Pipeline, LLC (VCP), to providing transportation for its total feed-gas requirements.

The project’s investment-grade equity owners including Exelon, Black & Veatch Corp. of Kansas and Kiewit Corp. of Nebraska.

Annova’s strategy is to offer volumes to mid-scale customers who are seeking to buy increments of 1.0 MTPA.

The accord proposes that the existing Valley Crossing Pipeline from Agua Dulce to Brownsville will be expanded along with the construction of an nine-mile lateral connecting VCP to Annova liquefaction plant.

“Annova LNG’s firm transportation arrangements will ensure security of supply and access to the most diversified, low-cost feed gas of any of the US LNG facilities,” said Omar Khayum, Chief Executive of Annova.

“We will be the most sustainable and reliable provider of LNG from the United States,” added Khayum.

The LNG facility also plans to use electric-driven compressor engines and source its electricity through 100 percent carbon-free renewable energy resources.

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MSC Cruises increases French shipbuilding book with order for another two LNG-powered ships

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MSC Cruises, the Swiss-based cruise ship operator, said it signed an agreement with French shipyard Chantiers de l’Atlantique for its third and fourth LNG-powered vessels.

The contract with MSC Cruises is such a boost for French shipbuilding that it was signed at the Paris office of the French Prime Minister.

The MSC “World Class” ships will be delivered in 2025 and 2027.

The first of the initial two ships in the class is currently under construction at the Chantiers de l’Atlantique shipyard in Saint-Nazaire, Western France, and is due to enter service in 2022.

MSC said the Saint-Nazaire LNG-fueled newbuild contracts are valued at more than 2 billion euros ($2.22Bln).

The company said the order guarantees over 2,400 full-time equivalent jobs for the next three-and-a-half years.“The signatures also allows the shipyard to start working with the hundreds of suppliers and subcontractors involved in the projects, setting in motion a new cycle that will greatly benefit the French economy,” said MSC.

The first newbuild will become the biggest vessel operated by a European cruise line as well as the first LNG-powered cruise ship built in France.

Compared to standard marine fuel, LNG decreases sulphur emissions and particulate matter by 99 percent, nitrogen-oxide emissions by 85 percent and carbon-dioxide emissions by 20 percent.

The signing ceremony took place at the Hotel Matignon, the French Prime Minister’s official residence.

French Prime Minister Edouard Philippe was in attendance along with Gianluigi Aponte, the MSC Group’s Founder and Executive Chairman as well as Pierfrancesco Vago, MSC Cruises’s Executive Chairman and Laurent Castaing, the General Manager of Chantiers de l’Atlantique.

A second accord saw MSC Cruises partnering with Chantiers de l’Atlantique in the development of yet another innovative prototype ship class concept. This explores opportunities that wind power and other advanced technologies could bring to passenger shipping.

MSC said the three agreements signed in Paris represented an investment in excess of 6.5bln euros ($7.3Bln) in the French economy.

“The three agreements extend our investment plan up to 2030,” said MSC’s Chairman Vago.

“They stem from an exceptional partnership, with Chantiers de l’Atlantique, that has already delivered 15 highly-innovative cruise ships over the past two decades and will see many more vessels come to life at Saint-Nazaire’s docks in the next 10 years,” explained Vago.

“They also confirm this industry’s commitment to environmental sustainability, in this case helping the French national industry further position itself as a world leader in the development of next-generation technologies and other solutions,” he added.

Shipyard Manager Castaing said Chantiers de l’Atlantique was really proud and happy to have built such an outstanding relationship with MSC Cruises.

“This is based on mutual trust and driven by the spirit of innovation. We are both committed to shaping the cruise of tomorrow and to developing ship concepts which go far beyond current environmental standards.,” said Castaing.

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Beijing Gas LNG import plans for Tianjin port are approved

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LNG Journal editor

Beijing Gas Group has obtained the government’s approval to construct a liquefied natural gas import terminal with huge storage tank capacity in the Nangang district of Tianjin city, giving the port of Tianjin three facilities to guarantee energy supply security to the Chinese capital.

The terminal will have an initial 5 million tonnes per annum of capacity and adds to the supply available from Sinopec’s Tianjin North import terminal and the Floating Storage and Regasification Unit capacity deployed in recent years by China National Offshore Oil Corp.

Bank loan

Asian Infrastructure Investment Bank (AIIB), backed by the Chinese government, said in December 2019 it was investing $500 million in a new LNG import project near Tianjin port under the management of state-run Beijing Gas to help support efforts to reduce air pollution.

With a population of around 113 million, the Beijing-Tianjin-Hebei region is one of the most important economic engines within China and has increasing natural gas demand.It is also an area where the Chinese government has concentrated its “Blue Skies” policy to reducing coal consumption will also deliver the co-benefit of improving air quality.

Beijing Gas is mainly engaged in city-gas distribution and supplies more than 10 billion cubic metres per annum to the Chinese capital and surrounding areas.

The AIIB said in extending the loan to Beijing Gas that the region can meet its environmental commitments and still ensure adequate gas supply to maintain peoples’ livelihoods.

The new Tianjin terminal project has also been approved by the National Development and Reform Commission.

Beijing Gas said its terminal in Tianjin was expected to be completed by 2022 and will include emergency reserves comprising 10 extra storage tanks with 200,000 cubic metres capacity each.

The new Tianjin terminal will also have a jetty to receive the largest carriers of 260,000 cubic metres capacity. There will also be a pipeline of 230 kilometres to send regasified LNG supplies to gas storage facilities near Beijing.

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Santos reports higher volumes and more CSG wells for Gladstone LNG

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Adelaide company posted record output which was up by 28 percent

LNG Journal editor

Australian energy company Santos reported average LNG prices of over US$9 per million British thermal units in the fourth quarter and higher sales at the Gladstone export plant in Queensland, driven by stronger upstream equity gas production and a record 393 coal-seam gas wells drilled.

Santos, based in the city of Adelaide, said annual production of 75.5 million barrels of oil equivalent was a record and 28 percent above the prior year.

Prices

Santos said that during the fourth quarter it sold LNG at an average price of US$9.07 per million British thermal units compared with US$10.04 in the third quarter and $10.96 per MMBtu in the same three months a year ago.

The company also logged record annual sales revenue of over US$4 billion, an increase of 10 percent, generated from volumes of 94.5 million barrels of oil equivalent.

Gross GLNG-operated upstream sales gas production increased at the end of the quarter, supported by continued steady growth from Roma and Arcadia.

“Drilling continues in the Roma East project with 327 wells drilled and 302 wells online to date,” said Santos.

“A record number of wells were drilled and connected in 2019: 393 wells were drilled (29 percent higher than 2018) and 431 wells were connected (44 percent higher than 2018),” added Santos.

“Sixty-two development wells were drilled across Santos’ non-operated Eastern Queensland acreage in the quarter,” it stated.

CSG-to-LNG projects each require feed-gas resources from several thousand CSG wells over the lifespan of the plants.

The fourth quarter was marked by the acquisition of the ConocoPhillips business in northern Australia and Timor-Leste comprising the single-Train Darwin LNG plant as well as the Bayu-Undan, Barossa and Poseidon gas field stakes.

The purchase was valued at US$1.39 billion, plus a US$75 million contingent payment subject to a final investment decision on the Barossa project. It was fully-funded from existing cash resources and new committed debt.

Santos had an existing stake in Darwin LNG. It is also a shareholder in Papua New Guinea LNG and its expansion plan, as well as being operator of GLNG plant on Curtis Island, near Gladstone.

During the fourth quarter, PNG LNG shipped 28 cargoes, a further 22 shipments departed from GLNG and 11 were shipped by Darwin LNG.

“The year was highlighted by highest ever free cash flow of more than $1.1 billion, record onshore drilling performance, lower unit production costs and significant progress on our diversified portfolio of growth projects,” said Santos Chief Executive Kevin Gallagher.

“Santos delivered record annual production and revenues in 2019, and lower unit production costs, clearly demonstrating the effectiveness of our disciplined, cash generative operating model,” added the CEO.

“The acquisition of ConocoPhillips’ natural gas assets in northern Australia and Timor-Leste announced in October is fully aligned with our growth strategy to build on existing infrastructure positions and delivers operatorship and control of strategic LNG infrastructure at Darwin,” explained Gallagher.

The CEO said that in the Northern Territory of Australia, there were better than expected gas flow rates from the ongoing Tanumbirini-1 vertical well test.

He added that this was very encouraging and an important step in the appraisal by the company of the significant resource potential of the McArthur Basin.

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Rescue plan approved for US company McDermott

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McDermott International, the US energy and engineering company, said it had received approval for a comprehensive restructuring plan supported by more than two-thirds of all its funded debt creditors.

The equity-for-debt plan would eliminate more than $4.6 billion of McDermott’s debt.

The restructuring transaction will be implemented through a pre-packaged Chapter 11 process, which under US law gives protection from bankruptcy.

It will be financed by a debtor-in-possession (DIP) financing facility of $2.81 billion.

McDermott is involved in some of the world’s leading LNG construction projects, including several on the US Gulf Coast and the North Field Expansion in Qatar.

Currently McDermott is working with other firms on both the Cameron LNG project at Hackberry in Louisiana and the Freeport export facility at Quintana Island in Texas.

McDermott has additionally been engaged as a contractor on the Golden Pass LNG export project for Qatar Petroleum and ExxonMobil venture in Texas.

“Subject to court approval, McDermott expects the DIP financing, combined with cash generated by McDermott, to enable the company to stabilize its cash flows, continue operating in the normal course and fulfil its commitments to key stakeholders, including customers, suppliers, joint-venture partners, business partners and employees,” stated the Houston-based company.

McDermott has additionally secured committed exit financing of over $2.4Bln in letter of credit facility capacity and will emerge from Chapter 11 with around $500 million in funded debt.

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UK February cargo

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Jan 28 (LNGJ) – The first February cargo is heading for the UK South Hook LNG import terminal at Milford Haven in Wales. The shipment will arrive on February 3 on board Qatari Q-Max carrier “Al Ghuwairiya” with 261,700 cubic metres of capacity. Cargoes are heading for the UK and other European destinations even as record seasonally low prices prevail because of excess supplies. The UK National Balancing Point price was last at around $3.60 per million British thermal units and the main price on Continental Europe, the Dutch Title Transfer Facility (TTF), was at the equivalent of $3.40 per MMBtu. 

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Magnolia LNG permit

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Jan 27 (LNGJ) – The US Federal Energy Regulatory Commission has  prepared a final supplemental environmental impact statement for the Magnolia LNG project proposed for Lake Charles in Louisiana, which has a deal to export shipments to Vietnam. The Magnolia project, owned by Australian-listed LNG Ltd, requested authorization to increase capacity at the previously authorized project from 8 million metric tonnes per annum to 8.8 MTPA. 

   “The increased production capacity would be achieved through the optimization of Magnolia LNG’s final design, including additional and modified process equipment,” the FERC noted. “With the incorporation of the mitigation measures identified in the supplemental EIS, staff concluded the LNG terminal design would include acceptable layers of protection or safeguards,” it added.

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US/China trade deal – what does it hold for LNG?

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Wood Mackenzie’s Asia/Pacific Vice Chair, Gavin Thompson, has commented on how the Phase One signing of the trade agreement between US and China earlier this month, will affect the LNG trades.

He said: “From an energy perspective, what is most notable is China’s agreement to increase energy imports from the US by up to $52.4 bill over the next two years as a part of a commitment to spend around $200 bill more on US goods and services than it did in 2017.

“Let’s be clear; $52.4 bill over two years is a lot of energy. But neither the 5% tariff on US crude oil nor the 25% tariff on US LNG is to be reduced or removed by China under the Phase One deal. For China to massively increase imports of oil and LNG from the US while tariffs remain in place, is going to be challenging.

“Consider LNG. In 2017, China imports from US were approximately 1.5 mill tonnes, worth around $0.6 bill. If China is to increase the value of US LNG imports considerably as a part of this agreement, let’s say to around 10 mill tonnes in 2021, then the 25% tariff would need to be either absorbed by the importing company, or passed through to the consumer. We expect that Chinese national oil companies will be reluctant to commit to large-scale purchases given this.

“At the same time, the next two years will also see a slower pace of gas demand growth in China, rising domestic production, and the arrival of Russian pipeline gas, creating a more competitive gas market.

“The Chinese uncontracted LNG demand is estimated to be 17 mill tonnes in 2020 and 23 mill tonnes in 2021; US offtakers will now be looking to target this market.

“Contract and portfolio suppliers with contracted supply into China and US offtakers – notably Shell, BP and Cheniere – could also target increasing volumes of US LNG within existing contracts into China, if agreement can be reached with key buyers, including CNOOC and PetroChina,” he concluded. 

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