Monthly Gas News Commentary: April 2018
The first LNG cargo from Russian energy major Gazprom will land in India in May, following an agreement in January with India’s state-owned gas supplier and developer GAIL (India) Ltd to bring down prices based on a new formula. The contract for a long-term deal mandates that GAIL will purchase about 2.5 mt of LNG from Gazprom per annum. This comes a few weeks after India’s first LNG cargo from the US landed at the Dhabol regasification terminal in Maharashtra. GAIL has already signed a $32 billion deal with the Dominion Energy Cove Point project in Maryland and the Cheniere Energy’s Sabine Pass project in Louisiana for a supply for 20 years. GAIL is in talks with new fertiliser plants for the supply of imported LNG and also trying to market it to anchor customers such as refineries, power plants and petrochemical units near its planned and existing pipelines. GAIL has entered into long-term contracts with global companies to bring LNG from various markets, expecting a rise in demand from the power sector.
GAIL plans to buy 0.5 mt or eight cargoes of LNG from Russia’s Gazprom in 2018/19. GAIL renegotiated the terms of a long-term 2.5 mtpa LNG purchase deal with Russia’s Gazprom in January. This was the third such renegotiation by India with LNG suppliers to make the imported fuel more affordable, using its position as one of the world’s biggest energy consumers to strike better bargains for its companies. India has also renegotiated long-term LNG deals with Qatar’s RasGas and Exxon Mobil Corp as spot prices declined substantially amid a supply glut that turned trading of the seaborne gas into a buyers’ market. The much-delayed Kochi-Mangalore natural gas pipeline, which can open up a substantial latent demand in South India, will be ready by November. GAIL is working on implementing a national gas grid that is aimed at connecting the under-served eastern part of the country to the rest of the nation.
GAIL said it will bring to India only half of the LNG it has contracted from the US as it has either swapped or sold the remaining volumes. GAIL has a deal to buy 3.5 mtpa of LNG for 20 years from Cheniere Energy of the US and has also booked capacity for another 2.3 mt at Dominion Energy’s Cove Point liquefaction plant. The first US cargo arrived at the firm’s Dabhol LNG import terminal in Maharashtra on March 30. Also, the firm’s renegotiated LNG import deal with Russian supplier Gazprom will kick-in from May, with volumes gradually ramping up to fully contracted quantity of 2.5 mt in 5-6 year, GAIL said. GAIL had sold 81-82 mmscmd of gas in 2017-18, which would rise to 91-92 mmscmd because of arrival of US and Russian volumes. The company has swapped half of the 5.8 mtpa of US LNG in a bid to rejig supply portfolio in line with domestic demand. GAIL sold 3.5 mt of the US LNG via time swaps, destination swaps and shipping optimisation.
India and the US decided to set up a joint task force on natural gas with a view to promote strategic and economic interest of the two nations. As a first step in realising the full potential of the Strategic Energy Partnership, the US and India are pleased to announce the US-India Natural Gas Task Force. The task force provides a team of US and Indian industry experts with a mandate to propose, develop, and convey, innovative policy recommendations to the Government of India in support of its vision for natural gas in the economy of India. The work of the task force is expected to advance the strategic and economic interests of both the US and India.
India plans to set up a natural gas trading exchange as early as October this year to prepare for a surge in supply from India’s east coast and a slew of LNG terminals. India currently imports LNG at global rates LNG-AS of around $7.50/mmBtu while the government sets domestic gas prices at $3.06/mmBtu. India plans to increase the share of gas in India’s energy mix to 15 percent by 2030 from below 6.5 percent now. India currently produces close to 90 mmscmd of gas and imports another 70 mmscmd as LNG, according to government figures for 2016-17. In the next three to five years, as natural gas projects from India’s ONGC and a partnership involving BP and RIL ramp up, India’s domestic gas output will be in the range of 140 mmscmd. India’s industrial gas consumers such as power plants and fertiliser makers were disappointed in 2010 after promised gas output from the east coast’s Krishna-Godavari basin fell short of expectations. Many facilities that were built in anticipation of more gas production remain stranded without adequate fuel. The RIL-BP partnership plans to develop three assets off India’s east coast, and ONGC is developing another gas field in the same region.
The PNGRB has sought bids to hire a consultant to help develop a regulatory framework for operationalising the gas trading / exchange hub. Currently, the government fixes the price of the bulk of domestically produced natural gas. The rate, arrived at using price prevalent in gas-surplus nations of US, Canada, UK, and Russia, is $3.06/mmBtu for six month period beginning April 1. In comparison, the cost of imported LNG into India is around $7.5/mmBtu. PNGRB said the oil ministry has asked it to initiate steps for framing of necessary regulatory framework to enable the establishment and operation of a Gas Trading Hub / Exchange. PNGRB would visit USA, UK, and Australia, where the gas trading hub is successfully operating, to decide if there is a need to amend existing regulations. The target for launch of the gas trading hub has been set for October. A hub is used as a central pricing point for a network that could aid better price discovery for domestic as well as imported gas. It isn’t clear if the government would abandon fixing the gas price and allow the rates to be discovered on the hub. India is not only country launching trading hub. China plans to launch a natural gas trading hub in Chongqing this year.
APSEZ said it has entered into a pact with IOC to provide LNG regasification services at its import terminal in Odisha. As per the contract, IOC has booked 3 mtpa regasification capacity spread over 20 years, APSEZ said. IOC plans to supply gas to its refineries in Paradip in Odisha and Haldia in West Bengal. The foundation stone of the project was laid in July 2017 and construction has commenced by infrastructure firm Larsen & Toubro, winning the contract to set up the tankages for gas storage. The terminal is expected to be commissioned during the second half of 2021. APSEZ said the proposed Dhamra LNG import terminal is designed for an initial capacity of 5 mtpa, expandable up to 10 mtpa.
Opportunities are poised to open for private oil and gas producers in CBM extraction. CIL is likely to float global tenders to appoint service providers on this project. Sources in CIL suggested as the Centre had cleared the grey area which previously stalled CBM extraction by the coal behemoth, it will be on the lookout for service providers which can extract the gas from its mines for commercial sale. However, the tender for this selection will depend on the Centre’s policy decision. In 2015, the Centre had approved CIL exploring and exploiting CBM but required it to apply to the petroleum and natural gas ministry. However, the government amended the rule, permitting CIL to explore and harvest CBM without a licence or grant from the petroleum and natural gas ministry.
GAIL said the first phase of the 2,655 km gas pipeline from Jagdishpur in Uttar Pradesh to West Bengal and Odisha will be completed before the scheduled target of December 2018. The company said it has placed pipe-laying order for 530 km between Bokaro in Jharkhand and Angul in Odisha, worth ₹ 7.80 billion. The prestigious 2,655 km long Jagdishpur-Haldia & Bokaro-Dhamra Natural Gas Pipeline project, also known as the ‘Pradhan Mantri Urja Ganga’ project. The project will usher in industrial development in eastern part of India by supplying environmentally clean natural gas to fertilizer and power plant, refineries, steel plants and other industries. It will also provide clean energy to households and transportation in the cities enroute the pipeline. The city gas network laying activity in Varanasi, Bhubaneswar and Cuttack has already commenced. Project activities will start on ground in other cities namely Patna, Ranchi and Jamshedpur by next month, GAIL said. GAIL said the project activities are progressing as per schedule and major contracts for the project have been awarded. GAIL has achieved its annual targeted total capital outlay and has expended around ₹ 40 billion during the fiscal year ending March 2018. The company will be spending its targeted capital outlay of ₹ 64 billion in the current fiscal largely for the 4,000 km of pipeline and city gas projects it is presently executing.
IGL expects its sales volume to industrial and commercial clients rise 20% in 2018-19, after experiencing a similar gain last fiscal year, following a ban on using polluting pet coke and fuel oil in the National Capital Region on rising green concerns. Delhi has been one of the most polluted cities in the world for years now. With smog-filled winter sky becoming an annual feature, the demand for dramatic steps to cut pollution has grown louder with years. IGL plans to use the restrictions on polluting fuel as an opportunity to add as many as 2,000 industrial and commercial customers in 2018-19 to its current base of 3,000. Since most of these clients are likely to be smaller, the sales volume addition is expected to be just 20% over the current volume of 500,000 standard cubic meters a day. IGL is also planning to rapidly expand sales of CNG, used by cars and buses. To tide over the scarcity of land in cities for setting up fuel stations, IGL has begun appointing dealers to set up CNG stations – so far the company owned and operated all its filling stations. Two dealer-owned, dealer-operated CNG stations have been launched while a dozen more are on the way, IGL said. IGL expanded its piped gas connection to households by a record 150,000 in 2017-18. IGL is waiting for permission to take piped gas to homes in Delhi’s cantonment area, which has 30,000 houses of defence personnel and an equal number of civilian homes. For its expansion, IGL is focusing on congested colonies, which had escaped attention earlier but are now being targeted with enhanced security features.
BPCL is planning to hive off its gas business into a separate wholly-owned subsidiary. BPCL, which is present in various segments of natural gas sales and supply, has been strengthening its gas business over the past few years. By hiving off this business as a separate subsidiary, the company intends to sharpen its focus and bring all natural gas-related businesses into one fold. The new unit may be christened Bharat Petroleum Natural Gas Company. BPCL is a co-promoter of Petronet LNG Ltd, along with IOC, ONGC and GAIL. Over the next five years, BPCL has set itself an investment target of ₹ 1 trillion to be spent on all its expansion activities including marketing, refining and strengthening of the gas business. BPCL has been importing LNG and supplying it to customers in the fertilizer, power, city gas distribution, steel and other industries across the country. Its own LNG imports help BPCL mark its presence in the LNG market, apart from being economical for use at its refineries. BPCL also markets LNG by tank trucks from Dahej to some customers such as General Motors, Mahindra & Mahindra Ltd, Modern Insulators Ltd and Tetrapak etc.
PNGRB released new rules on bidding for obtaining a licence to retail CNG and PNG in cities. Under the fresh parameters, future auctions would be conducted by asking companies to quote the number of CNG stations to be set up, while for PNG it would be the number of domestic cooking gas connections to be given in the first eight years of operation. Bidders quoting higher numbers of these would be given more marks. The previous criteria for winning a licence – the tariff charge for transporting CNG and or PNG within the city – has been given just 10 percent weightage under the new regulations. The number of CNG stations and PNG connections to be released command 70 percent of the bidding weightage. Bidders will also be required to quote the length of pipeline they would lay on winning the licence. Entities having experience of at least one year in operation and maintenance of a CGD network and having sufficient technically qualified personnel would be eligible for bidding, as per the terms of the bid. Companies with net worth of no less than ₹ 1.5 billion can bid for cities with population of 5 million and above, while ₹ 1 billion is the minimum requirement for cities with population of 2-5 million. A company with a ₹ 50 million net worth firm is eligible to bid for cities that have less than 1 million population. According to PNGRB, the successful CGD licence bidder would have to enter into a firm natural gas supply agreement with a natural gas producer or marketer in a transparent manner on the arm’s length principle within 180 days of winning a license. The winning company would have eight years of marketing exclusivity in the given city, which is an increase from the current 5-year licences. So far, the petroleum regulator has undertaken eight rounds of bidding. While the last few rounds of CGD have drew lukewarm response, the fourth round was scrapped altogether.
The oil ministry has asked sector regulator PNGRB to look at unbundling of companies like GAIL to resolve the conflict of interest in being both the transporter and marketer of natural gas. The reference to the PNGRB follows a revival of a plan to split GAIL by hiving off gas marketing business into a separate firm, leaving just pipeline transportation with GAIL. Over a period of time more players have come into gas marketing. Gujarat government entity GSPC is a major player in gas marketing and also in gas transportation. The Government had in 2006 issued the Policy for Development of Natural Gas Pipelines and City for Local Natural Gas Distribution Networks which envisaged that in the long run and with the maturing of gas markets, the authorised entities will have transportation of natural gas as their sole business activity and will not have any business interest in the gas marketing or city or local gas distribution networks. GAIL had in the past resisted the split on grounds that its gas marketing and transmission businesses operate at arm’s length, and hence do not need to be separated. GAIL’s marketing business formed 71 percent of its 2016 -17 total sales, and 25 percent pre-tax profit. The government has 54.89 percent stake in GAIL.
Rest of the World
Russian gas giant Gazprom said it has lodged a claim to an international arbitration seeking to cancel its supply and transit contracts with Ukraine. It said talks with Kiev over the contracts had ended without concrete results and it had lodged a claim to a Stockholm arbitration court. The contracts are due to expire at the end of 2019. Gazprom appealed against a previous Stockholm arbitration ruling, which obliged the Kremlin-controlled company to pay Ukraine’s Naftogaz $2.65 billion following a long dispute between the companies over gas delivery. Ukraine is a major transit country for Russian gas supplies to Europe where Gazprom accounts for around 35 percent of the gas market. Gazprom said it would terminate its gas contracts with Ukraine after it lost the court case, escalating a dispute which had left Ukraine struggling to stay warm and which the European Union said could threaten gas flows to Europe.
Russia’s No. 2 oil producer Lukoil has started operations at a $3.4 billion gas processing plant at its Kandym gasfield in Uzbekistan, which is seen as central to its efforts to boost gas production and exports to China. The Russian government said that the gas processing complex, with a capacity of 8 bcm per year, had been launched ahead of schedule. Lukoil has not revealed any data on gas exports to China from Uzbekistan. Lukoil said it has raised a $660 million loan to finance part of the cost of building the gas plant in Uzbekistan. Lukoil is working in the country under a production-sharing agreement that accounts for a quarter of all of Uzbekistan’s gas output. The company plans to double gas production in Uzbekistan to 16 bcm per year by 2020 from 8 bcm in 2017. Lukoil’s total gas output reached almost 33 bcm in 2017.
Russian said it was ready to consider using Ukraine as a gas transit route after 2020. Germany said that a gas pipeline planned to run from Russia to Germany through the Baltic Sea could not go ahead without clarity on Ukraine’s role as a transit route for gas, appearing to harden her stance on the scheme. The Russian energy ministry said that Novak and Sefcovic had spoken by telephone and discussed the delivery of Russian gas to European markets. ExxonMobil Corp expects to restart production from its Papua New Guinea LNG project at the start of May after it was shut following an earthquake in February, ExxonMobil LNG Vice President Emma Cochrane said. The $19 billion LNG facility, opened in 2014 in a remote location in one of Asia’s poorest and most politically troubled countries, has been closed since the powerful 7.5 magnitude earthquake. The project is considered one of the world’s best-performing LNG operations, despite the challenge of drilling for gas and building a plant and pipeline in the remote Papua New Guinea jungle. Australia’s Oil Search and Santos are Exxon’s main partners in the project. The LNG export terminal may not be able to produce at full capacity at first and will likely ramp up gradually, Cochrane said. Cochrane said the company has recertified the reserves in its P’nyang field in Papua New Guinea, and the reserves are higher than it previously thought. Exxon is likely to take a final investment decision this year on expanding its Golden Pass LNG terminal in Texas – a joint venture between Qatar Petroleum, ExxonMobil and ConocoPhillips, Cochrane said.
One of Russia’s European neighbours is fully embracing US LNG. Lithuania, the Baltic state that used to be completely dependent on gas piped in from Russia, is turning to LNG from Norway to the US to help negotiate better prices from its former Soviet ruler. The country of just 2.8 million people is now the biggest European buyer of US LNG after Spain and Portugal. The US has been trying to encourage Europeans to buy more of its gas and vehemently opposes the expansion of a pipeline directly from Russia to Germany that bypasses Ukraine and other eastern European transit nations. Lithuania signed two agreements with the Freeport LNG project in Texas during a meeting with President Donald Trump in Washington earlier this month, deepening its ties with the US and the rivalry with Russian gas.
CNOOC sold cargoes of LNG on a domestic exchange for the first time, the latest step by China to boost supplies of the clean fuel as the nation shifts away from coal. CNOOC sold 60,000 tonnes of LNG for delivery in July at prices between 3,380 yuan ($537.80) to 3,390 yuan per tonne. It sold another 30,000 tonnes for November delivery at between 4,200 yuan and 4,210 yuan per tonne through an auction on the Shanghai Petroleum and Gas Exchange. Buying forward supplies through auctions like the Shanghai Exchange’s would give factories a chance to lock in prices and gas ahead of the winter heating season. More auctions would also help build liquidity on the Shanghai Exchange. CNOOC is likely to hold another auction next month. China is the world’s third-biggest consumer of natural gas. Shanghai launched its electronic platform in 2015 to create a pricing benchmark for China’s burgeoning gas market.
China’s shale gas production will likely reach 17 bcm in 2020, nearly double the 2017 level, as local oil companies make big progress with drilling technology and cost cutting, consultancy Wood Mackenzie said. Nearly 700 new wells will come on-stream between 2018 and 2020 at three key projects – Sinopec’s Fuling, and PetroChina’s Changning-Weiyuan and Zhaotong – all located in the country’s southwest, and at a total cost of $5.5 billion, Woodmac estimated. The forecast 17 bcm of output in 2020 falls short of Beijing’s goal of 30 bcm, which was slashed by more than half from the government’s initial target set in 2012. That means the world’s No.3 gas user will need to keep its imports of LNG at elevated levels. Woodmac has separately forecast China’s LNG imports will increase by a quarter to nearly 49 mt this year, from record highs in 2017. China produced 9 bcm of shale gas last year, or 6 percent of its total gas output. Despite estimates that China is home to the world’s largest recoverable shale gas resource, its shale formations tend to be deeper, more fractured and located in densely populated mountainous terrains, leading to higher costs and complications in drilling. Shell, which pledged billions of dollars of investment in China’s shale sector, pulled out of shale operations in Sichuan several years ago.
China’s Sinopec group, parent of Sinopec Corp, aims to more than double its receiving capacity of LNG over the next six years and lift domestic shale gas production by two thirds by 2020. The plans are part of the state energy firm’s efforts for clean fuel production to account for half of its total energy supply by 2023. Sinopec will have 60 bcm of natural gas supply capacity, which includes both imports and domestic production, by 2023, the group said. It produced 27 bcm of gas in 2017. The group plans to add new receiving facilities for imported LNG along China’s east coast to a total of 26 mt annually by 2023, up from the current 9 mt including the recently launched terminal in Tianjin.
China has cut resources tax on shale gas production by 30 percent from April 1, the finance ministry said, as the world’s largest energy consumer aims to lift domestic gas supplies. Resources tax on shale production was reduced to 4.2 percent from the previous 6 percent, according to the ministry. The new tax rate will be effective for three years, the ministry said.
US natural gas prices could rise in 2018 after utilities pulled the second biggest amount of gas from storage on record over the winter, even though the season was slightly warmer than normal. That left total stockpiles about 20 percent below usual at the end of the heating season on March 31, and will require companies to add 16 percent more gas than usual into storage this summer just to get inventories back to normal levels before next winter. Some analysts think the market is putting too much weight on rising production to refill inventories this year, and is not worried enough about a projected increase in domestic demand and exports. Prices for gas at the Henry Hub benchmark in Louisiana have averaged less than $3/mmBtu since 2015, versus more than $5 over the prior 10 years, and are expected to remain below $3 through at least 2024 based on current futures trading on the New York Mercantile Exchange. US dry gas production is projected to rise to an all-time high of 2.3 bcm per day in 2018, but US consumption is also expected to hit an all-time high of 2.2 bcm per day in 2018. With exports rising to record highs as well, it does not leave a lot of extra gas to go into storage.
Shell and Inpex are on the final stretch of a years-long race to export gas from offshore northern Australia, where both have spent billions of dollars building the world’s biggest maritime vessels to grab a slice of Asia’s booming LNG market. Anglo-Dutch energy major Royal Dutch Shell and Inpex, Japan’s biggest oil and gas producer, are vying for first gas from two overlapping fields after delays and cost overruns that have plagued both projects. Inpex has the 340 meter-long Ichthys Explorer, a floating LNG production and storage unit, built in South Korea, in parallel with Shell’s Prelude.
Japan’s Inpex Corp and its partners have bought a cargo of LNG to cool their Ichthys LNG plant in Australia ahead of a potential start-up of the much delayed facility. To produce LNG, natural gas is cooled down to around minus 160 degrees Celsius, so facilities must be chilled before production can begin, typically by using fuel from other sites. Taking such a step indicates the plant, in northern Australia’s Darwin, is getting closer to starting output. The LNG tanker ‘Pacific Breeze’ is currently in the Java Sea and expected to reach Darwin on April 26, with a draft of 93 percent, suggesting it is almost full. The ship has the capacity to carry up to 182,000 cubic metres of LNG, according to Inpex. Inpex said the vessel had been chartered to transport LNG bought from another LNG project with the objective of cooling the onshore Ichthys LNG plant ahead of the project’s start-up. Inpex said the vessel’s LNG could also possibly be used as a first export cargo should Ichthys experience further delays in production, but stressed this had not yet been decided. Inpex said in March it had postponed its latest planned start-up to April or May. The start was originally slated for 2016. Exports from new LNG projects including Ichthys are expected to help Australia overtake Qatar to become the world’s largest exporter of the super-chilled fuel by 2019.
Japan’s biggest city gas seller Tokyo Gas Co expects that contracts for LNG cargoes with destination flexibility will spread from the West and Japan to be a common thing worldwide, Tokyo Gas President Takashi Uchida said. Japan’s Fair Trade Commission last June ruled that destination restrictions that prevent the reselling of contracted LNG cargoes breach competition rules. The decision is set to shake up the Asian market for the fuel in the same way as in Europe. LNG exports from the US are also free from destination restrictions. In Japan, only Shizuoka Gas has the capability to re-export fuel by re-loading LNG onto ships. Tokyo Gas and JERA, the world’s top LNG buyer, separately renewed their expiring contracts for the fuel from Malaysia, after decades of jointly procuring gas from the country, due to a difference in procurement strategy, Uchida said. Thanks to the buyer’s market, Tokyo Gas, Japan’s second-biggest buyer of LNG, renewed long-term contract for LNG from Malaysia with destination flexibility “at good terms” last month, he said. Tokyo Gas would increase its ratio of short-term and spot LNG cargoes to long-term contracts out of a total of about 14 million tonnes it buys annually. However, the company would not make a drastic cut in long-term LNG volumes of 50 percent by 2030 as that would be too risky, he said. Tokyo Gas is expected to take the first delivery of LNG from the Cove Point project in the US. state of Maryland some time in April to June. The company has a contract to buy 1.4 mtpa of LNG for 20 years from Cove Point, its first procurement of US shale gas. The company has been arranging with Centrica to exchange a part of its Cove Point offtake with LNG that the British firm procures in Asia Pacific markets, under a location swap deal, to cut transportation costs, but the exact volumes have not been fixed, Uchida said.
The long-delayed Browse gas project off Western Australia has gained key support, with partners in the North West Shelf LNG plant aiming to agree on a tariff by end-June to handle Browse gas, Woodside Petroleum said. Browse is seen as a key source of growth for Woodside but has been stuck on the drawing board for years as plans for onshore and floating LNG development estimated at $30 billion to $45 billion were scrapped. The plan now is to develop the giant gas field to feed the North West Shelf plant, Australia’s biggest LNG plant, when its current gas source runs dry in the 2020s. Just two years ago, the market had been expected to remain in oversupply until around 2023, but that has changed following a sharp jump in gas demand in China.
Chevron Corp will proceed with the second stage of its giant Gorgon LNG export plant off the northwest coast of Western Australia, the company said. Chevron and its joint venture partners plan to sink 11 new wells in the Gorgon and Jansz-Io fields and build offshore pipelines and subsea structures to pipe the gas to the nearby 15.6 mtpa LNG plant on Barrow Island. The $54 billion Gorgon project came on stream in March 2016 but suffered numerous unplanned shutdowns in its early stages. Gorgon Stage Two is part of the original Gorgon development plan which includes the expansion of the subsea gas network required to maintain long-term natural gas supply to Barrow Island. Chevron leads the development of the Wheatstone natural gas project, manages a one-sixth interest in the North West Shelf Venture and operates Australia’s largest onshore oilfield on Barrow Island.
BP plc announced that, together with its partner Oman Oil Company Exploration & Production, it has approved the development of Ghazeer, the second phase of the giant Khazzan gas field in Oman. The final investment decision for Ghazeer follows the successful start-up of Khazzan’s first phase of development in September 2017. This project, which started production ahead of schedule and under budget, is now producing at design capacity of around 1 billion cubic feet of gas per day and around 35,000 barrels per day of condensate, BP revealed. Ghazeer is expected to come onstream in 2021 and deliver an additional 28.3 million cubic meters of gas and over 15,000 barrels of condensate per day.
Finland has approved the construction of the Nord Stream 2 gas pipeline through Finland’s economic zone, the Finnish government and Russian gas exporter Gazprom said. The pipeline between Russia and Germany, which would run for around 375 km across Finland’s economic zone through the Baltic Sea, still requires a construction permit from local Finnish authorities. Nord Stream 2, planned to run from Russia across the bed of the Baltic Sea to Germany, would double the existing Nord Stream pipeline’s current annual capacity of 55 bcm. Eastern European and Baltic states fear the pipeline could increase reliance on Russian gas and undermine Ukraine’s role as a gas transit route, but Germany and other beneficiaries in northern Europe back the project. Germany has approved the pipeline and the project is currently collecting permits from Russia, Sweden and Denmark.
South Korea expects its natural gas demand to rise to over 40 mt in 2031, driven by higher household and industrial consumption of the fuel, the energy ministry said. The world’s third-largest LNG importer had previously forecast natural gas demand falling to 34.65 mt of LNG equivalent in 2029 from 36.49 mt in 2014 due to lower power generation demand. The increased demand forecast of 40.49 mt of LNG in 2031 from estimated 36.46 mt in 2018 comes as South Korea shifts away from coal and nuclear fuel. Reflecting the country’s growing gas demand over the next 13 years, South Korea also plans to spend about 5.8 trillion Korean won ($5.48 billion) by 2031 on expanding its gas supply infrastructure including storage tanks and pipelines. Household and industrial consumption of LNG is expected to grow by 1.24 percent annually to 23.40 mt in 2031 from 19.94 mt in 2018. For power generation, it is expected to increase to 17.09 mt of LNG in 2031 from 16.52 mt in 2018. To ensure gas supply security, South Korea also seeks to diversify gas supplies and have more flexible LNG contracts that do not include restrictive destination clauses or take-or-pay terms. Most of the long-term LNG contracts include the destination clauses that prevent buyers from reselling excess cargoes to other markets, and Asian LNG buyers have been vocal about the removal of the restrictive clauses. South Korea imports most of its LNG through the country’s sole LNG wholesaler Korea Gas Corp. Last year, South Korea imported 37.55 mt of LNG, mainly from Qatar and Australia.
LNG: liquefied natural gas, mt: million tonnes, US: United States, mtpa: million tonnes per annum, mmscmd: million metric standard cubic meter per day, mmBtu: million metric British thermal units, RIL: Reliance Industries Ltd, PNGRB: Petroleum and Natural Gas Regulatory Board, UK: United Kingdom, APSEZ: Adani Ports and Special Economic Zone, IOC: Indian Oil Corp, CBM: coal-bed methane, CIL: Coal India Ltd, km: kilometre, IGL: Indraprastha Gas Ltd, CNG: compressed natural gas, BPCL: Bharat Petroleum Corp Ltd, ONGC: Oil and Natural Gas Corp, PNG: piped natural gas, CGD: city gas distribution, GSPC: Gujarat State Petroleum Corp, bcm: billion cubic meters, CNOOC: China National Offshore Oil Corp
Courtesy: Energy News Monitor | Volume XIV; Issue 47