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MONDAY, NOVEMBER 25, 2019 - VOL. 1, NO. 32

SUPPLYQatar Planning More LNG Mega Trains; Capacity Seen Climbing 64% by 2027

State-owned Qatar Petroleum (QP), the world’s largest nat-ural gas producer, said by 2027 it should be able to increase cur-rent liquefaction capacity by 64%.

Liquefied natural gas (LNG) capacity now is set to climb to 126 million metric tons/year (mmty) from 77 mmty.

NEWSCommonwealth Export Project Scores Offtake Deal with Major LNG Trader

Gunvor Group Ltd. has thrown its support behind the Commonwealth liquefied natural gas (LNG) export project through an agreement that would see the LNG trading heavyweight commit to take more than a third of the capacity at the Cameron Parish, LA, facility....cont' pg. 3 ...cont' pg. 4

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...cont' pg. 4

...from SUPPLY - Qatar Planning More LNG Mega Trains, pg. 1

Last April, QP CEO Saad Sherida Al-Kaabi said the country was working to boost capacity from the massive North Field to 110 mmty by 2024, which he affirmed in October. The field extends into Iran.

However, newly completed studies have revealed that the North Field’s productive layers extend “well into Qatari land in Ras Laffan,” allowing expanded production in the northern part of the country.

Al-Kaabi addressed the new findings in a press conference on Monday.

“During the past two years, Qatar Petroleum worked dili-gently to determine the degree to which the North Field extends towards the southwest, as well as the possibility of production from Qatar’s northern coastal onshore areas,” he said.

The “appraisal efforts have borne fruit, and we have confir-mation that the productive layers of the North Field extend well into Qatari land in Ras Laffan. Studies and well tests have also confirmed the ability to produce large quantities of gas from this new sector of the North Field.”

The latest North Field appraisal well, NF-12, was drilled onshore in the Ras Laffan Industrial City, about 12 kilometers (7.4 miles) from shore and “underwent extensive testing over the past few months.”

Al-Kaabi also announced that the confirmed gas reserves of the North Field exceed 1,760 Tcf, in addition to more than 70 billion bbl of condensates, and “massive quantities” of lique-fied petroleum gas, ethane, and helium.

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“These are very important findings, which will have a great positive impact on Qatar’s gas industry, and which will move it forward into bigger and wider horizons,” he said.

“These results will also enable us to immediately com-mence the necessary engineering work for two additional LNG mega trains with a combined annual capacity of 16 mmty. This will raise Qatar’s LNG production from currently 77 mmty to 126 mmty by 2027, representing an increase of about 64%.”

The expansion, Al-Kaabi said, also is expected to increase Qatar’s overall hydrocarbon production to about 6.7 million boe/d. Combined oil and natural gas, which QP supplies via pipeline and through LNG exports, this year has been around 4.8 million boe/d.

QP in late 2018 said it planned to exit the Organization of the Petroleum Exporting Countries, i.e. OPEC, to concentrate on building its gas business. In the United States, QP is part-nering with ExxonMobil Corp. to build the 16 mmty Golden Pass LNG export project in Texas, which was sanctioned in February and is set for ramping up in 2024. QP and Exxon-Mobil also have established Ocean LNG to handle all produc-tion marketing. n

...cont' pg. 5

. . . from NEWS - Commonwealth Export Project Scores Offtake Deal, pg. 1

Under the agreement, Gunvor will commit to take up to 3 million metric tons/year (mmty) of LNG offtake from the facility. The trading house will also support Commonwealth in securing binding LNG offtake and gas supply agreements for the full 8.4 mmty of capacity at the facility.

“In this highly competitive market, it is critical for compa-nies, particularly ones pursuing an LNG greenfield project, to recognize their core competencies and strengths,” said Gunvor’s Kalpesh Patel, co-head of LNG Trading. “Commonwealth LNG’s engineering and procurement team is best in class. And, now, with the comprehensive support of Gunvor’s LNG and U.S. Gas marketing team, Commonwealth LNG will excel not only at controlling costs and project execution, but also at commercial-izing their project and creating the lowest cost offering on the U.S. Gulf Coast.”

The Commonwealth facility is planned for a 393-acre site on the west side of the Calcasieu Ship Channel and would boast six liquefaction trains. The company, in its official filing to federal regulators in August, is also seeking authorization to build six LNG storage tanks, one marine loading berth and a 3.04-mile long, 30-inch diameter pipeline to deliver gas to the facility from interconnects with existing interstate and intrastate pipelines.

Commonwealth expects to make a final investment decision (FID) in 1Q2021, about six months after its previous target, and deliver its first shipments of LNG in 2Q2024.

Gunvor in September also agreed to help build five new LNG import terminals across Pakistan, a country viewed by other LNG developers as an emerging demand market. Pakistan cur-rently has two operational LNG import terminals with a combined total capacity of 1.2 Bcf/d. A third terminal is slated to become operational next year, adding another 600 MMcf/d of capacity.

Although FID is still more than a year away, the Common-wealth project is part of an extensive lineup of second-wave export projects vying for a slice of the global demand pie. Arling-ton, VA-based Venture Global LNG Inc. sanctioned its 10 mmty Calcasieu Pass LNG terminal this summer, while NextDecade Corp.’s Rio Grande and Tellurian Inc.’s Driftwood facilities are targeting FIDs in 2020.

“We believe Gunvor’s substantial capabilities in LNG marketing and overall market presence, coupled with Com-monwealth’s strengths in engineering, construction and project execution, create a dynamic combination that ultimately dif-ferentiates Commonwealth from every other U.S. LNG project currently chasing FID,” Commonwealth CEO Paul Varello said.

Spot Exports At RiskWith the first wave of U.S. LNG export projects almost in

the rear-view mirror, the glut of global supplies and low prices has given the market some pause about the potential of new projects trying to get off the ground. Just last week, Singapore-based Pavilion Energy Pte. Ltd. reportedly cancelled a U.S. cargo from Cameron LNG in Louisiana. The company has a long-term, take-or-pay supply deal with Japan’s Mitsubishi Corp., one of the Cameron project’s sponsors.

Meanwhile, near-curve LNG prices moving into backward-ation heightens the risk of shut-ins by eliminating the option to load cargoes for later sale, according to Energy Aspects. This is likely what drove Pavilion’s decision to reject the cargo and puts other U.S. cargoes at risk unless pricing improves.

“When global netbacks were challenging for U.S. exports late this summer, the contango in the near-term curve still offered an incentive to load cargoes for sale on future-dated markets,” Energy Aspects said. “The flattening and backwardation in the LNG near curve eliminate that incentive, meaning all U.S. cargoes need to find a home immediately after export.”

The firm sees some modest relief for U.S. spot exports com-ing from the softening of freight rates, as the last of the floating storage booked for September-December is unloaded, which will increase vessel availability. However, freight rates remain high, at around $113,000/day on Nov. 18, and would offer no incentive for new floating storage unless Japan Korea Marker January 2020 prices drop considerably against February 2020 prices.

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MoNday, NoveMber 25, 2019

voLuMe 1, No. 32

Meanwhile, Europe, generally seen as the balancing arm for the global market, is testing its physical limitations, with near-full underground storage, high terminal storage and record-high sendout at some terminals, according to Energy Aspects.

“LNG offers into Europe may have to price at a deep dis-count to Summer 2020 to encourage firms to take that supply in favor of underground storage withdrawals and roll their inven-tories into the 2020-21 storage year,” the firm said.

Any potential upside to global LNG prices could come from a lack of a transit deal between Ukraine and Russia, though, Energy Aspects does not consider that in its base-case scenario. Weather outlooks also provide a dismal outlook for the remainder of the winter. n