Two LNG months in a nutshell

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         Two LNG months in a nutshell
 A roundup of key developments in the world of LNG carriers in the two
         months since the last edition of LNG World Shipping

March 2010
•  The  Papua  New  Guinea  LNG  (PNG  LNG)  project 
partners and Taiwan’s Chinese Petroleum Corp (CPC)
signed a long-term sales and purchase agreement (SPA)
under which PNG LNG will supply CPC with 1.2
million tonnes of LNG per annum (mta) for 20 years.
LNG cargoes from the planned, two-train, 6.6 mta PNG
LNG export terminal are scheduled to begin moving in
2014. SPAs covering the full output volume have now
been finalised.
•  Kathleen  Eisbrenner  joined  Poten  &  Partners             Samsung points out that the hull part of the LNG FPSO is
from Royal Dutch Shell to manage the US energy                  valued at US$1.2 billion
consultancy’s project development group. Previously
head of Shell’s LNG business, she will be based at              engineering and design (FEED) work for Prelude, taking
Poten’s Houston office.                                         into account the composition of the gas, local weather
                                                                conditions and other site-specific factors. The second
                                                                contract details the terms under which the floating LNG
                                                                facility will be built when the FID is taken. The value of the
                                                                hull part of the FLNG vessel is put at US$1.2 billion.
                                                                •  BPMigas, Indonesia’s upstream oil and gas regulator, 
                                                                signed an LNG supply deal with Chubu Electric Power
                                                                Co of Japan under which the Tangguh project will deliver
                                                                a total of 2 million tonnes (mt) of LNG to Chubu by
                                                                2015. Some 250,000 tonnes will be supplied in both 2011
                                                                and 2012 while annual volumes will climb to 500,000
                                                                tonnes over the 2013-2015 period. The cargoes will come
Kathleen Eisbrenner’s LNG experience with Excelerate            from the LNG that would normally be lifted by Sempra
Energy and Shell will be an asset for Poten & Partners          Energy. Sempra holds an option under its 20-year SPA
                                                                which enables up to one half of its 3.6 mta Tangguh
•  Total  agreed  to  reserve  some  of  the  regasification    allotment to be sold to other buyers.
capacity at the planned Dunkirk LNG terminal on the             •  Dominion  Cove  Point  LNG  LP  received  all  US 
French Channel coast and to acquire a stake in the
import facility. The scheme is being led by EDF, the
French energy group, and calls for an import capacity
within the 7-9 mta range. Dunkirk LNG plans to make a
final investment decision (FID) on the project in summer
2010 and to have the facility in operation by 2014.
•  Shell signed two contracts with Technip and Samsung 
Heavy Industries relating to its proposed Prelude floating
liquefied natural gas (FLNG) project off the coast of
xxxxxxxxxxxxxxxxxxxxxxxx caption xxxxxxxxxxxxxxxxxxxxx          Once the jetty is reinforced, Cove Point will be able to
Western Australia. The first contract covers the front-end
xxxxxxxxxxxxxxxxxxxxxxxx caption xxxxxxxxxxxxxxxxxxxxxx         receive LNG carriers up to the 266,000m3 Q-max size




                            LNG world shipping May/June 2010                                                                     11
                                                              events




     federal authorisations necessary to proceed with its pier
     reinforcement project at the Cove Point import terminal
     on Chesapeake Bay. The jetty at Cove Point is currently
     unable to accommodate LNG carriers larger than
     150,000m3 in size. Once reinforced, the jetty will be able
     to handle LNG ships up to the 266,000m3 Q-max size.
     •  Dutch LNG terminal operator 4Gas dropped plans to 
     construct an LNG receiving terminal in Rotterdam. The
     so-called Lion Gas project was shelved after 4Gas failed
     to reach agreements with customers on long-term supply
     contracts. The Lion Gas terminal would have competed
     with the Gate LNG facility currently being built in
     Rotterdam by Vopak and Gasunie.
     •  The  US  Federal  Energy  Regulatory  Commission 
     (FERC) approved the entry into service of the                 Conceptual drawing of the Sengkang export terminal
     infrastructure enhancement project at Southern Union          in Sulawesi
     Co’s Trunkline LNG receiving facility. The initiative
     involved the installation of four ambient air vaporisation    will own Arrow’s Queensland CSG assets and domestic
     units (AVUs) and the construction of a natural gas liquids    power business as well as Shell’s Queensland CSG assets
     (NGL) extraction facility at the Lake Charles, Louisiana,     and its site for a proposed LNG export terminal on
     terminal. Trunkline is now the only regasification            Curtis Island in the port of Gladstone. An FID on the
     terminal in North America to employ ambient air               LNG project is expected in 2012 and Shell hopes to ship
     vaporisation technology. Utilisation of the AVUs will         the first LNG from its two-train, 8 mta plant by late 2014
     improve fuel efficiency during the regasification process     or early 2015.
     while the NGL extraction facility will provide BG, the        •  China National Offshore Oil Corp (CNOOC) signed 
     user of the terminal, with greater flexibility in sourcing    a 20-year SPA with BG Group covering the supply of
     its LNG supply.                                               3.6 mta of LNG from BG’s Queensland Curtis LNG
                                                                   (QCLNG) export terminal to be built at the Australian
                                                                   east coast port of Gladstone. Subject to final approvals
                                                                   and an expected FID later this year, the facility is due to
                                                                   start up in 2014. In volume terms the CNOOC/BG deal
                                                                   is the biggest company-to-company LNG contract ever
                                                                   concluded in Australia and the contract could be worth
                                                                   up to US$60 billion over the life of the project. CNOOC
                                                                   has acquired a 10 per cent stake in the project as a result
     BG has been provided with a higher degree of flexibility in   of the deal. Days later BG signed a 20-year SPA with
     sourcing its Trunkline LNG supplies                           Tokyo Gas covering the supply of 1.2 mta from QCLNG
                                                                   and under which Tokyo Gas will acquire a 2.5 per cent
     •  Spain’s Iberdrola group agreed to sell 750,000 tonnes      equity stake in the project.
     per annum (tpa) of LNG to Denmark’s Dong Energy,              •  Tokyo  Gas  Co  signed  a  preliminary  agreement  with 
     beginning in 2011. The contract, which is due to be           Energy World Corp (EWC) covering the purchase
     finalised in the next few months, will be for a 10-year       of 500,000 tpa of LNG from EWC’s planned 2 mta
     period and includes an option to extend for a further five    Sengkang LNG export terminal on the Indonesian island
     years.                                                        of Sulawesi. Tokyo Gas plans to take a 25 per cent stake in
     •  The  board  of  Arrow  Energy  Ltd  approved  the  sale    the project and commence LNG purchases in 2012.
     of the Australian coal seam gas (CSG) company to a            •  The US FERC approved a Freeport LNG proposal for 
     Shell/PetroChina joint venture for US$3.2 billion. The        the construction of LNG road tanker unloading bays at
     Australian competition watchdog approved the purchase         its Texas import terminal. The discharge facility will be a
     and Arrow shareholders caption xxxxxxxxxxxxxxxxxxxxx
     xxxxxxxxxxxxxxxxxxxxxxxxwill vote on the plan in July. On     contingency measure in that it will enable Freeport LNG
     successful completion of caption xxxxxxxxxxxxxxxxxxxxxx
     xxxxxxxxxxxxxxxxxxxxxxxxthe acquisition the joint venture     to take delivery of quantities of LNG by road in order to




12                               LNG world shipping May/June 2010
                                                       events




keep its large storage tanks cold on those occasions when
there are no LNG cargoes stored in the tanks and the
terminal’s boiloff gas reliquefaction plant is not working.
•  Croatia’s  environment  ministry  approved  the  Adria 
LNG proposal for the construction of the country’s first
LNG import terminal. The plan calls for the facility to be
built on the northern Adriatic island of Krk and to have
the first phase, with a capacity of 7.5 mta, in operation
by 2014.
•  JP  Morgan  and  Cheniere  Energy  signed  a  multiyear    The South Hook jetty serves Europe’s largest LNG
agreement under which the two firms will work together        import terminal
to promote mutual LNG marketing interests. JP Morgan
will gain capacity rights at Cheniere’s Sabine Pass LNG       is Europe’s largest LNG receiving terminal. Featuring five
import terminal in Louisiana, while Cheniere will benefit     storage tanks, the facility forms an integral part of the
from JP Morgan’s client relationships, financial expertise    Qatargas 2 project’s LNG supply chain.
and strong balance sheet.                                     •  The  environmental  impact  statement  (EIS)  prepared 
                                                              by ConocoPhillips and Origin Energy for their Australia
                                                              Pacific LNG (APLNG) export terminal planned for
                                                              Gladstone was released for public consultation. The
                                                              APLNG scheme is configured as a multi-train terminal
                                                              that will be built on Curtis Island and will liquefy coal
                                                              seam gas from the Queensland coal fields for export to
                                                              world markets beginning in 2014.
                                                              •  Mexico  and  Indonesia  suffered  earthquakes  during 
                                                              the month and, although the epicentres were not that
Under their new agreement JP Morgan secures capacity          distant from LNG terminals, the tremors did not disrupt
rights at Cheniere’s Sabine Pass terminal                     operations at the facilities. The Mexican quake, in the
                                                              California border area, registered 7.2 on the Richter
•  GE Energy Financial Services acquired the 30 per cent      scale but the nearby Costa Azul LNG import terminal
stake in the Gulf LNG Energy import terminal held by          was unaffected. The 7.7 magnitude quake in Indonesia’s
the Crest Group, a Houston-based investor, for US$150         Aceh province jolted some towns in North Sumatra but
million. The other shareholders in the Gulf LNG               operations at the Arun LNG export terminal continued
terminal are El Paso Corp and Sonangol. The facility is       uninterrupted. Also during the month a drifting ash
now under construction and due to be commissioned at          cloud from a volcanic eruption in Iceland delayed the
the end of 2011.                                              start of the LNG 16 conference at Oran in Algeria due to
                                                              disruptions to European air traffic. Chile had been hit by
April 2010                                                    an 8.8 earthquake in February. The epicentre was 200km
•  Construction work commenced on the Nord Stream             from the Quintana LNG import terminal but operations
natural gas pipeline from Russia to Germany via the
Baltic. The 1,225km pipeline will cost US$10 billion to
build and will be able to deliver up to 27.5 billion m3 of
gas per year when it is commissioned at the end of 2011.
•  Yemen  LNG  started  production  from  the  second  of 
two liquefaction trains at its new Balhaf LNG export
terminal. Yemen expects the plant to reach its peak design 
capacity of 6.7 mta within the next several months.
•  South  Hook  LNG  commissioned  the  second  phase 
of its new import terminal at Milford Haven in South
Wales, doubling its LNG-handling capability to 15.6 mta.
xxxxxxxxxxxxxxxxxxxxxxxx caption xxxxxxxxxxxxxxxxxxxxx        The effects of the volcanic ash were felt across Europe
Formally opened for business in xxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxx captionMay 2009, South Hook          and delayed the start of LNG 16




                            LNG world shipping May/June 2010                                                               13
                                                         events




at the facility were not disrupted.                             the Yangtze River to enable a new generation of river craft 
•  Sinergie  Italiane,  an  Italian  gas  company,  bought      to be propelled by LNG.
an LNG cargo from BG Group sourced in Equatorial                •  Pertamina, Indonesia’s state oil and gas company, and 
Guinea. It was the first shipment of LNG between the            Perusahaan Gas Negara (PGN), the country’s national gas
two countries and the discharge terminal was the offshore       distributor, established a joint venture to operate a 3 mta
Adriatic LNG facility not far from Venice. Some 20 per          floating regasification terminal in West Java near Jakarta.
cent of the 6 mta capacity at Adriatic LNG is available to      The new company, Nusantara Regas, is 60 per cent owned
third parties. Sinergie Italiane is in talks with other LNG     by Pertamina and 40 per cent by PGN. It is expected that
sellers with the aim of bringing more gas to Italy.             the LNG will be sourced from the Bontang plant in East
•  Icon  Energy,  a  small  Australian  CSG  company,           Kalimantan and that the terminal will be operational
signed a non-binding memorandum of understanding                before the end of 2011. The joint venture company will
with China’s SinoGas Group covering the sale of 40              also investigate the possibility of two additional offshore
mt of LNG over 20 years. Icon has no plans to build a           receiving terminals to serve the domestic market, in
liquefaction plant itself and will seek to process gas at one   Medan and East Java.
of the four CSG-based LNG export terminals that other           •  Qatar  Gas  Transport  Co  (Nakilat)  reported  a  2009 
firms plan to build in Gladstone. Icon and SinoGas will         net income of US$162 million, a fourfold increase on
seek to finalise the detailed terms of their agreement by       2008 and larger than earlier estimates. Profits rose as the
this August. SinoGas plans to construct a 3 mta import          company expanded its fleet of tankers to match rising
terminal at Budaiao Bay on Nanao Island near Shantou            Qatari LNG production. Nakilat partly owns 29 LNG
City in the Pearl River Delta to receive the LNG.               tankers. The last two of its 25 wholly owned Q-flex and
•  ConocoPhillips  and  Marathon  Oil  announced  they          Q-max LNG carriers are scheduled for delivery in the next
will seek a two-year extension of their LNG export licence      few months. Funding this fleet necessitated the creation
for the Kenai LNG plant owned by the two companies.             of a US$6.8 billion financing programme.
Kenai currently ships a small volume of LNG to Japan and
has done since 1969. The plant’s current export licence
expires in March 2011. ConocoPhillips and Marathon
have cut back on LNG exports at certain points over the
past three winters so that gas could be diverted to local
utilities during winter cold snaps.


                                                                Al Gattara, one of 31 LNG carriers of the 216,000m3
                                                                Q-flex size built for Nakilat


                                                                •  Azerbaijan,  Georgia  and  Romania  signed  a 
                                                                memorandum of understanding covering the delivery of
                                                                Azerbaijan gas to Romania in the form of LNG loaded
                                                                at a Georgian export terminal. The Azerbaijan-Georgia-
                                                                Romania-Interconnection (AGRI) scheme calls for Azeri
Should the extension be granted, Kenai LNG will move            gas to be piped across the Caucasus to Georgia’s Black
towards 44 years of continuous operation                        Sea port of Kulevi for liquefaction. The LNG will be
                                                                then shipped across the Black Sea to a regasification
•  China  Natural  Gas  Inc  received  local  government        terminal in the Romanian port of Constanta. Finally,
approval from Wuhan City, Yichang City, Xiangfan City           the gas will be introduced into Romania’s gas grid for
and Huangshi City in China’s Hubei province to build            onward delivery to other EU states. The project will be
LNG reserve stations, harbour LNG fuelling stations and         sized to handle up to 5 mta of LNG, about 1.5 mta of
inland LNG fuelling stations in the region. The approvals       which is earmarked for Romania and the rest for onward
enable China Natural Gas to build a total of three LNG          transmission to Europe.
reserve stations, nine harbour LNG fuelling stations and        •  MISC  of  Malaysia  established  a  60/40  joint  venture 
xxxxxxxxxxxxxxxxxxxxxxxx caption in the four cities. The
47 inland LNG fuelling stations xxxxxxxxxxxxxxxxxxxxx           LNG shipping company with Papua New Guinea’s
xxxxxxxxxxxxxxxxxxxxxxxx caption fuelling stations along
company also plans to build LNGxxxxxxxxxxxxxxxxxxxxxx           Petromin PNG Holdings. The company has been created




                             LNG world shipping May/June 2010                                                                   15
                                                             events




     to provide LNG transportation solutions for Papua              partner interest in the Freeport LNG import terminal
     New Guinea LNG export projects and to secure related           in Texas to the Zachry group and Hastings Funds
     shipping contracts.                                            Management (USA) Inc, part of Westpac Banking Corp,
     •  Indonesia’s BPMigas approved the development plans          for approximately US$104 million.
     for the oft-delayed Donggi-Senoro LNG liquefaction             •  Turkey’s Energy Market Regulatory Authority awarded 
     plant in Central Sulawesi. The government’s policy of          a 10-year licence to Aygaz, allowing the fuel retailer
     prioritising domestic gas supply had delayed construction      to import LNG. Under the terms of the licence Aygaz
     as the project owners Medco Energy, Pertamina and              Dogalgaz will be able to buy LNG as a wholesaler on the
     Mitsubishi had wanted part of the output to be exported.       spot market and import cargoes via Turkish terminals.
     This may now happen. The estimated cost of the project         •  The  Pakistani  Supreme  Court  declared  null  and 
     had earlier been put at US$3.7 billion.                        void an SPA agreed between Sui Southern Gas Co and
     •  Construction  work  was  completed  on  the  third          GDF Suez under which GDF Suez would have supplied
     160,000m3 LNG storage tank at the Canaport LNG                 2.75 mta of LNG for six years to the new Mashal LNG
     import terminal near St John, New Brunswick. Canaport          import terminal due to be built at Port Qasim. The Sui/
     commenced operations in June 2009 and has received 22          GDF Suez agreement included the possible supply of a
     cargoes to date. Deliveries of gas from Canaport to the        further 1.5 mta of LNG over a 20-year period. The deal
     new England market in winter 2010/11 are expected to           was cancelled when the court found that the country’s
     be double this past winter’s volumes.                          petroleum ministry did not deal with the award of the
                                                                    contract in a serious and conscientious manner. 4Gas
                                                                    is responsible for the construction of the Mashal LNG
                                                                    import terminal on a 170-acre (69ha) site at Khiprinwala
                                                                    Island in Port Qasim. Two initial tranches of funding
                                                                    have recently been organised for the project.
                                                                    •  Gazprom  Global  LNG  (GGLNG)  and  Sempra  LNG 
                                                                    agreed a deal whereby Gazprom will send cargoes to
                                                                    Sempra’s Cameron LNG import terminal near Lake
                                                                    Charles, Louisiana. Under the terms of the multiyear
                                                                    agreement, which commences in June 2010, GGLNG
                                                                    will pay Sempra LNG for the right to sell and deliver up
     All three Canaport tanks are now fully operational             to two LNG cargoes per month to Cameron according to
                                                                    a predetermined price formula.
     •  An approval from China’s National Development and 
     Reform Commission cleared the way for CNOOC to
     begin work on its planned 3.5 mta LNG regasification
     terminal in Zhuhai City in southern China’s Guangdong
     province. The US$1.65 billion terminal will have three
     160,000m3 storage tanks, and operations are scheduled
     to commence in 2013. Funding for the project will be
     provided by CNOOC and Guandong Yudean Group, a                 Gazprom has gained the right to deliver up to two cargoes
     state-owned electricity utility.                               per month to the new Cameron terminal
     •  Russia and Ukraine agreed a new deal on pipeline gas 
     prices, resolving a longstanding pricing dispute between       •  Sunrise  joint  venture  partners  Woodside  Petroleum, 
     the two countries. Under the previous, 10-year deal            Shell and ConocoPhillips stated that they would like
     Ukraine paid more than US$300/1,000m3 for Russian              to develop the gas in the Timor Sea field by means of a
     gas. The new deal provides a discount of    $100/1,000m3       floating LNG (FLNG) production vessel. The companies
     when the price is higher than $330/1,000m3 and of 30           still need to convince the East Timorese government of
     per cent when the price is less. As part of the deal Ukraine   the efficacy of this solution. The Greater Sunrise offshore
     extended Russia’s lease on a naval base in the Black Sea       field is jointly administered by Australia and East
     xxxxxxxxxxxxxxxxxxxxxxxx caption 25 years.
     port of Sevastopol for a period of xxxxxxxxxxxxxxxxxxxxx       Timor. The latter favours piping the gas to an onshore
     •  Cheniere Energy agreed to sell its 30 per cent limited 
     xxxxxxxxxxxxxxxxxxxxxxxx caption xxxxxxxxxxxxxxxxxxxxxx        liquefaction plant in East Timor for processing. LNG




16                                LNG world shipping May/June 2010

				
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