Tag: LNG

Escondida Workers End Copper Mining Strike, Opt to Extend Old Contract With BHP Billiton

Escondida Workers End Copper Mining Strike, Opt to Extend Old Contract With BHP Billiton

The strike at Chile’s Escondida, the world’s largest copper mine, is ending after workers decided to invoke a rarely used legal provision that allows them to extend their old contract, the union said on Thursday.
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Hours earlier, talks between the two sides failed, and Escondida, which is operated by BHP Billiton, said it would attempt to restart production, presumably with replacement workers. The workers said they would present their decision to the government on Friday and return to work on Saturday.
Escondida produced 5% of the world’s copper last year.

Asian LNG Buyers Come Together

The world’s biggest liquefied natural gas buyers, all in Asia, are clubbing together to secure more flexible supply contracts in a move which shifts power to importers from producers as oversupply grows.
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Korea Gas Corp. said on Thursday it had signed a memorandum of understanding in mid-March with Japan’s JERA and China National Offshore Oil Corp (CNOOC) to exchange information and “cooperate in the joint procurement of LNG.”

US LNG Shale Gas Exports Likely to Face Headwinds

US LNG Shale Gas Exports Likely to Face Headwinds

In many debates about energy costs we tend to lump crude oil and natural gas together.

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Indeed, they are pumped out of the ground in a similar way. They come from the same or similar regions and formations and are extracted, processed and sold by many of the same firms. Both are intrinsically “energy” products and these similarities explain why most people expect them to behave similarly in relation to each other when it comes to price.

[caption id="attachment_77762" align="aligncenter" width="550"]ship tanker lng gas in port An LNG tanker in port. Source: Adobe Stock/pornsakamp.[/caption]

But, in fact, the correlation is, historically, not close. For long periods of time, the correlation in price movements was little better than 25% but in periods of price spikes for crude oil, natural gas prices have also spiked bringing their aligned movements up to a 60-70% correlation.

Not Birds of a Feather

In reality, though, there is little reason why they should or would follow one another. Oil has been a freely traded and easily transported product making price arbitrage opportunities limited and tending to smooth out regional differences. Natural gas, on the other hand, is highly regional needing pipelines to transport it even modest distances of a few hundred kilometers and it needs to be converted into liquefied natural gas (LNG) to be transported globally.

Increasingly, though, lower LNG prices are making power generation more attractive and a global drive for less carbon intensive fuels has encouraged massive investment in LNG processing facilities and transport vessels. At one time Qatar was the undisputed LNG king even though other countries had larger gas reserves and pumped more from the ground, but for historical reasons had invested in pipelines rather than LNG. Russia is a prime example.

Power Generation Demand

It was feared by industrial consumers in the US that historically low domestic natural gas prices would be undermined if shale gas firms were allowed to export LNG in volume, but — unfortunately for the firms that have invested billions in refitting import LNG terminals to make them export terminals — they are coming onstream at a time of oversupply and weak prices.

So badly has the landscape for LNG deteriorated that Woodside Petroleum — along with it’s partners Royal Dutch Shell, BP and Japan Australia LNG — has shelved it’s $40 billion Browse LNG project off western Australia. Asian LNG prices have collapsed, falling 45% over the past year according to a Financial Times in the face of new supply and softening demand.

Woodside’s competitor Chevron is just completing its massive $54 billion Gorgon project, also off western Australia, and is poised to ship its first cargo. Australia was positioned to overtake Qatar as the world’s largest LNG producer, but the raft of postponements and project cancellations will delay that achievement. Meanwhile, new entrants are joining the market.

Export Competition

Qatar’s neighbor Oman has not one but two projects about to add to global supply. One is maximizing the capacity of it’s three-train 10.4 million metric-ton-per-year LNG plant by taking 1.5 million tons of natural gas 400 kilometers by pipeline from Iran and maxing out the liquefaction capacity.

Iran has the worlds largest gas reserves and the potential, with foreign investment now that sanctions are being lifted, to swamp supply. Oman’s second project is BP’s development of the Khazzan shale gas resource, the project is currently 65% of the way to completion according to oilprice.com and when completed will boost Oman’s reserves by as much as 40%. Khazzan’s estimated 24.9 trillion cubic feet of reserves, though pale in comparison to Iran’s 1,046 trillion cubic feet of proven reserves.

With so much capacity coming onstream in Australia, with the Middle East adding further capacity to its already leading position, with Iran just a few years away from adding further supply and with Asian demand softening, maybe U.S. consumers do not have too much to worry about domestic prices being raised by a flood of LNG leaving the country.

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America’s liquefaction export plants will find markets willing to take their cargo. The UK already says its domestic market price has fallen in response to potential supply from U.S. shale producers encouraging suppliers to moderate prices in the face of the threat, but the world is not screaming out for LNG supplies today in the way it was a at the end of the last decade. Does that suggest both LNG and crude prices are set to fall? Probably, yes, and for similar reasons of oversupply and a softening market.

LNG Investments Quietly Transforming Transportation Infrastructure, Overseas Markets

LNG Investments Quietly Transforming Transportation Infrastructure, Overseas Markets

ast week UGI Energy Services announced plans to build a liquefied natural gas production facility in Wyoming County, Pennsylvania.

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The facility will draw Marcellus Shale gas from UGI’s Auburn gathering system, then chill it to produce up to 120,000 gallons per day in liquid form. While we have regularly reported the slowdown in both new shale oil and LNG projects in the US this year — and the subsequent cutbacks in oil country tubular goods production — investments are still being made, in the US and overseas, in drilling.

Plants, Projects Planned

Bloomberg Business reported this week that Anadarko Petroleum Corp. selected a group of developers including Chicago Bridge & Iron Co. for a potential $15 billion LNG project in Mozambique.

CBI’s joint venture with Japan-based Chiyoda Corp. and Saipem SpA, based in Italy, will work on the onshore project that includes two LNG units with 6 million metric tons of capacity each, Anadarko said Monday. Construction plans also include two LNG storage tanks, each with a capacity of 180,000 cubic meters, condensate storage, a multi-berth marine jetty and associated utilities and infrastructure, according to Texas-based Anadarko, which says it will make a final investment decision by the end of the year.

Last week, the Department of Energy gave Cheniere Energy Inc. final approval for the nation’s fifth major export terminal at Corpus Christi in Texas, which will ship the fuel from 2018.

What’s Driving Infrastructure Investment?

While oil prices have bounced back from lows seen earlier this year, it’s certainly not the market that’s driving these investments. While high-cost projects, such as those in Canada’s oil sands, have been canceled by oil exploration companies, relatively inexpensive projects with a quicker path to payback, such as these LNG projects, are still being funded.

The payback is diverse and not confined to domestic home heating. LNG has been priced at a fraction of diesel prices for the last four years. Domestic trucking (18-wheelers and other heavy consumers of diesel) have yet to make a large-scale commitment to LNG, and most places where fuel is dispensed have yet to put in expensive infrastructure to handle the product, but there has been enough success for UGI to justify committing resources to its adoption.

U.S. Steel Layoffs: 285 More at Gary Works

U.S. Steel Layoffs: 285 More at Gary Works

The downturn in steel has led to more layoffs and a major liquid natural gas project was announced last week.

U.S. Steel Layoffs

U.S. Steel has laid off another 285 workers at its Gary Works mill in the latest wave of layoffs spurred by weak demand for its steel.

Why Manufacturers Need to Ditch Purchase Price Variance

Company spokeswoman Courtney Boone cited “challenging market conditions that are impacting the company” for the latest layoffs at the northwestern Indiana plant.

UGI Plans Pennsylvania LNG Processing Plant

UGI Energy Services LLC plans to build a liquefied natural gas production facility in Northeastern Pennsylvania.

The facility will be adjacent to UGI’s Manning compressor station in Washington Township, Wyoming County, Pa., the gas supplier announced Thursday. State and local officials have not yet approved the project.

The facility will draw Marcellus Shale gas from UGI’s Auburn gathering system, then chill it to produce up to 120,000 gallons per day in liquid form.

The plant could supply a variety of industries, spokesman Matt Dutzman told the Times-Tribune.

These include oil and gas drilling rigs, truck fleets and remote industrial users not well connected to pipeline grids. The new $60 million facility would support 50 to 75 construction jobs and at least six permanent jobs during operations.

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