Here is what is going on in the natural gas industry around the world:
Japan’s interest in importing U.S. natural gas from shale with contracts linked to the U.S. benchmark at Henry Hub threatens as many as 50 liquefied natural gas projects in Australia that rely on oil-indexed prices, Hartland Shipping Services Ltd. said. The following are comments from the London-based shipbroker in a report dated March 1.
“A move to spot and short-term gas-linked pricing arguably cannot underpin the long-term financing and return expectations of many developers. America is shaking things up.”
“Japanese, Korean and Chinese buyers are pulling back from supporting pricey Australian and other LNG projects that need the old Asian pricing formula to turn a profit, preferring instead to exploit the arbitrage of buying cheaper U.S. exports.”
“Japan was a hesitant mover in America as the only one of 17 U.S. LNG export projects so far approved, Cheniere’s Sabine Pass in Louisiana, has presold its production to Korean, British, Indian and Spanish buyers.”
The Ukrainian government throws away billion of dollars in payments to Russia for annual natural gas deliveries, Ukrainian Prime Minister Mykola Azarov said.
Ukrainian President Viktor Yanukovych arrived Monday in Moscow to discuss energy policy with Kremlin officials. Dmitry Peskov, a spokesman for Russian President Vladimir Putin, told state news agency RIA Novosti that both sides were expected to discuss pricing issues.
Russian energy company Gazprom said Ukraine’s energy company Naftogaz owes it $7 billion for unused natural gas covered under a take-or-pay scheme.
Former Ukrainian Prime Minister Yulia Tymoshenko is serving a seven-year prison sentence after being convicted on charges she overstepped her authority when she helped broker a deal with Gazprom in 2009. Kiev maintains it’s paying too much for Russian natural gas when compared to other European countries.
Azarov said his government overpays Gazprom on a regular basis.
“We very politely replied that we do not consider the $7 billion claim to be justified and we will not pay it,” he was quoted by the Interfax news agency as saying.
Myanmar plans to put over 20 offshore oil and gas exploration blocks up for auction by April as the country pushes to attract foreign investment and expertise to help overcome an energy deficit that’s a legacy of gas export deals made by its former military rulers.
A new gas pipeline to China, which may not be able to commence operations in June as scheduled because of a recent outbreak of violence in Myanmar’s northeast, would initially send an additional 400 million cubic feet of natural gas per day out of the country. Eventually, that could rise to 1.2 billion cubic feet per day, government officials said.
That leaves Myanmar with about half of the natural gas it needs to meet domestic demand. If it didn’t export so much, it could easily meet its domestic needs, which are expected to rise from 471 million cubic feet per day in the fiscal year that ends March 31 to 918 million cubic feet per day next fiscal year, according to Ministry of Energy statistics.
China’s drive to fuel more vehicles with cleaner-burning natural gas could reduce oil demand by nearly a tenth — equivalent to Turkey’s total oil consumption — and may help ease its cities’ toxic smog problem, too.
The country’s rise to become the world’s biggest car market has seen rapid growth, too, in oil demand over the past decade, and has contributed to the heavy pollution that chokes its cities. China is now the world’s second-largest oil consumer after the United States, burning some 9.6 million barrels per day (b/d) — more than a tenth of global demand.
A Beijing-coordinated campaign to fuel more vehicles with natural gas — part of a drive to reduce costly oil imports and a dependency on coal — could increase gas consumption to as much as 55bn cubic metres by 2030, predicts energy consultancy Wood Mackenzie — about equal to 840,000 b/d of oil. That’s about 10 times more natural gas than is used in vehicles today, and close to 9 percent of China’s oil demand.
Taxi drivers have been quick to see the financial benefits, too, of switching to natural gas. The cleaner fuel is 50-70 percent the price of petrol and a third cheaper than diesel — savings that have encouraged rapid take-up of natural gas among drivers, and enough to make people like Yu Binghua queue for up to five hours to fill his Volkswagen Jetta taxi.