February 2017, Vol. 244, No. 2

In The News

World News

Pipeline Gas, LNG Will Compete for European Demand

Europe is set to retain numerous gas supply options throughout 2017 as traditional pipeline suppliers continue their market-share offensive and LNG imports rally from their unexpected lows in 2016. With European demand – especially in the power sector – likely to continue its recovery from the past two years, focus will again be placed on declining domestic gas production and the need for increased imports.

European Union gas demand is expected to have increased by 6% in 2016 to almost 16 Tcf, according to industry group Eurogas, following a rise of 4% in 2015. Demand could rise further in 2017, according to Platts Analytics, driven by the arrival of more LNG. Gas demand for power generation in the UK rose 50% in 2016 while Italian gas-for-power demand jumped 12%, according to Platts Analytics. Demand in France rose sharply at the end of 2016 as some of its nuclear fleet was taken offline for safety checks.

While LNG is expected to stage a European recovery in 2017, in part fed by new supply from the U.S. and a global glut of the fuel, traditional pipeline suppliers to Europe – Russia, Norway and Algeria – will fight to retain, or even grow, market share. In 2016, Russia smashed its record for deliveries to Europe and Turkey with exports hitting an all-time high of 6.354 Tcf. Norway was expected to have exported near its record high from 2015 of 4.06 Tcf, and Algeria saw its exports to Italy rise threefold to 635 Bcf..

Sinopec to Sell 50% Pipeline Stake

China’s state-owned Sinopec plans to sell a a 50% stake in its Sichuan to East China gas pipeline to two other state-owned companies for $3.3 billion as part of the government’s push for cleaner energy, according to The Wall Street Journal. The massive gas pipeline covers 1,400 miles across eight Chinese regions and sends up to 12 Bcm of gas annually from central China to eastern cities such as Shanghai. Sinopec said proceeds from the pipeline sale would help fund growth of its natural gas business.

Petronas’ Floating Facility Produces First LNG

Petronas’ first floating LNG facility, known as PFLNG SATU, moored by SOFEC’s external turret achieved an industry breakthrough with the production of its first drop of LNG from the Kanowit gas field, offshore Sarawak on Dec. 5. The milestone was achieved with introduction of gas from the KAKG-A central processing platform Nov. 14. The first commercial offtake is expected shortly. A flexible turret design allows the vessel to be redeployed to other locations to unlock other marginal and stranded gas fields in Malaysian waters at water depths of 70-200 meters for up to 20 years without dry docking.

IEA Welcomes Italy’s Plan to Further De-carbonize Economy

The International Energy Agency (IEA) praised Italy’s comprehensive long-term energy strategy and the acceleration of efforts to comply with 2020 goals on renewable energy, climate change and energy efficiency.

The IEA’s new report, Energy Policies of IEA Countries: Italy 2016 Review, said the country’s 2013 National Energy Strategy (NES) sent a strong signal about its medium- and long-term objectives for the energy sector. The NES established clear goals: reduce energy costs, meet environmental targets, strengthen security of energy supply and foster sustainable economic growth.

Still, the review found that monitoring implementation and maintaining momentum would present a challenge. To that effect, the IEA welcomed Italy’s decision to present a consultation document for an updated 2030-50 energy strategy, which would take into account the EU 2030 energy package and the impact of the Paris Agreement.

Midsize Canadian Gas Producer Eager to Reach Asia

While the Canadian oil patch is fixating on oil pipelines, natural gas player Seven Generations Energy is eager to see movement on gas pipelines to tap the Asian market, including liquefied natural gas export projects.

Seven Generations President Marty Proctor told the Financial Post his company’s interest in a liquids-rich pipeline to the West Coast is still an early stage idea, and compared it to a blank piece of paper. “We (expect) those opportunities will take affect into the next decade,” he said.

New pipeline capacity may be required even as Canadian natural gas production is expected to drop to 14.8 Bcf/d in 2020, from 15.4 Bcf/d last year. Western Canadian shipments to Eastern Canada have been displaced by cheaper U.S. shale in recent years. Shut out from its traditional markets, Western Canadian producers are eyeing growth markets in Asia, though that would require capital-intensive LNG plants.

“The existing pipelines that deliver natural gas to the Lower Mainland, for example, are all full … so any scale project to bring natural gas to the coastline requires a new pipeline,” said Seven Generations Senior Vice President Tim Stauft. Seven Generations produced an average 314 MMcf/d of gas in the third quarter , along with oil and gas liquids, from its acreage in British Columbia and Alberta.

India Must Spend $10 Billion to Meet Natural Gas Goal

The ambitious plan to more than double the share of natural gas in India’s national energy mix from 6.5% in 2015 to 15% will need at least $10 billion in investments just to add infrastructure for gas imports and new pipelines, according to a report cited by Press Trust of India.

The analysis shows boosting LNG import and regasification facilities will require over $5 billion, plus money for 5,500 miles of new pipelines in the east and south, said the report by Indian rating agency Crisil. Rahul Prithiani, director of Crisil, said if the share of gas in the energy mix is to reach 10% by 2020 it would need to double gas consumption. With domestic gas production limited, demand for LNG could surge threefold, and the country’s regasification capacity would have to jump to 60 mtpa.

Gas consumption by the power sector needs to rise significantly if India’s energy-mix goal is to be met. The share of gas-based power in generation plunged to under 4% in fiscal 2016 from 12% in 2011 due to inadequate domestic supplies and costly LNG.

Emerson to Acquire UK-based Permasense Limited

Emerson will acquire UK-based Permasense Limited, a leading provider of non-intrusive corrosion monitoring technologies for pipelines, refining and oil production. Permasense monitoring systems use sensor technology, wireless data delivery and advanced analytics to continuously monitor for metal loss from corrosion or erosion in pipes, pipelines or vessels. The Permasense product line will become part of Emerson’s Rosemount portfolio of measurement and analytical technologies.

New Island for $27 Billion Canada LNG Plant

Malaysia’s Petroliam Nasional wants to move ahead with a proposed $27 billion LNG project in Western Canada after identifying a new site for shipping the fuel, a shift that may help reduce costs and quell local opposition.

Bloomberg reported The Pacific NorthWest LNG project would continue as planned with the liquefaction plant on Lelu Island in British Columbia. The company would move the docking facilities to neighboring Ridley Island, where ships would berth to take deliveries of the fuel for export. This would eliminate the need for a costly suspension bridge that was part of the original plan and also circumvent an environmentally sensitive marine area.

“Pacific NorthWest LNG is conducting a total project review over the coming months,” spokesman Spencer Sproule said. “During this time, the project is continuing to work with area First Nations, stakeholders and regulators to manage any potential impacts through mitigation measures.”

Petronas and its partners – China Petrochemical, Japan Petroleum Exploration, Indian Oil and Brunei National Petroleum – are expected to decide whether or not to proceed with the project in early 2017. The facility would produce as much as 19.2 mtpa LNG and open up a new trade route for Canadian gas to be shipped to Asia.

Exxon Awards Key Contracts for Liza Oil Production

ExxonMobil subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), awarded contracts to SBM Offshore for a floating production, storage and offloading (FPSO) vessel, a key step in moving the Liza field toward first production. SBM Offshore will perform front-end engineering and design for the FPSO, and, subject to a final investment decision, will construct, install and operate the vessel.

“Liza development activities are steadily progressing, and we’re excited to reach this important milestone,” said Neil Duffin, president of ExxonMobil Development Co.

ExxonMobil submitted an application for a production license and its initial development plan for the Liza field in December which includes drilling, operation of the FPSO, and subsea, umbilical, riser and flowline systems. The Liza field has a potential recoverable resource estimate in excess of 1 billion oil-equivalent barrels and is located in the Stabroek block 120 miles offshore Guyana.