Liquefied natural gas (LNG) is gaining significant traction spurred most recently by Russia-Ukraine fiasco and top global LNG countries like Qatar and Australia are not taking it lightly. They are boosting their presence on the market.
The other drivers for the LNG include the fact that it’s easier to store and ship, and safer too, and most importantly, demand is at an all-time high and fetching nice prices particularly on the Asian market. Current LNG prices in Asia, at over $15 per million British thermal units (MMBtu), is a big inspiration and would spur most firms and countries to successfully carry out final investment decision for pending LNG projects.
Deals are coming online at a seemingly faster pace. Royal Dutch Shell and BP recently announced deals to supply Kuwait with LNG for the next five to six years, during peak demand periods from April-October, 2014. The total volume for both companies will be around 2.5 million tons per year. In addition, intelligence reports gathered that Kuwait is preparing to sign another LNG contract with a third party in the next one week.
In Canada, regulators on 16 April, 2014 approved a 25-year LNG export license for Triton LNG, which is backed by Canadian AltaGas and Japan’s Idemitsu Kosan. The approval is for the shipment of 320 million cubic feet per day from a planned floating LNG facility.
LNG export license approvals are piling up in Canada and the US and most of the facilities have begun construction, even where some have not received the necessary permits or environmental permission yet. The location for the Triton facility for instance has not even been chosen yet.
The Canadian government has approved four other long-term LNG export licenses on the Pacific Coast in British Columbia. The proposed export terminals would potentially be sponsored by Exxon Mobil, British-based BG Group and Malaysia’s state-owned Petronas, and licenses have been approved for the export of up to 73.38 million metric tons of LNG per year, or around 3.43 trillion cubic feet/year. The potential projects for which licenses have been approved in advance by Canada’s National Energy Board include the Pacific NorthWest LNG, Prince Rupert LNG, WCC LNG and Woodfibre LNG terminals.
Turkey’s ambitious plan is about the idea of transporting LNG through the Bosphorus Strait and across the Black Sea to Ukraine. This will be the game-changer for the European side of the LNG equation, and indeed power Turkey’s ambitions to become the European energy hub as well as helping Ukraine’s desperation to become more independent in terms of energy and free itself from the shackles of Russia.
In Mozambique, Anadarko recently announced that it has signed long-term supply agreements with Asian buyers for two-thirds of the capacity of the first train of its planned liquefied natural gas project and hopes to sign similar agreements for the rest soon. These long-term supply contracts are crucial to raising the huge capital required to finance LNG projects and have financially de-risked the project which is expected to ship its first LNG cargo in 2018.
Russia too is entering the global LNG arena as prices are being driven by growing demand in the Asia-Pacific region. Rosneft is on track to start production at its first liquefied natural (LNG) gas plant in the country’s Far East in 2018-2019. Despite East-West tension over Ukraine, ExxonMobil has already signed its partnership for building the plant, which will have an initial annual capacity of 5 million tonnes.
Beyond the 3000th NLNG cargo
The Nigeria Liquefied Natural Limited (NLNG) has delivered its 3000th cargo. LNG Lokoja, one of the 23 vessels in NLNG’s fleet, with a 148,471 cubic metre capacity, loaded the cargo and sailed from Bonny Island Terminal on January 7, 2014 carrying 47,778,900 million British Thermal Units (MMbtus) of LNG to Botas Petroleum Pipeline Corporation at Marmara LNG Terminal in Turkey.
Beyond the celebration of the 3000th cargo, NLNG should expedite action on its Train 7 to boost the company’s total production capacity to 30 million tonnes per annum (MTPA) of LNG and potentially increase Nigeria’s supply of world LNG demand to 10 per cent.
Whither Brass LNG and Olokola LNG
Brass LNG project was designed to produce 10 million metric tonnes of LNG per year, with the final investment decision (FID) initially planned for 2006. But it was later rescheduled for 2008 and then 2010. It was expected to happen in 2012 and then last year, but it has yet to be taken by the shareholders, which include the Nigerian National Petroleum Corporation (NNPC), Total and Eni Group. ConocoPhillips withdrew from the project in 2012. The withdrawal of ConocoPhillips in 2012 is among the factors hindering the existing stakeholders in the project from taking the FID on the project.
In 2005, former President Olusegun Obasanjo initiated Olokola Liquefied Natural Gas (OKLNG). The Memorandum of Understanding (MoU) and shareholders Agreement were signed in October 2006. The OKLNG plant is designed to process about 30,000 barrels per day (bpd), 15,000 bpd of condensate and 2 million tons per annum of Liquefied Petroleum Gas (LPG). Some of the International Oil Companies (BG Group, Chevron and SHELL) that have equity stake have withdrawn from the project. The IOCs argued that none of the milestones have been actualized. For instance, first shipment of LNG from the OKLNG plant was supposed to have commenced in 2009 while the phase 2 was scheduled for 2010.
Government should therefore show more commitment to ensuring the completion of Brass LNG and OKLNG.
Mid-sized LNG project is game
With the experience of Brass LNG and OKLNG, perhaps focusing on mid-sized LNG projects should be game.
Mid-Scale LNG shall mean LNG plants with a train capacity between 300,000 and 800,000 tons of LNG per year. The high end represents the capacity which comfortably can be implemented with a single flow mixed refrigerant cycle using one compressor train as well as current compressor and driver technology. The low end represents a threshold below which the diseconomies of scale in jetty, tank and infrastructure tend to become too dominant.
Mid -Scale LNG projects are fast track projects as from commencement of first plant engineering activities, it can be expected to produce first LNG at least four to five years earlier than large scale LNG projects Nigeria has been enmeshed in.
Source: Business Day
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