LNG

By pjain      Published Dec. 10, 2019, 8:35 p.m. in blog Invest   

LNG Key factors and Trends

Key: LNG is a costly process with expensive infrastructure is not quite there yet

Key: LNG needs Financing in Billions of Dollars - hard to justify as Fracking NPAs common

To secure funding for these projects that typically cost billions, U.S. companies need long-term commitments to convince banks the projects are viable. Chinese buyers were the natural choice for these long-term commitments but this is no longer the case as Chinese investors shun U.S. projects amid the war.

GAS & LNG Major Consumers, Importers

Global coastlines with terminals for importing NG

Many already exist, with several new regasification terminal projects under way. In fact, the IEA projects that 50 countries will be importing LNG by 2025, up from just 10 at the start of this century .

Europe too dependent on Russian Gas via Pipelines for Severe Winters, LNG offers competition

As the main supplier of natural gas to Europe, Russia has a near-monopoly on Western European countries. This advantage creates pricing risk and security risk for any country that imports natural gas.

China slowdown, US Trade war wipes out Major LT customer

China can’t absorb all of this new LNG which is coming into the market

China has imported no U.S. LNG since March,2019 according to data from ClipperData. Bloomberg data is even gloomier: it suggests no U.S. LNG has made its way into China since February. No wonder, since Beijing first imposed a 10-percent tariff on the commodity and then upped this to 25 percent in retaliation for U.S. tariffs.

China Splits out 4th Infra, Pipeline from Top 3 E&P, Importer Oil & Gas companies

A key problem is that the current tariff battle between the United States and China could have long-term implications — on both natural gas and coal exports.

India needs Gas for Cooking, $60b plan for national gas pipeline grid?

Japan

Korea

LNG Tech, Supply, Capacity and Major Exporters

Supply: US Fracking produces LOTS of gas

U.S. energy companies are producing too much gas at a time

Gas technology, LNG E&P and shipping is complex

The United States is in a position to export its advanced carbon capture and natural gas drilling technologies. At the same time, this country is in a position to sell its liquefied natural gas, or LNG, to Asian nations.

What is LNG tech - shipping not pipelines

LNG, liquefied natural gas is simply natural gas in its liquid form.

  1. Pipelines to bring gas to LNG terminals

  2. Trains to cool and liquefy NG. LNG plants consist of one or more trains responsible for cooling and condensing natural gas. To liquefy natural gas, it must be cooled to -260°F [-160°C], a process that condenses the gas to occupy 1/600th of its original volume. Natural gas will not burn in its liquid state, making LNG safe for international shipment.

  3. Inland large LNG storage tanks to store it or buffer before pumping into ships. The LNG flows into cryogenic storage tanks, which are designed for low temperatures to keep the gas cooled and in its liquid form.

  4. Terminals with Cyrogenic high pressure Pump into ships

  5. Ships with 4 or so large LNG tanks on them LNG requires specialized LNG carriers to transport it around the world. These ships either have a series of cylinder tanks, known as Moss tanks, or a steel membrane built right into the hull that holds the LNG and keeps it cool. The specialized ships then transport LNG from an export facility to an import site where it can then undergo a regasification process and move through local pipelines. Companies then load the LNG into specialized gas carrying ships known as LNG carriers that transport it to market centers.

  6. Import terminals with tanks to store LNG from ships.

  7. Regasification Plants The ability to import LNG, turn it back into a gas using what's called a regasification plant When the LNG arrives at its final destination, it then goes through a regasification process at an import facility where it's pressured and regasified using heat exchangers that transform the LNG back into a gas so that it can flow through local pipelines.

  8. Pipelines to consumption destination It then transports it through intrastate pipelines eliminates dependence on a single natural gas source.

Global LNG end'17 production at 280 m-tons

  • Note for LNG 1 b cuft = 0.021 m tonnes, so 10b cuft/day = 103650.021 = 76 m metric tonnes

Australia No.1 11.5 bcfd'19

In 2016, the country exported 44.3 MMT of LNG, putting it second in global market share with 17.2% of the total and doubling output since 2004.

Australia exported more LNG than Qatar in November 2018 and April 2019. The U.S Energy Information Administration (EIA) says Australia is on track to consistently export more LNG than Qatar.

However, domestic natural gas prices have spiked due to internal shortages. Earlier 2017, Australian Prime Minister Malcolm Turnbull took measures to curb exports in order to support domestic consumers, primarily manufacturers and other industrial users. This could slow the country's export growth in coming years.

Projects

Australia has rapidly ramped up production on a slew of multi-billion dollar export projects. Eight new LNG projects came online in Australia between 2012 and 2018 pushing Australia’s export capacity from 2.6 in 2011 to 11.4 bcf/d in 2019.

  1. Wheatstone

  2. Ichthys

  3. Prelude, Royal Dutch Shell’s floating LNG facility. offshore facilities known as floating LNG (FLNG) terminals. Royal Dutch Shell (NYSE:RDS-A)(NYSE:RDS-B) is currently constructing the Prelude FLNG facility in Australia. The $14 billion offshore facility will produce at least 3.6 mtpa of LNG when it starts up. Gets its gas from a remote field northeast of Broome in Western Australia, shipped its first LNG cargo to customers in Asia in June'19. It is capable of holding 175 Olympic-sized swimming pools of LNG in its storage tanks alone.

Qatar No.2 77m tons pa > 110m tons- Early but losing prominence

Qatar was an early LNG faithful and its energy exports have skyrocketed. Qatargas, which is owned by the government of Qatar, is the world's largest LNG producer. The company operates 14 LNG trains that can produce 77 mpta. Other companies, including Shell, ExxonMobil and Total own minority interests in some of those trains.

A tiny Middle-Eastern country on the northeastern coast of the Arabian Peninsula but in dangerous proximity to Iran, it sits on top of some of the largest natural gas reserves on the planet, many of which are found offshore. With a tiny population of just over 300,000 Qatari citizens, Qatar relies heavily on immigrants to run its economy: About 2.3 million non-native expatriates living in the country make up over 90% of its workforce. Qatar's natural gas and oil reserves are the biggest single driver of the economy.

Qatar exported 77.2 million metric tons (MMT) of LNG in 2016, good for a massive 29.9% of the global total. With a fairly steady annual output, Qatar has dominated LNG exports for over a decade. It still has the third-largest reserves in the world, so that dominance is likely to continue.

It plans to boost its LNG capacity by early 2024 to 110 million tons a year, up from around 77 million tons a year

US No 3 LNG 10b cuft/day by 2020 or 25% of global LNG capacity!

U.S. LNG exports were hailed as a double blessing: on the one hand, expanding U.S. companies global presence on the LNG market and on the other, relieving a persistent natural gas glut resulting from the growth of the shale oil and gas industry. The size of this relief grew from just 2.92 billion cu ft in 2013 to 1,083 billion cu ft last year. Now, its further growth that could turn the United States into the world’s top LNG exporter by 2024 is under threat.

US to have 10b+ cu ft/day LNG capacity by 2020

  • 2b>3.5b As of end 2017 there was only one LNG terminal in the U.S., which is owned by Cheniere Energy and has been exporting LNG at its Sabine Pass facility since last year. Sabine Pass has a capacity of about 2 billion cubic feet per day. Total capacity here is expected to be 3.5 billion cubic feet per day once rail infrastructure is fully built.

  • 7.5b increase by end'19 - There are five additional LNG projects under construction with a total capacity of about 7.5 billion cubic feet per day that will come online in 2018 and 2019, making total U.S. LNG export capacity about 10 or 11 billion cubic feet per day by 2020 - Institute for Energy Research in Washington.

  • 7b+ in Four more projects are approved but not yet under construction.

  • Cameroon - Golar LNG
  • Shell’s Elba Island
  • Freeport project

A tally of all 26 LNG export terminals approved by (12) or proposed to (14) energy regulators shows that the United States could one day have an export capacity of a staggering 44.2 Bcf/d. While some of those facilities may never get built, the growth potential is difficult to comprehend.

Exports mainly to Europe

US is trying to ensure Europe uses its LNG instead of becoming dependent on Gazprom. * Using NATO and threats of sanctions, * Blocking "new" Nord Stream pipelines * A recent five year deal signed between Poland and U.S. liquefied natural gas (LNG) exporters in Gulf of Mexico * Similar deal with Lithuania for new LNG plants

U.S. natural gas exporters are already encroaching on long-held Russian markets in Europe, particularly in countries whose governments tend to be anti-Russia.

The U.S. has become a serious competitor to Russia in Europe. Animosity towards the Russian company are seen by Washington energy policy makers as an opportunity to convince energy ministers there to diversify away from Russian gas and import U.S. LNG.

Trade war hurts US Exports to China - biggest consumer

Malaysia No4 LNG

It exported 25 MMT of LNG in 2016 -- nearly 10% of the global supply.

Malaysia has substantial offshore natural gas reserves located on a continental shelf it shares with Thailand and the the two countries jointly develop the natural gas and share the proceeds, having worked together on developing these assets for almost three decades.

Nigeria No.5 LNG

One of only three OPEC member states on the list of biggest LNG exporters, Nigeria produced and exported 18.6 MMT of LNG in 2016, or 7.2% of global market share. And while Nigeria's LNG export volume is far smaller than that of fellow OPEC member Qatar, the country is far bigger, with 190 million residents making it one of Africa's most populous. It's also Africa's biggest economy, in no small part because of its oil and gas resources.

Also a major oil-producer, Nigeria produced 1.75 million barrels per day during the second quarter of 2017. Its oil and gas industry has also been the target of insurgents for years, a major reason its LNG exports fell 1.8 MMT from 2015. Unfortunately, Nigeria's oil and gas wealth hasn't benefited all of its citizens: It is estimated that 80% of Nigerians live on less than $2 per day.

Indonesia No.6 in LNG

In 2016, Indonesia liquefied and exported 16.6 MMT of natural gas, good for 6.4% of global supply.

Algeria No.7

In 2016, its LNG exports came to 11.5 MMT, 4.5% of the global total. It's also a major producer of oil. According to OPEC (of which it is a member), Algeria produced 1.1 million barrels of oil per day on average in 2016 and exported a total of 48.6 MMT of natural gas (including non-liquefied natural gas, which is typically transported through pipelines).

Trinidad No.8 in LNG

Its vast oil and gas reserves, located in its waters off the northern coast of Venezuela, make Trinidad the third-richest country in the Americas by per-capita GDP, behind the United States and Canada.

Trinidad exported 10.6 MMT of LNG in 2016, accounting for 4.1% of global supply -- all from an island that's only 120 square miles in size and has a population of less than 1.5 million.

Companies in LNG

Qatargas No 1

RDS-A R5 No.2 41 mpta - Diversified Major with huge LNG play

Royal Dutch Shell

Shell is the most focused on becoming a dominant force in the market. Because of that, it's an ideal option for those seeking a less risky way to invest in LNG. Shell combines its LNG upside with operations that span across the entire oil and gas market. That diversification makes it less prone to a potential downturn in the LNG market, which could happen if LNG supply outpaces demand.

GAS MAJOR A key reason why Shell is a force in the LNG market is that it's one of the biggest natural gas producers in the world. While a large portion of that gas flows through pipelines to end users, the energy giant is working toward liquifying an increasing amount of its gas production so that it can take advantage of the fast-growing LNG market.

LNG TRADER. In addition to producing LNG, Shell is a major force in the LNG trading market, buying it from third-parties and then selling it to end-users at either the going market rate or under oil-linked contracts. Those activities boosted Shell's LNG sales volumes to 66 million metric tons last year. The company's LNG trading business will get a near-term boost since it has contracts to buy all the LNG produced by Kinder Morgan's Elba Island terminal near Savanah, GA, which will come online in 2019.

LNG PRODUCER. RDS has become a major force in the LNG market in recent years. It vaulted to the top in 2016 when it spent $70 billion to buy BG Group, which not only boosted its gas output 25% but bolstered its presence in the LNG market.

  1. Stakes in Qatar Gas 4

  2. Gorgon in Australia (one of the largest and most expensive LNG projects in history)

  3. Queensland Curtis LNG, which BG Group developed. In 2017, the company's facilities manufactured 33.2 million metric tons of LNG, which gave it a 12% share of the market.

  4. It is building offshore facilities known as floating LNG (FLNG) terminals at the Prelude FLNG facility in Australia. The $14 billion offshore facility will produce at least 3.6 mtpa of LNG when it starts up.

  5. Shell also initiated LNG Canada, a $31 billion facility on that country's west coast end 2019.

  6. Lake Charles LNG on the U.S. Gulf Coast with Energy Transfer Equity

  7. Expansion of the Sakhalin facility in Russia.

Malaysia's Petronas No 3

TOT 20 mpta No.4'19 but stagnant rising to 23 mpta at most

Cheniere LNG No.5 22.5+8 mtpa

Cheniere Energy -- a pure-play LNG stock -- will continue to dominate the industry and investing opportunity

Its LNG projects have heavy costs and it has been on a spending spree. Many of the projects won't see positive cash flows till years after their first days of construction. As such, Cheniere's price to earnings ratio (PE) currently sits at a whopping 95. Near a 52-week low, Cheniere still carries a premium valuation compared to other energy infrastructure and pipeline companies.

The company has also proved capital discipline by staging in their liquefaction trains into their Corpus Christi export terminal instead of building them all at once.

However by 2020 should be much more reasonable, with a rPE of 19.

Its projects are over 1,000 acres. The terminals will be responsible for receiving, cooling, and exporting natural gas from nearby plays such as the Permian Basin in West Texas.

  1. The Sabine Pass LNG Terminal can house up to six liquefaction trains capable of processing over 3.5 billion cubic feet per day (Bcfd) of natural gas. Currently, the Sabine Pass is the largest approved and operational LNG export terminal in the United States. Once complete, the $23 billion investment will give the company the capacity to produce 40.5 million tonnes per year (mtpa) of LNG, which would make it one of the five largest global suppliers.

  2. Corpus Christi 0.71 Bcfd, another 1.4 Bcfd - could expand to 10 mtpa A 23 mile, 48" [122cm] pipeline connects The Corpus Christi Liquefaction Project to several interstate and intrastate pipelines, allowing the export terminal to receive natural gas from several locations.

  3. Owned Midship pipeline, which will move gas out of the STACK Shale play of Oklahoma. As the country's largest natural gas customer, it's vital that Cheniere has an ample gas supply, which is why it's considering building that pipeline to improve its access to gas.

  4. Future regasification site in Chile to create a captive near-sea buyer

Customers are already lined up for the terminal's growing list of global buyers, including Pertamina, Endesa, Iberdrola, Naturgy, Woodside, EDF, EDP, Trafigura, and PetroChina.

XOM No3 22 mpta + potential 20 by 2025

  1. 2.0 Bcfd Golden Pass (Texas) completes 2024
  2. ExxonMobil (30%), Qatar Petroleum (70%)

CVX 16 mpta

TELL Tellurian No 5 R5 - sharp mgt

Tellurian is a risky stock and doesn't produce any LNG at the moment since it's still in the development stage

Those partnerships are a major part of the company's funding plan as its strategy is to sell LNG at a fixed up-front fee to customers, which will enable them to buy it at cost. This approach will allow Tellurian to build Driftwood without taking on too much debt. These financial arrangements also set the company up to produce as much as $2 billion in annual free cash flow upon completing the facility, which is substantial considering that it currently has a valuation of less than $2 billion.

It could have a significant upside potential. Because of that, investors need to have a long-term mindset and a high-risk tolerance to consider Tellurian.

Tellurian's Chairman was the CEO and founder of Cheniere Energy while its current CEO was an executive at that company, and it also hired several people away from BG Group after Shell bought it.

It's working to build a fully integrated LNG business from scratch, which includes constructing an LNG terminal, building pipelines, and making direct investments into drilling new gas wells.

  1. $15b Driftwood TERMINAL 4.0 Bcfd completes 2023 near Lake Charles, Louisiana.
  2. Its export terminal in Calcasieu Parish, LA has been approved and is under construction.
  3. Once complete it will have the capacity to export 27.6 mtpa of LNG. The project is still in the development stage, with the company hoping to make a final investment decision next year on when it would begin construction. If all goes according to plan, the facility will start operations by 2023.
  4. Total owns a 19% interest, while the company selected to build Driftwood
  5. Bechtel and GE major equipment suppliers have also taken stakes.

  6. $7b Tellurian Pipeline Network a series of pipelines would feed gas to Driftwood.

  7. Driftwood Pipeline is a 96-mile line that would transport 4 billion cubic feet of natural gas per day (Bcf/d) from the nation's existing pipeline network to the Driftwood terminal. In addition, the company is working on several pipelines that would move gas from major supply basins to Driftwood.
  8. $1.4b The Haynesville Global Access Pipeline would be a 200-mile could transport as much as 2 Bcf/d from the Haynesville Shale toward Driftwood.
  9. Permian Global Access Pipeline would be a 625-mile line that would move gas from the Permian Basin.

  10. Gas production - includes constructing an LNG terminal, building pipelines, and making direct investments into drilling new gas wells.

  11. It bought Rockcliff Energy, which owns natural gas reserves in Louisiana's Haynesville Shale.

NextDecade

NextDecade could also provide a unique investment opportunity, but a string of delays might imperil the company and should be viewed as a serious red flag by investors.

  1. 3.6 Bcfd Rio Grande (Texas) completes 2023

Other Big Oil Majors - Mostly find Overseas LNG projects More Profitable

Big Oil majors, which are a lot more resilient to any single segment of the energy industry, are forging ahead with their own LNG projects outside the U.S. Mozambique is a hot spot and so is Papua New Guinea. They are adding capacity that would ultimately compete for market share with U.S. independents.

LNG Shipping Majors

Overview

Companies will also charter some of their ships on the spot market, meaning they lease them at market rates, which can ebb and flow with demand. That enables them to make more money during boom times, but it also exposes them to market downturns.

Golar LNG GLNG - shipping major

Golar LNG currently owns 16 LNG carriers (including 10 under construction)

Golar LNG is also working on smaller scale projects to convert old LNG carriers into floating liquefaction vessels (FLNGVs) that can turn "stranded" natural gas, -- which are offshore fields that aren't currently viable due to the lack of a local market -- into LNG so that it access global markets.

The company's recently completed work on its first FLNGV conversion (Golar Hilli), which has the capacity to produce 2.4 mpta from an offshore field in Cameroon. The company also has two more FLNGV conversions under consideration.

Gaslog GLOG

Gaslog owns 29 LNG carriers (with five on order). Gaslog has secured long-term contracts with major LNG producers such as Shell and Cheniere for the bulk of its fleet, which enables those companies to ship their LNG around the world while Gaslog earns steady revenue backed by the agreements.


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