|
World LNG looks to U.S. markets Several potential suppliers can ship LNG at under $2 f.o.b., says study Larry Persily Petroleum News Government Affairs Editor
There are more than 40 existing and proposed natural gas liquefaction plants around the world, with many of them looking to help feed North America’s growing need for LNG by the end of the decade and beyond.
A Wood Mackenzie Ltd. report reviews each of the projects and says the most likely candidates to boost their deliveries or to start new service to North America by 2010 include Norway, Algeria, Nigeria, Trinidad and Tobago, Equatorial Guinea, Venezuela, Qatar, Australia, Russia and Indonesia.
The company’s report, “Falling Short? The Growing Challenge to Supply the North American Natural Gas Market,” includes a table listing existing and proposed liquefaction projects and providing an estimated f.o.b. price for the LNG. The research project looked at only those LNG supplies that could start filling tankers by 2010.
The table assumes a 15 percent rate of return on the upstream gas supply, a 12 percent return on any pipe needed to move the gas from the well to tidewater, and a 12 percent return on the terminal.
The low-cost providers on the list include several projects in Qatar averaging about $1.25 per million Btu, Equatorial Guinea at $1.36, new projects in Nigeria expected to average less than $1.50, a couple of Indonesia projects averaging under $1.70, Trinidad at $1.87 and Venezuela at $1.91.
The next level of potential suppliers for North America include Norway at $2.26, Russia’s Sakhalin Island at around $2.40, several Australian projects close to the same average, and Algeria at $2.71. More competition post-2010 Those suppliers could be ready by 2010. After that, any new projects would have to compete with expansion of those already in the game, said Matt Snyder, managing consultant at Wood Mackenzie’s Boston office.
The difficulty is that if you miss an early window of opportunity, he said, it’s easier for existing plants to expand to fill multiple windows than it is for a greenfield project to start up.
“Indonesia and Australia appears to be front-runners in realizing the potential of the U.S. West Coast,” Wood Mackenzie said. “Sempra (through BP’s Tangguh project in Indonesia), Shell and ChevronTexaco appear to be setting the early pace for getting Pacific Basin LNG into the West Coast.”
The study did not look at the cost of Alaska LNG. “The study only covers through 2010, which is a pretty quick timeframe to get an (Alaska) LNG plant, contracts and all the other tangible/intangible elements up and running,” Snyder said.
Regardless of the timing, some or all of several other issues could work against an Alaska LNG project, Snyder said — the cost of an 800-mile arctic pipeline to move North Slope gas to tidewater, more expensive U.S. tankers and the perhaps more attractive option of moving a larger volume of gas through a pipe to Canada and the Lower 48.
But sometimes the decision is about more than just money, he said. Long-term contract relations, security of supply, country risk, and avoiding congested international shipping lanes at the Panama Canal, Southeast Asia and the Middle East could work in Alaska’s favor over foreign suppliers, Snyder said. “There are positives and negatives.” Publicly owned Alaska LNG projects still possible Although the major North Slope producers have rejected LNG as a financially viable alternative for moving Alaska gas to market — and instead are focusing their efforts on a pipeline through Canada — two publicly owned ventures believe their possible tax savings could make Alaska LNG competitive on the U.S. West Coast or in the Far East.
The municipally owned Alaska Gasline Port Authority, which wants to build a $26 billion project to move 6 billion cubic feet from the North Slope, estimates in its base-case assumption that it could ship LNG from its proposed terminal at Valdez at $2.75 per thousand cubic feet f.o.b.
Potential tax savings of a publicly owned project could help lower that cost, according to the port authority, which proposes to move 2.7 bcf per day as LNG and 3.2 bcf per day through a pipeline into Canada.
The Alaska Natural Gas Development Authority, a state-owned venture, shares the same tax-free hope as the municipal port authority and is expected to get about $1 million from the state Legislature this year to study the possibilities.
The state authority calculates it could deliver LNG to either West Coast or Far East ports for about $2.50 per mcf, but that number does not include any wellhead value for the gas. Assuming $1 to buy the gas from North Slope producers, the delivered price would be $3.50 — unless the authority could borrow more money at lower interest rates to drop the cost. A lot of players in the LNG supply business Among the candidates singled out by Wood Mackenzie as likely to expand their current supply contracts or start supplying LNG to North America by 2010 are several of the world’s major producers and state-run companies:
• Statoil ASA’s Snohvit project in Norway’s Barents Sea is scheduled to start deliveries in 2006, at an average 560 million cubic feet per day. Statoil bought up El Paso’s capacity rights at the Cove Point, Md., regasification terminal, with long-term deliveries expected to include Snohvit gas.
• Marathon Oil Corp.’s LNG project at Equatorial Guinea is scheduled to go online in 2007 at 400 million cubic feet per day, with much of the gas likely to go to regas terminal at Lake Charles, La., or Elba Island, Ga.
• Royal Dutch/Shell Group and Total are expected to look toward North America markets from the expanded Bonny Island project in Nigeria.
• Algeria’s state oil and gas company Sonatrach will be lojoking to U.S. markets to take some of the LNG from its expansion plans at its Arzew development.
• Trinidad and Tobago expect the Caribbean island nation’s fourth LNG train to start production in 2006. “We anticipate the output being delivered primarily into the U.S.,” Wood Mackenzie said. Partners in the project include England’s BG Group and BP PLC, Spain’s Repsol-YPF, Belgium’s Tractebel, and Trinidad’s National Gas Co. The shareholders also are discussing the possibility of adding a fifth and sixth train.
• BG Group and its partners are developing a liquefaction project in Egypt and the second train, scheduled to go online in 2006, could help supply the regas terminal at Lake Charles, La.
• Shell, Mitsubishi and Qatar Petroleum are partners in a Venezuela LNG project that could start producing more than 600 million cubic feet per day in 2008, with North America a likely market for much of the gas. ChevronTexaco and ConocoPhillips could follow in 2010 or later with their own LNG terminal in Venezuela.
• Qatargas and ConocoPhillips are partners in a project to liquefy 1 bcf per day, targeting the North America market and scheduled to start service before the end of the decade.
• Qatar’s RasGas and ExxonMobil are looking at trains to produce 2 bcf a day of gas, though Wood Mackenzie said this project could be delayed if ConocoPhillips gets too far ahead in its Qatargas development.
• Australia’s Gorgon project “now looks to be taking shape as a key supplier to the West Coast U.S. market around the 2010 time period,” the report said. ChevronTexaco, Shell and ExxonMobil are partners in Gorgon.
• Expansion at Australia’s North West Shelf project could supply some LNG to the West Coast mid-decade. Partners include BP, ChevronTexaco, Shell and BHP Billiton.
• Shell’s joint venture with Sempra Energy for an LNG regas terminal on Mexico’s Baja Peninsula could receive gas from Shell’s Sakhalin Island project in Russia’s Far East. “While marketing Sakhalin LNG remains a key challenge for Shell, Sakhalin is without doubt a key, new legacy LNG asset for Shell which should help Shell maintain its global LNG leadership position,” Wood Mackenzie said. The two-train project is scheduled to start deliveries in a few years, building up to 1.3 bcf per day.
• BP is still looking to sign up more firm contracts for its Tangguh project in Indonesia, with a final investment decision expected this year.
| 