On this page the ARD presents Australian, Russian, and sometimes international news from the energy sector to stimulate interest of Australian and Russian petroleum companies in various projects and investment opportunities that may be mutually beneficial.
APPEA welcomes West-East Gas Pipeline study
30 October, 2017. APPEA welcomes the Commonwealth Government’s announcement today that tenderers have been selected to conduct a pre-feasibility study on the West-East Gas Pipeline. The study will be conducted by ACIL Allen, in conjunction with GHD, and is due to report back to government in March 2018. APPEA Chief Executive Dr Malcolm Roberts said the gas industry supported rigorous cost-benefit studies for new pipeline infrastructure. “Provided the business case stacks up, APPEA welcomes more interconnection and further steps towards a larger, more integrated national market,” Dr Roberts said. “But is must be acknowledged that west coast gas is likely to be an expensive solution to east coast supply concerns.
“The reality is local gas will always be cheaper gas.”
“The Australian Consumer and Competition Council (ACCC) recently advised that customers in Victoria and New South Wales were already paying a 25 per cent premium for importing gas south from Queensland. “Transportation charges alone would mean gas travelling across the continent would carry an even greater premium.” Dr Roberts said developing local gas supply was the logical solution to supply concerns in the eastern Australian market. “Victoria and NSW cannot continue to rely on other states to solve their gas supply issues. These states have abundant local onshore resources but would rather import gas from other states or, incredibly, from overseas,” Dr Roberts said. “It’s time the Victorian and NSW governments recognised that the cheapest gas available to homes and businesses in their states is the gas they are standing on. They need to get on and develop it.”
Russia’s Novatek aims topple Qatar from LNG top spot
Yamal project could be completed earlier than expected
* Arctic LNG 2 construction in 2019 subject to final decision
* Both projects could pump 70 mln T vs Qatar’s 77 mln T
* Tighter U.S. sanctions do not impact technology purchases
By Sabina Zawadzki
LONDON, June 23 (Reuters) – Russian gas producer Novatek aims to topple Qatar as the world’s biggest exporter of liquefied natural gas as it gets closer to completing its first LNG project, a top executive said, batting away concerns about U.S. sanctions on the sector.
The country’s largest non-state gas producer is expected to start exporting LNG from the first phase of the Yamal project, situated far above the Arctic circle, towards the end of this year and may bring forward its final stage by six months, CFO Mark Gyetvay said.
But it is the inception of Novatek’s second, and Russia’s third, large-scale LNG project called Arctic LNG 2 that would transform the company, headed by Russia’s richest businessman Leonid Mikhelson, into a top global producer within a decade.
“We have huge ambitions to be just as large as Qatar is as one country, but as one company,” Gyetvay said in London on the sidelines of an energy forum.
Qatar and Russia have long been rivals in global gas markets. Qatar’s supplies came under the spotlight in the past month after Saudi Arabia cut economic and diplomatic ties, in a move ratcheting up a wider violent and diplomatic conflict in the Middle East.
In terms of LNG, Qatar is by far the largest exporter, selling 77.2 million tonnes of the liquefied gas and accounting for just under 30 percent of market share in 2016, according to energy research group IHS and the International Gas Union.
Russia that year was seventh with exports of 10.8 million tonnes and a 4 percent market share. The Yamal project, once all stages are complete, will export an additional 16.5 million tonnes, which would put Russia, already the world’s largest crude oil exporter, in third place just below Australia.
Of progress on Yamal, Gyetvay said the second phase would be ready in the second half of next year while the third could be completed by the first half of 2019, rather than the second, as all facilities were expected to be delivered this year.
“If we do Arctic LNG 2 – we’ll start the process of construction in 2019 if we make that FID (final investment decision) – the plan is to make sure we have the first LNG in the market by 2023,” he said.
Mikhelson said on March 29 production from the two projects on the Yamal and neighbouring Gydan peninsula could produce more than 70 million tonnes annually – within spitting distance of Qatar’s exports. And President Vladimir Putin told Mikhelson a day later Russia not only could but would become the largest LNG exporter should the pace of development continue.
Saudi Energy Minister Khalid al-Falih expressed the Kingdom’s interest in participating in the Arctic LNG 2 project earlier this month although Gyetvay said it was too early to comment on any future foreign investors. Qatar already has a large investment in Russia’s energy industry in the form of the 19.5 percent stake in Russia’s largest oil company, Rosneft, that it bought last year with trading group Glencore.
Western sanctions on Russian companies including Novatek “obviously had an effect” on the Yamal project, Gyetvay said: “We had to revert to the use of Russian and Chinese finance”. But for now, he does not see further impact even as Washington tightened those sanctions because they concern financing rather than technology, which Novatek is free to purchase from anywhere as it needs for its projects.
NOVATEK Signs Cooperation Agreement with Kamchatka Territorial Government
Moscow, 23 October 2017. PAO NOVATEK has signed a Cooperation Agreement with the Kamchatka Territorial Government on building a sea terminal facility for reloading liquefied natural gas (LNG) at Kamchatka. The Cooperation Agreement was signed by the Chairman of NOVATEK’s Management Board Leonid Mikhelson and Kamchatka’s Governor Vladimir Ilukhin.
Woodside Petroleum CEO Peter Coleman says gas industry ‘out to lunch’
Sydney Morning Herald, July 2017. Woodside Petroleum chief executive Peter Coleman has raised the hackles of his rivals, telling the industry it has been ”out to lunch”, taking years to build LNG projects that ran well over budget and only has itself to blame for failing to capture a bigger share of the fossil fuel market. Mr Coleman pointed to the $200 billion figure that is cited for investment in liquefied natural gas over the past 10 years in Australia and said it was nothing to be proud of, given that the original budgeted figure was so much lower.
“Whilst we may wax lyrical about the $200 billion, it actually started as $100 billion,” he told the APPEA oil and gas industry conference in Brisbane on Tuesday. “We didn’t deliver on our promise. We delivered a very expensive energy source,” he said, taking the industry to task for losing discipline in investment, making projects too complex, and losing touch with gas markets.
Some industry executives privately took issue with the criticism, pointing out that Woodside has little recent track record of delivering growth. But others interpreted the comments as a positive call to re-examine established processes and business models, and resolve to do better in future.
NOVATEK Joins the Society for Gas as a Marine Fuel and the SEA\LNG Association
Moscow, 14 July 2017. Novatek Gas & Power, a wholly owned trading subsidiary of NOVATEK has joined the Society for Gas as a Marine Fuel and the SEA\LNG Association to help promote liquefied natural gas (LNG) as a marine fuel. Both organizations are active in promoting the increased use of cleaner burning LNG for marine transportation.
NOVATEK Reports Preliminary Operating Data for the First Half 2017
Moscow, 10 July 2017. PAO NOVATEK reported today preliminary operating data for the first half 2017. NOVATEK’s marketable hydrocarbons production totaled 252.3 million barrels of oil equivalent (boe), including 31.04 billion cubic meters (bcm) of natural gas and 5,885 thousand tons of liquids (gas condensate and crude oil), resulting in a decrease in total hydrocarbons production by 21.3 million boe, or by 7.8%, as compared to the first half 2016. Preliminary natural gas sales volumes aggregated 33.13 bcm, which was 4.1% higher compared to the first half 2016. For more see:
Shell to shut Curtis Island LNG export plant for maintenance in October
(World LNG News, 14 Jul 2017) The exact timing of the shutdown has not been revealed by QGC, Shell’s unit operating the two two-train LNG export facility. QGC, Australian coal seam gas (CSG) producer became part of Shell when the Anglo-Dutch giant acquired BG Group in a $54 billion deal in February last year. The QCLNG plant located on Curtis Island off Gladstone produces about 8 million tons per year of LNG, enough to load around ten vessels per month. China’s CNOOC holds 50 percent equity in Train 1 while Japan’s Tokyo Gas owns a 2.5 percent stake in Train 2.
Australia trims 2017-18 LNG export forecast by 3.8 mil mt on Ichthys delay
(Sydney, Platts, 7 Jul 2017) The Australian government Friday lowered its forecast for the country’s fiscal 2017-18 (July-June) LNG exports by 3.8 million mt, due mainly to the later-than-expected startup of Inpex’s Ichthys LNG project. The Department of Industry, Innovation and Science revised down its forecast for fiscal 2017-18 LNG exports to 63.8 million mt in its latest quarterly report from 67.6 million mt issued in March. While pointing to the delay from late 2017 to March 2018 of the Northern Territory-based Ichthys LNG project startup, as well as minor revisions to forecasts for other LNG projects, the report also flagged intensifying global competition and federal government LNG export restrictions as casting uncertainty over the outlook.
Two other LNG projects are scheduled to start production in Australia in the current fiscal year: the 8.9 million/year Wheatstone LNG project and 3.6 million mt/year Prelude floating LNG facility.
Australian average wholesale gas prices remain below Asian average
(APPEA Media Release (extract), 5 July2017). Average wholesale gas prices in Australia remain lower compared to the average in the Asia‑Pacific region, according to a new report. The International Gas Union’s Wholesale Gas Price Survey 2017 shows that the average wholesale gas price in Australia last year of around $US4.29/MMBTU was around one-third less than the average price for the Asia‑Pacific region. By comparison, Australia’s leading trade partners Japan, South Korea and China all paid average wholesale gas prices between $US7 and well over $US8/MMBTU. Australia also enjoyed lower wholesale gas prices than its two regional LNG export competitors, Malaysia and Indonesia. Globally, Australia’s average wholesale price ranked 26th in a survey of 52 nations.
Australian LNG benefits cannot be taken for granted
(APPEA Media Release (extract), 6 July2017). Australia has received a timely reminder of the value to our economy of a growing gas export industry – and a warning that ongoing success cannot be taken for granted. The June 2017 Resources and Energy Quarterly released by the Department of Innovation, Industry and Science confirms liquefied natural gas (LNG) is on track to overtake metallurgical coal as Australia’s second largest export commodity in 2018-19. The report forecasts the value of Australia’s LNG exports will jump from $23 billion to $37 billion in the next two years as new projects in Western Australia and the Northern Territory enter production. APPEA Director Matthew Doman said LNG exports delivered jobs and revenue for Australia as well as energy and reduced emissions for our Asian trading partners.
“While global supply capacity is set to increase from 285 million tonnes to 382 million tonnes by 2019, almost half of this increase will come from the five new export projects under construction in the US. Qatar, the world’s largest LNG producer, has also signalled its intention to massively increase its own export capacity. So, Australia may soon find itself caught between an established LNG giant determined to regain its market share and an emerging challenger, hungry for success. A supportive policy and regulatory framework in Australia is vital to the industry meeting these competitive challenges.” Mr Doman said the risk to Australia’s export industry was exacerbated by threats to export contracts under the Commonwealth’s new Australian Domestic Gas Supply Mechanism and possible tax increases on new gas projects.
“As a nation, we cannot take the industry’s ongoing success for granted. We are facing intense competition from low-cost producers in an already oversupplied global LNG market. Australia can succeed as a high-cost, low-risk country but we cannot succeed as a high-cost, high-risk country”, he said.
Crude tumbles after Russia said to oppose deeper production cuts
(Extracts from HONG KONG, Bloomberg, by Ben Sharples and Grant Smith on 7/5/2017). Crude oil fell, snapping the longest winning streak this year, as Russia was said to oppose any proposal to deepen OPEC-led production cuts.
Trump to promote U.S. gas exports in Russia’s backyard
(Extracts from Washington, Reuters, by Roberta Rampton and Timothy Gardner on 7/3/2017). President Donald Trump will use fast-growing supplies of U.S. natural gas as a political tool when he meets in Warsaw on Thursday with leaders of a dozen countries that are captive to Russia for their energy needs. In recent years, Moscow has cut off gas shipments during pricing disputes with neighboring countries in winter months. Exports from the United States would help reduce their dependence on Russia. Trump will tell the group that Washington wants to help allies by making it as easy as possible for U.S. companies to ship more liquefied natural gas (LNG) to central and eastern Europe, the White House said. Trump will attend the “Three Seas” summit – so named because several of its members surround the Adriatic, Baltic and Black Seas – before the Group of 20 leading economies meet in Germany, where he is slated to meet Russian President Vladimir Putin for the first time.
Among the aims of the Three Seas project is to expand regional energy infrastructure, including LNG import terminals and gas pipelines. Members of the initiative include Poland, Austria, Hungary and Russia’s neighbors Latvia and Estonia.
“In many ways, the LNG exports by the U.S. is the most threatening U.S. policy to Russia,” said Michal Baranowski, director of the Warsaw office of think-tank the German Marshall Fund. The U.S. is expected to become the world’s third-largest exporter of LNG in 2020, just four years after starting up its first export terminal. U.S. exporters have sold most of that gas in long-term contracts, but there are still some volumes on offer, and more export projects on the drawing board.
Cheniere Energy Inc, which opened the first U.S. LNG export terminal in 2016, delivered its first cargo to Poland in June. Five more terminals are expected to be online by 2020. Tellurian Inc has proposed a project with a price tag of as much as $16 billion that it hopes to complete by 2022, in time to compete for long-term contracts to supply Poland that expire the same year and are held by Russian gas giant Gazprom. A global glut in supply may, however, limit U.S. LNG export growth, regardless of Trump’s support. Russia has the advantage in Europe due to its proximity and pipeline connections.
Europeans will be watching to see whether Trump clarifies his administration’s position on a new pipeline to pump Russian gas to Germany, known as Nord Stream 2. The U.S. Senate in June passed a package of sanctions on Russia, including provisions to penalize Western firms involved in the pipeline. The new sanctions have stalled in the House of Representatives. The U.S. State Department has lobbied against the pipeline as a potential supply chokepoint that would make Europe more vulnerable to disruptions. The threat of sanctions adds to tensions between Washington and Berlin. Germany’s government supports the pipeline, and Trump’s position on it is a concern for European diplomats.
Russia’s Rosneft set for global gas tussle with Gazprom
(MOSCOW, Reuters, by Vladimir Soldatkin and Olesya Astakhova on 6/30/2017 ). Russia’s Rosneft, the world’s top listed oil producer, wants to supply gas in parts of Europe where Gazprom is not present – or Moscow risks losing the market to U.S. liquefied natural gas (LNG), a Rosneft executive said. Gazprom, the leading global gas producer, enjoys monopoly rights on gas pipeline exports. It has lost its exclusive rights to ship seaborne LNG overseas to Rosneft and Novatek, Russia’s largest non-state gas producer.
Rosneft has long been vying for pipeline gas exports as it strives to grow globally. It now wants permission to export to the parts of Europe in which Gazprom does not operate. The Russian producer has a memorandum with BP, which owns a 19.75% stake in the Russian company, to trade up to 20 Bcm of gas annually in Europe. Rosneft V.P. Vlada Rusakova, a former Gazprom executive, said the company wants to conduct “an experiment” in supplying gas to new markets “in coordination” with Gazprom. She added that as part of the “experiment”, Rosneft could supply gas to markets where Gazprom is not present and into which U.S. LNG could be imported. Rusakova did not identify any such European countries. “Of course, this should be done in close coordination with Gazprom, in order to avoid competition between Russian gas suppliers.”
Gazprom targets $32-34 billion in revenues from exporting more than 180 Bcm to Europe and Turkey this year. Rosneft produced almost 70 Bcm of gas last year, earning 208 billion roubles ($3.5 billion) in revenues from gas sales at home. Rosneft, like Novatek, is winning some of Gazprom’s clients at home thanks to a more flexible gas pricing policy. But unlike Novatek or Gazprom, Rosneft plans to have an LNG plant only in Russia, as it eyes Russia’s Far East and Asian markets. The company wants to export gas to China, where Gazprom plans to start shipping gas in 2019-2021 via the Power of Siberia pipeline, currently under construction. It also wants access to China’s domestic gas market and end-users via swap deals. “There are significant gas resources in Russia’s East, while no infrastructure has been built. And that’s why we are interested in gaining access to the future Power of Siberia pipeline,” Rusakova said.
Rosneft plans to produce 100 Bcm of gas per year by 2020 and become the world’s third-largest producer of natural gas sometime later, thanks to a number of international projects. Last year, Rosneft agreed to buy a stake of up to 35% in Egypt’s Zohr offshore gas field from Italy’s Eni. The Russian company also plans to expand in gas projects elsewhere, including Mozambique and Venezuela.
Rosneft states that the company may seek to build an LNG plant in the Far East based on its own gas reserves, in addition to its ongoing 20% WI in the Sakhalin project
(MOSCOW, June 29, Reuters). Rosneft VP, Vlada Rusakova, said on Thursday the company was looking at building a liquefied natural gas (LNG) plant in Russia’s Far East using exclusively its own resources and gas reserves. Rosneft and U.S. energy firm Exxon have previously talked about building an LNG plant in Russia’s far east together, using gas from the Sakhalin-1 project in which both firms have a stake.
Rusakova said building a plant with Exxon still featured in Rosneft’s plans, but her suggestion that Rosneft could go it alone reflects the company’s growing ambitions, especially in Asia. Rosneft Chief Executive Igor Sechin, one of the most influential businessmen in Russia, has said his firm plans to become the world’s third-largest producer of gas early next decade. Rosneft has been lobbying for access to a gas pipeline to China being built by Gazprom, which currently has a monopoly on Russian pipeline gas exports. It said on Thursday it was looking at cooperating with Beijing Gas in Russia’s far east and east Siberia in exploration, production of hydrocarbons and gas marketing.
Beijing Gas Group has bought a 20% stake in the Verkhnechonskneftegaz gas field from Rosneft for $1.1 billion
(Rosneft Online, June 30, 2017). As a result of the transaction, the parties are going to create a vertically integrated system of cooperation. The Chinese company acquires a stake in one of the largest producing fields in Eastern Siberia with developed infrastructure and access to the ESPO pipeline while Rosneft gets an opportunity to enter China’s prospective domestic gas market, including end users via swap gas supplies.
Prelude floating LNG facility sails toward Australia
(OGJ Online, June 30, 2017). The Prelude floating LNG (FLNG) facility is en route from its construction site in South Korea to offshore Western Australia, a 5,800-km trip that should take about a month. Led by tugboats, the vessel left the Samsung Heavy Industries shipyard in Geoje, said operator Royal Dutch Shell PLC. It was constructed by Technip Samsung Consortium. It’s the largest offshore floating facility ever built, said partner Inpex Corp. Prelude measures 488 m in length and 74 m in width. Once it arrives at the Prelude natural gas field, the facility will be secured by preinstalled mooring chains lifted from the seabed. The Prelude facility will then undergo hook-up and commissioning, and start producing. The facility will be installed on Block WA-44-L, about 475 km north-northeast of Broome. Prelude FLNG’s peak capacity is 3.6 million tonnes/year of LNG, 400,000 tpy of LPG, and 36,000 b/d of condensate. Shell Australia has 67.5% and Inpex has 17.5%. Other partners are Kogas Prelude Pty. Ltd. with 10% and Overseas Petroleum & Investment Corp. with 5%.
Australia’s North West Shelf LNG facility hit by Karratha plant outage
LONDON, June 28 (Reuters) – Work to restart production at Australia’s Woodside-operated Karratha Gas Plant, which hosts the North West Shelf liquefied natural gas (LNG) export project, is underway following a partial outage on June 24, a spokeswoman said. The spokeswoman declined to comment on whether LNG exports have been affected. Industry sources, however, said the outage had affected LNG exports and was helping to support spot LNG prices in Asia LNG-AS, which have been on a downward trend for months.
Russia cuts oil output in June by 305,000-308,000 bpd in comparison to October
MOSCOW. June 28 (Interfax) – Russia has cut oil output in June by 305,000-308,000 barrels per day (bpd) in comparison to October levels, exceeding its OPEC commitments by around 2%, Russian Energy Minister Alexander Novak told journalists.He added that Russia was not currently discussing making additional oil cuts. “At the moment the issue of [making more oil cuts] is not being discussed. At the July meeting [of the ministerial committee for monitoring the fulfillment of the OPEC+ agreement] we will discuss the situation on the market in whole,” he said.
Rosneft reports cyber attack, oil production unaffected
MOSCOW (Reuters, 28/06/17) – Russia’s top oil producer Rosneft said on Tuesday that its servers had been hit with a large-scale cyber attack, but its oil production was unaffected. “The company’s servers underwent a powerful hacking attack,” the company said on Twitter. “The hacking attack could lead to serious consequences, but the company has moved to a reserve production processing system and neither oil output nor refining have been stopped.”
Gazprom Neft begins exploratory drilling in the Sea of Okhotsk
Gazpromneft Sakhalin (a subsidiary of Gazprom Neft) has begun drilling the first exploratory well at the Ayashsky licence block, located on the continental shelf of the Sea of Okhotsk. Leading Russian and international companies have been engaged in implementing the project, and extensive preliminary activities essential to project completion successfully undertaken. Drilling and well testing in 2017 will be performed by a semisubmersible drilling rig (the HAKURYU-5), delivered to the field in mid-June, its equipment having undergone extensive modernization and further adaptations in line with the climatic conditions of the Sea of Okhotsk in 2016.
Russia’s Mikhail Fridman drops bid for West Texas assets on political concerns
Fridman’s investment company, LetterOne, has pulled out of an U.S. investment to avoid resistance from an unexpected corner — the Trump administration. LetterOne’s L1 Energy unit recently walked away from a deal to buy Texas oil producer ExL Petroleum Management LLC for about $700 million over concerns the plan could be rebuffed by the Committee on Foreign Investment in the U.S., or CFIUS, the government panel that reviews deals for national security risks.
Gazprom smells opportunity as UK’s biggest gas store closes, 26 June, 2017, from ‘World Oil’ (Extract)
Gazprom PJSC is in talks to ramp up natural gas sales in the UK as coal plants are shuttered and the nation’s biggest storage site is closed for good. “We see an appetite from major players in the UK for additional volume of contracted gas,” Deputy CEO Alexander Medvedev said in an interview in Prague on Thursday, declining to provide further details on negotiations. “Our supplies to the UK increased substantially in the course of the last two years.”
The world’s biggest gas producer sees an opportunity to sell more of the fuel after Centrica Plc announced it would close its Rough storage facility in the North Sea and the nation plans to stop using coal-fired plants by the middle of next decade. Medvedev expects Britain to increase imported volumes by 8 billion to 12 billion cubic meters a year by 2025. Extra Russian gas in the UK could drive down prices by boosting competition and may help ease the sting of losing Rough, according to Nick Campbell, an energy risk manager at Inspired Energy in Preston, England.
“Technically it is encouraging,” he said. “Russian pipeline gas would offer greater flexibility than LNG delivery with gas field production being able to flex to meet demand quicker than sending a tanker from the U.S. East Coast and/or Qatar.”
Putin, Gazprom CEO, and Allseas CEO meet on pipelay vessel Pioneering Spirit to begin TurkStream pipeline
The offshore pipeline which will carry Russian gas to Turkey, will consist of four parallel pipelines running through the Black Sea. The pipelines will enter the water near Anapa, on the Russian coast, and come ashore on the Turkish coast some 100 kilometers west of Istanbul, near the village of Kiyikoy.
U.S. concerns rise over Russian intentions in the Arctic, March, 2017, from ‘World Oil’ (Extract)
Back in 2008, the U.S. Geological Survey (USGS) released an assessment of Arctic undiscovered, technically recoverable, conventional oil and natural gas resources. In so doing, the USGS estimated undiscovered resources for 25 Arctic sedimentary provinces. Overall, USGS estimated 412.16 Bboe of resources. Among the world’s undiscovered resources, this represents 13% of the oil, 30% of the gas and 20% of the NGLs.
USGS also said that the West Siberian basin and East Barents basin, both in Russian territory, hold 47% of the undiscovered resources, with 94% being natural gas and NGLs. So, it’s not a surprise that the Russians are leading the way in exploring for, and developing, Arctic hydrocarbons. Back in late 2013, Russia’s Gazprom initiated the world’s first Arctic oil production at Prirazlomnoye field, which continues to produce today. The potential in the Arctic Alaska province, by the way, was estimated at 29.96 Bbbl of oil, 221.40 Tcf of gas and 5.90 Bbbl of NGLs.
Meanwhile, the significance of Arctic potential, coupled with Russian initiatives, led the Norwegians in 2010 to strike a border deal in the Barents Sea with Moscow. Yet, there are credible rumors that the Norwegians remain highly wary of Russian intentions in the Arctic, so much so that they drilled a record 14 wells in the region during 2014, including several “to plant the flag” in the southeastern portion of their jurisdiction, near the border with Russia. And this year, plans call for a record-breaking 16 Norwegian Arctic exploration wells, including one by Statoil at the Korpfjell prospect near the Russian border. Korpfjell may hold up to 10 Bboe of resources.