Russia’s Novatek 2018 income up to $2.5 bln after Yamal LNG launch
Russian gas producer Novatek said on Wednesday its 2018 net profit rose 4.7 percent to 163.7 billion roubles ($2.5 billion) thanks to the start of liquefied natural gas (LNG) production. Novatek, controlled by CEO Leonid Mikhelson and businessman Gennady Timchenko, a friend of Russian President Vladimir Putin, launched Yamal LNG in the Arctic in December 2017 as part of Russia’s plan to raise its share on global energy markets. Moscow-traded shares in Novatek, Russia’s biggest gas producer which is not owned by the state, rose 1.3 percent. Other stakeholders in the project with annual capacity of 16.5 million tonnes per year are Novatek’s shareholder and French energy major Total, as well as China’s CNPC and the Silk Road Fund. Excluding the effect of foreign exchange differences, as well as the one-time effect from the disposal of interests in joint ventures, profit jumped 49 percent to 232.9 billion roubles. Higher oil and gas prices helped lift earnings, the company said. Last-year revenues rose by 42.6 percent to 831.8 billion roubles, while natural gas production increased 8.5 percent to 68.8 billion cubic metres, oil and gas condensate output edged up by 0.3 percent to 11.8 million tonnes.
Gas pricing, marketing freedom to help companies draw investments
The government’s decision to free up gas pricing and incentivise incremental output is likely to fire up investments in gas fields and raise production, said company executives and analysts. The Cabinet on Tuesday granted marketing and pricing freedom to all new gas discoveries whose field development plan (FDP) had yet to be approved. It also introduced fiscal incentive to operational fields for producing more than the current level. “This is positive for us as we will be able to fast-track at least three projects that were ready to develop but commercially not viable,” said ONGC chairman Shashi Shanker. These three discoveries have a producible reserve of 30 billion cubic metres and are expected to have a combined peak production of 10 million metric standard cubic metres a day, he said. For ONGC, the benefit will not be limited to just three discoveries. “We welcome the reform momentum and are looking forward to details of the policy to assess the impact on our production, including in current sites,” said a spokesperson for Vedanta. “This is a positive step in terms of encouraging additional activities in the E&P sector and should help accelerate development of discovered resources. We have yet to review the notification, but at this point of time none of BP’s existing developments will be affected by this announcement,” said a spokesperson for BP. BP is a partner of Reliance Industries in several upstream projects in India. “Pricing freedom would incentivise production. Producers can easily expect a price that is double that of domestic formula prices,” said K Ravichandran, analyst at credit rating agency ICRA. At present, the domestic formula price for gas is $3.36 per unit. Just about 25 of the total 115 gas discoveries made in blocks auctioned previously are under production as per the official data, and so 90 discoveries can potentially benefit from pricing freedom, Ravichandran said.
Australia’s east coast LNG plants unlikely to ever hit full capacity -study
Australia’s three east coast liquefied natural gas (LNG) plants are unlikely to ever run at their combined full capacity of 25.3 million tonnes a year as there is not enough gas to feed them and meet local demand, a study released on Thursday said. The three plants – Queensland Curtis LNG, Australia Pacific LNG and Gladstone LNG – were the world’s first LNG exporters to use coal seam gas rather than gas from conventional fields. But the wells they source their gas from in Australia’s Surat and Bowen basins in Queensland state have turned out to be less productive than expected. As a result, the three plants – each with two processing units – have been running below capacity, operating at average 82 percent in 2018. “Unfortunately, there are serious headwinds coming and the outlook is less rosy as the industry over-reached by building three projects of six trains,” EnergyQuest CEO Graeme Bethune said in a statement. QCLNG, run by Royal Dutch Shell averaged 87 percent capacity, and GLNG, run by Santos, only 65 percent, EnergyQuest, an industry consultancy, said. In a detailed study of government and company drilling and production data and reserves booked at coal seam gas (CSG) prospects and licenses, it found that only 56 percent of booked proven and probable reserves had shown any commercial productivity. “The emerging and critical shortages are resulting from the fact the CSG LNG projects were sanctioned on ambitious estimates of proved and probable (2P) reserves, not proven reserves (1P) that underpin conventional LNG projects,” Bethune said. He predicted that by 2025 at least two trains would have to be shut to keep four trains running at full capacity, which would reduce medium-term exports to around 17 million tonnes a year, down from about 21 million tonnes in 2018. About 70 percent of exports go to China, 16 percent to South Korea and 9 percent to Japan. Exacerbating the problem, the producers have come under pressure to step up gas sales into the domestic market, with supply in Australia’s southeast falling as ageing offshore fields dry up and as states restrict drilling onshore. The three projects supplied about 25 percent of Australia’s eastern demand in 2018. “With dwindling production from southern gas fields, the political pressure on the LNG producers to divert gas to the domestic market is likely to intensify,” Bethune said.
Shell, PetroChina spat holds up Australia’s biggest coal seam gas project
Royal Dutch Shell and PetroChina are at loggerheads over gas sales pricing at their Arrow Energy joint venture, holding up development of Australia’s biggest coal seam gas resource, three industry sources said. Shell and PetroChina acquired the Surat gas resource in a A$3.5 billion ($2.5 billion) takeover of Arrow in 2010, and had expected to reach a final investment decision in 2018, with first production around 2020. That was after the Arrow Energy venture signed a 27-year deal in December 2017 to supply natural gas from Surat to the Queensland Curtis LNG plant (QCLNG), which is operated by Shell. PetroChina, though, is unhappy with the price in the sales agreement with QCLNG and the technical plan for developing the gas, issues that are now holding up final approvals, according to three industry sources familiar with the talks, who declined to be named due to the sensitivity of the matter. “PetroChina, as a 50-percent stakeholder in Arrow, expects to maximise interests from the JV versus QCLNG. But for Shell, it may be thinking of using its operator role at QCLNG to protect its interests,” a Chinese oil industry executive said. “We are working hard to manage approvals with joint venture partners,” a Shell spokeswoman said. PetroChina did not respond to a request for comment.