LNG Glut, UK Politics and East Europe - NGW Magazine
US Tellurian’s decision to pull a share offering in its major Driftwood liquefaction project in Louisiana shows expected common sense: at a time of oversupply, investors are unlikely to be tempted just yet. US petrochemicals might seem a safer bet, given the cost advantage of their feedstock relative to many other countries.
Perhaps Tellurian’s co-founder Charif Souki, as founder of the Sabine Pass import terminal before he was ousted from Cheniere, remembers the frustration of seeing Asian LNG prices rocket and being unable to secure affordable cargoes for his terminal a decade ago. Might the reverse happen, and US export facilities be unable to find a high enough priced market for their output?
In a world that is going to be turned on its head by rampant competition and US hub-priced LNG, intermediary buyers such as Jera and the European utilities who are not committed to US contracts are going to be in a strong position to negotiate terms with the sellers.
Such projects may be outside the US, such as Perenco’s Cameroon LNG in West Africa which is expected to start exports later this year, or similar floating liquefaction projects yet to take a final investment decision offshore Equatorial Guinea, Senegal and Mozambique that are eying start-up by the mid-2020s.
In the UK, the campaigning in advance of the June 8 General Election has got off to an unexpected start with the Conservative leader, Theresa May, planning to introduce price caps on energy retail supplies.
Perhaps less unexpected was Labour’s plan to renationalise National Grid and regional distribution networks, as though companies had not become a lot more efficient post-privatisation.
The last Conservative government halved the transporter’s allowable revenue base in the 1990s and National Grid CEO John Pettigrew told an analysts briefing on the results May 18 that “to spend billions of pounds on renationalisation doesn’t look sensible to us.”
The two parties also disagree on hydraulic fracturing, the Conservatives being for it, Labour wanting to ban it.
After being granted an extension, the Polish state-run oil and gas company has responded to the European Commission/ Gazprom market test and it is not forgiving. PGNiG wants the Russian supplier to be fined, so that the European Union can recover the losses it has incurred through Gazprom’s abuse of its dominant position, suggesting 2004 as the starting point for this calculation, that being the year Poland joined the EU and could expect protection under its anti-trust law.
Other requests on the wish-list are similarly ambitious, involving pipelines into the European Union such as Yamal and the two Nord Streams, a giant storage in Germany named after German-born Russian empress Catherine the Great, and reverse flow in all interconnectors. But as it points out, until the decision is reached Gazprom can continue exactly as it has been before.
While this is for the EC to decide upon, Poland itself is not whiter than white, in terms of embracing the market – unlike neighbouring Ukraine, where only this week commodities trader Trafigura joined Trailstone, Engie and many others excited by the prospects of east European gas trade.
TrailStone’s head of European gas, Didier Magne, told the Flame conference that it was good to see pipeline capacity in and into Ukraine being used, rather than left controlled by “the big guy” – meaning Russian giant Gazprom.
Ukraine had “gone extremely fast in making gas flow; this is why we have set up a subsidiary in the country – we want to be there,” he said, although further progress hinged on which way an arbitration ruling in Stockholm goes.
However he had harsh words for Poland, describing it as a “failed state when it comes to creating a gas market.” PGNiG’s presence was making it impossible for the Polish market to develop, he added; TrailStone had been waiting for three years for a licence to operate in Poland – whereas TrailStone’s Kiev office has already operated for one year.
Wolfgang Peters, former head of RWE Gas Midstream, and now founder of consultancy Gas Value Chain, said that Poland was “not truly embracing a liquid traded gas market.” Poland’s stateowned Gaz-System was building more and more expensive pipelines, instead of opening up to flows from the German Gaspool market.
And when asked by NGW why his company is evaluating a possible floating LNG import terminal (FSRU) at Gdansk, when it already has plans to expand an under-used 5bn m./yr onshore LNG terminal at Swinoujscie by 50%, Gaz-System development director Pawel Jakubowski said the Gdansk FSRU feasibility study – a study due for completion end-2017 – was “in order to be prepared for unexpected situations” rather than a definite project.