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    Daily Digest: March 23rd, 2020


Daily digest of the latest natural gas news and LNG news by Natural Gas World.

by: NGW

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Complimentary, Daily Digest

Daily Digest: March 23rd, 2020

Shell Cuts Spending, Suspends Buyback Plan

Shell has scaled back its capital expenditure plan for 2020 by 20% to $20bn or less, in order to boost its free cash flow, the Anglo-Dutch major said.


The Big Picture:



Low Crude to Delay LNG: Timera

The almost halving of the Brent crude oil price has brought long-term oil indexed contracts for LNG closer to the spot market prices. This will keep LNG prices lower for longer, say energy market analyst company Timera.


The Big Picture:

  • The gap that had opened up between long term oil indexed contracts and gas hub prices will now narrow substantially. That translates into further resistance to gas price recovery, at least across the Covid-19 demand shock horizon in 2020, it said.

  • This means cost relief for LNG buyers.



North Sea Entering Unchartered Waters: WoodMac

The North Sea oil and gas sector is entering "unchartered waters" following the collapse in oil prices to $25-30/b, Edinburgh-based Wood Mackenzie said in a research note.


The Big Picture:

  • "In the short-term, the North Sea can survive. Cost reductions achieved during the last downturn mean 95% of onstream production is ‘in the money’ at $30/b," WoodMac upstream analyst Neivan Boroujerdi estimates.

  • "But close to a quarter of fields will run at a loss in this price environment."



Total Follows Other Majors in Slashing Capex 

France's Total said it would shave more than $3bn off its planned investments in 2020, lowering the total to under $15bn, in order to weather the oil market downturn.


The Big Picture:

  • With Brent now trading at around $25/b, it has suspended its $2bn buyback programme, just as fellow European majors Shell and Equinor have done.

  • In a presentation, Total said it was more prepared for the current crisis than prior to the 2015-2016 downturn. Its cash breakeven point was less than $25/b in 2019, versus more than $100/b in 2014.



 Alberta Extends Relief Package for Energy Industry

The government of Alberta extended a C$213mn (US$147mn) relief package to the province’s energy industry late on March 20, measures it said were a first step in enhancing the liquidity and longer-term certainty of an industry ravaged by the Covid-19 pandemic and the global crude price collapse.


The Big Picture:

  • The government is stepping in to fund the industry levy for the Alberta Energy Regulator for a period of six months, achieving C$113mn in industry relief.

  • The Canadian government is expected to announce its own wide-ranging program to support the oil and gas industry soon.



Norway's Equinor Halts $5bn Buyback Scheme

Equinor has suspended its share buy-back programme in response to testing market conditions, adding that it had begun taking steps to reduce its operating costs, capital expenditure and exploration spending.


The Big Picture:

  • Equinor announced plans in September to buy back $5bn of shares by the end of 2022. It completed the first $1.5bn tranche in early February, and the second, worth $675mn, had been due to take place between May 18 and October 28 this year.

  • The company added it would present an updated market outlook by the end of this month.



Rig Market Feels the Heat: Westwood

The offshore rig market has come under pressure as operators rein in spending in response to the market downturn and Covid-19 creates crew and logistical challenges, Westwood Global Energy said in a note.


The Big Picture:

  • With upstream companies announcing typical capital expenditure reductions of 20-30% and Covid-19 making it harder to mobilise personnel and equipment, the number of idle rigs will increase substantially in the near future, Westwood warned.

  • Most of the almost 300 drilling programmes slated to start this year will be delayed, Westwood predicts, while the number of new contract awards in the next few months will be minimal.



Aker BP Puts All Pre-FID Projects on Hold

Norway-focused Aker BP announced a 20% cut in capital expenditure owing to the coronavirus (Covid-19) pandemic, adding it will put all non-sanctioned projects on hold.


The Big Picture:

  • The company estimated its 2020 capex at $1.5bn in February, mostly relating to work at the sanctioned Johan Sverdrup Phase 2, Aerfugl Phase 1 and Valhall Flank West projects off Norway. However, $300mn relates to non-sanctioned investments, including the Hod redevelopment scheme, which will now be shelved.

  • Aker BP, 30% owned by BP, also said it would curtail planned exploration spending by 20% in 2020 to $400mn.



India's LNG Imports in Feb Spike 68%

India’s LNG imports in February jumped almost 68% yr/yr to a monthly record as global prices remain at multi-year lows, according to data published by the Petroleum Planning and Analysis Cell. 


The Big Picture:




Russia's Novatek Boosts Dividends for 2019

The board of Russia's Novatek has approved plans to pay rubles 18.10/share ($0.23) in dividends from its profits in the second half of 2019, the gas producer said.


The Big Picture:

  • Novatek's proposal to increase payments to shareholders comes as some international oil companies cut or suspend their dividend programme to bolster cash reserves following the steep decline in oil prices.




China's LNG Imports in Jan-Feb Up 2.3%

China’s LNG imports during January-February totalled 11.13mn metric tons, up 2.3% yr/yr, according to customs data.


The Big Picture:

  • Chinese gas imports have taken a hit this year because of the coronavirus (Covid-19) outbreak, with yr/yr growth slowing down significantly. In January last year, Chinese LNG imports grew 27.8% yr/yr and in February they grew 9.7% yr/yr.