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The Three Reasons Why Entering the LNG industry was a Great Move by the Philippines

9 January, 2017 News No comments
The Three Reasons Why Entering the LNG industry was a Great Move by the Philippines

     1. Something to Replace Malampaya’s Role

The Malampaya deepwater gas-to-power project located offshore northwest of Palawan is Philippines’ only major gas field. It starts production in 2001 and supplies a huge 2700 Megawatts (MW) to three power plants in the Luzon Island. Malampaya is considered as an “ageing” field since depletion is projected by 2024. Also, the license of Malampaya operating under Service Contract (SC) 38 will expire on the same year. Luzon Island will run out of power. And if there will be no local gas fields discovered in the future, a facility to receive natural gas imports is required. Whether or not SC 38 will be extended or not, a LNG terminal is the best option to meet the country’s continuous and growing energy demand.

     2. Win-Win Solution

Ongoing projects and plans for LNG facilities involve huge financial investments. The LNG industry is indeed a win-win solution because it will bridge the gap of Philippines’ energy need while bringing investments to the country. Expression of interest and plans for LNG projects started to be surfaced out by Shell, Energy World, First Gen, Meralco and the government.

Shell’s local unit Pilipinas Shell Petroleum Corporation started working on a floating regasification unit (FSRU) to be constructed in Batangas Bay near the Shell Tabangao refinery. The facility could provide power as much as 2,000 megawatts (MW). Australian-listed company Energy World Corporation has finishing construction on its $800-million LNG hub. It is located on Pagbilao, Quezon province and could provide 400 MW. On the other hand, First Gen, a leading clean energy company revealed its plans for a $1 billion LNG terminal to be also located in Batangas City. The terminal to be built can handle 5 million tons of LNG, or an equivalent of 5,000 megawatts. First Gen currently opens the 40% of the $1 billion for local and foreign stakeholders. While Meralco (Manila Electric Co.) the largest local power distributor partnered with Japan’s Osaka Gas Co. Ltd. for a $2 billion integrated LNG project, covering a terminal and a power plant.

The Philippine government has eyes also on converting the mothballed Bataan Nuclear Power Plant (BNPP) into its main LNG receiving terminal, DOE secretary Alfonso Cusi said.“One of the projects that we will be undertaking is to put up an LNG receiving and distribution centre and that could be in Bataan. It could be converted” he said, adding the proposal.

     3.Change in Energy Mix

Philippines was one of the countries that agreed to a 70-percent reduction in greenhouse gas emission by 2030 at the United Nations Climate Change Conference in Paris. Since natural gas is considered the “cleanest” fossil fuel compared to coal and petroleum, it will take a bigger share on the country’s energy mix.

By Ray Francisdeo Romey

Bibliography:

http://www.rigzone.com/news/oil_gas/a/143648/Shell_Total_Mull_LNG_Terminal_Projects_in_the_Philippines/?pgNum=1

http://www.philstar.com/business/2016/09/14/1623461/doe-rolls-out-plan-lng-terminal

http://www.lngworldnews.com/ewc-to-start-up-lng-projects-by-end-2016/

http://breakingenergy.com/2015/05/29/philippines-to-finally-enter-lng-sector-with-first-receiving-terminals/

http://www.seatrade-maritime.com/news/asia/shell-philippines-seen-going-for-fsru-project-in-batangas-by-2017.html

http://thestandard.com.ph/business/216081/cusi-govt-to-lead-lng-terminal.html

http://www.bworldonline.com/content.php?section=Corporate&title=first-gen-eyes-foreign-partners-for-lng-terminal&id=134870

http://business.inquirer.net/199866/construction-of-lng-facility-to-start-in-2016#ixzz4RV3JB5Z1

http://www.naturalgasasia.com/philippines-mulls-converting-bataan-nuclear-power-plant-into-lng-terminal-18959

 

Black Sea, Romania’s path to energy independence

Black Sea, Romania’s path to energy independence

The history of oil and gas operations in the Romanian waters of the Black Sea starts in 1969. Below are presented the most important stages in the development of the offshore production activities:oana

Romania has the capacity to become one of the great European powers in the energy sector due to oil and gas deposits in the Black Sea, much of it in deepwater where several companies have begun to explore. The big players like Total, OMV, Repsol, Turkish Petroleum Company (TPAO), Shell and ExxonMobil are all interested in what lies under the Black Sea. TPAO estimates there are up to ten billion barrels of oil in the region, and the various companies are working on several projects in different sections which are divided into „blocks”.

Romania currently imports 20% of energy needs, the other 80% are satisfied from own production of natural gas, oil, coal and nuclear power. It is estimated that Romania holds 1,400 billion cubic meters of shale gas, which ranks it on the third place in Europe and starting with 2019 will begin extraction of natural gas reserves located in the Black Sea, considered globally significant.

The gas resources discovered by Exxon Mobil and Lukoil are in amount to a maximum of 130 billion cubic meters. If this amount is fully exploited, which is unlikely, and to operate it profitable requires a production of 6 billion cubic meters per year, specialists said that will get a production which will be exhausted in 20 years. This production in the Black Sea overlaps with current production of on shore fields, 6 billion cubic meters per year, which has a constant decrease.

The exploration of the Black Sea will start when gas and oil prices will increase and if gas transportation system will be connected to international markets. One of the main reason is that demand in the country has decreased significantly and the investors which will extract the sea deposits need a market for the transportation of gas from maritime perimeters, which are quite far, from 150-200 kilometers from shore. According to these statements, in the medium and long term, energy future of Romania depends on the interconnection of gas and electricity, but also diversification. Experts believe that Romania will become independent in terms of energy by 2020, but the results could be seen over the decades due to the long process of exploitation and lack of infrastructure.

Will Romania become independent until 2020, as was expected?

by Oana Alexandra

Bibliography:

http://www.petroleumreview.ro/ro/67-april-2016/957-the-black-sea

http://www.economica.net/iulian-iancu-romania-dispune-de-rezerve-uriase-de-gaze-naturale-in-marea-neagra-270-miliarde-mc_110635.html

http://adevarul.ro/economie/stiri-economice/romania-treilea-stat-independenta-energetica-uniunea-europeana-iubirea-fata-rusia-vine-conducta-infografie-1_57e2b1065ab6550cb8dcd28f/index.html

https://image-store.slidesharecdn.com/219660ba-8f5b-4757-b116-28bbc652d533-original.jpeg

LNG Croatia – to be or not to be?

15 December, 2016 News No comments
LNG Croatia – to be or not to be?

According to the latest Annual report (World Energy Outlook 2016) published by International Energy Agency few days ago, rise in global energy demand for 30% is expected to happen up to 2040. However, it seems that gradual changes are about to happen in the share of a modern fuels in global energy mix. Although fossil fuels demand is expected to decline in a coming decades, slope of its’ increase in global energy mix is somewhat smaller than that from renewable and nuclear energy sources. Among all fossil fuels, natural gas is by far the best option when it comes to meeting the goals from Paris Agreement. In comparison to oil and coal, natural gas emits significantly lower amounts of CO2 when burning, therefore being more ecologically acceptable. Therefore, only natural gas sees an increase in consumption relative to today’s needs.

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Figure 1: Position of planned LNG regasification unit on Island of Krk (www.google.hr)

Implications stated in a previous paragraph show free space for development of new projects related to natural gas. One of them is a broader development of worldwide LNG (Liquefied Natural Gas) projects. LNG terminals, either liquefaction or regasification, unlock the access to more remote sources of natural gas, being independent on existing pipeline grid and geopolitical issues associated

to it. Although European energy demand is expected to decline due to energy efficiency measures, the level of gas demand is likely to remain coupled to the economic activity. To ensure future security of gas supply, the European Union should definitely improve infrastructure, include new supply routes and LNG terminals to diversify dependence on a few suppliers.

Construction of LNG terminal, specifically regasification unit, in Croatia is not a new story. What is more, it has been a subject of many debates for a few decades. Position of the planned on-shore LNG terminal was Cape Zaglav on the Island of Krk in the Adriatic Sea with 6 bcm/y capacity. Geographical position of the planned terminal is promising because of specific position of Croatia on the European map, allowing supply for both south-eastern and central Europe. Sea depths at the location of the terminal allow docking of all LNG transportation vessels. One specific feature of the Adriatic Sea is that it penetrates in the hearth of Europe, therefore positioning itself among the fast and secure supply hub of goods for European countries (Figure 1).

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Figure 2: Animated view on planned on-shore LNG regasification unit in Croatia (www.zavod.pgz.hr)

After the property and legal issues, without clear defining of financial model and strategic partners, Croatian government made a decision on construction of the on-shore terminal. In the same time, debate on much cheaper, faster and adoptable solution came up, as to be floating regasification terminal for LNG (Floating Storage Regasification Unit). The time of construction was reported to be much smaller, less time consuming, option to be cheaper and adoptable to market needs in terms of additional capacity installation. Another problem was to convince investors in profitability of the project since the gas consumption was continuously declining, both in Europe and Croatia, due to new technical advancements and energy efficiency measures. Today, new tender on preparing project documentation and special license issuing has finished, all of that for FSRU unit.

The importance of the construction of the LNG terminal in Croatia is in security of supply of Croatia and Europe, diversification of European supply corridors, connection with LNG terminal in Swinoujscie in Poland forming energy corridor north-south and strengthening Croatian energy position in the European natural gas market.

Direction of project development is known. Government brought a decision on construction of off-shore storage and regasification unit with the primary stage capacity of approximately 2 bcm/y which would satisfy Croatian gas demand and possible export capacities. Remaining questions rise up as who will be investors in the project, which markets will be supplied with this gas and from which locations and under which contracts. Croatia and Europe would definitely benefit from the construction of LNG terminal in Croatia but it is now the question of time when it will be realized since major number of regasification units in Europe are currently operating significantly under capacity. Hopefully, project will not only be actualized in situations of gas crisis in Europe as it was the case so far.

References:

1) World Energy Outlook 2016: Executive Summary; International Energy Agency, 2016

2) Adria LNG, 2008: Liquefied Natural Gas, Informative Brochure, Zagreb, Croatia

3) Gas Infrastructure Europe (www.gie.eu), April 2015

4) Long Term Outlook for Gas to 2035, Eurogas Brochure (www.eurogas.org)

5) D. Pavlovic, M. Jovicic: Projekt koji će učvrstiti geoenergetski položaj Hrvatske, EGE 1/2016, Energetika Marketing d.o.o. Zagreb, Croatia

by Ivan Bosnjak

Weather impact on natural gas and LNG industry.

11 December, 2016 News No comments
Weather impact on natural gas and LNG industry.

There are several factors which can impact the LNG industry, however, there is one which is completely independent from human actions. The nature of liquefied natural gas extraction and transport make weather conditions a serious factor which could affect the seasonality of LNG supply and largely affect the prices.

Due to the nature of LNG liquefaction process it is largely dependent on temperature variations. Output is much higher at cooler temperatures because the procedure requires the gas to be cooled down to approximately −260 °F. All the complexity of this process results in strong dependency of the LNG output on ambient temperature variations. Even as little as 1 ºC change can potentially impact the output – we read form Wood Mackenzie’s report. (Wood Mackenzie, 2016)

Most of the liquefaction plants were built in hot and stable temperature areas, hence, the LNG output has been consistent as well. However, recent projects show that there will be a significant shift towards more temperature unstable regions. “Around 200 mmtpa of capacity is currently under construction or proposed in areas with more than 10°C annual temperature variation, including the US Gulf Coast and Australia.” – says Lucy Cullen, Wood Mackenzie’s Senior Research Analyst.

The chart provided by Wood Mackenzie, perfectly shows how the LNG plants are distributed per temperature variations:

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Moreover, weather conditions may affect the LNG pricing in other ways. It is worth mentioning a case study from years 2005 and 2006 when hurricanes were responsible of a 4% plunge in US natural gas production. Such events should not be a significant problem during summer periods when the demand for natural gas is usually low. Problem may arise when increased demand during winter periods clashes with severe weather conditions. This may result in a situation when supply cannot meet demand on time, therefore a price increase is most likely. The difficulty of predicting the consequences of weather change means storage gas supplies may not always cushion the unexpected turbulences.

It is worth to point out that extremely cold conditions can affect the machinery that is used at drilling and extraction sites. Below certain temperatures additional heating equipment is required to protect hydraulics from freezing. Snowfall may slow down most of the machine movements making the production less effective and more expensive than under normal conditions. Therefore, it may lead to decreased supply and higher gas prices.

On the other hand, as natural gas has significant share in electricity production, it can be affected by abnormalities during summer season as well. If warmer than normal temperatures occur, then electricity demand for air cooling increases. This may lead to natural gas and LNG prices increase as well.

To sum up, natural gas and LNG industry must be considered as largely dependent on weather conditions, therefore, increased seasonality of gas supply is most likely imminent.

by Alex Zakrzewski

References:

https://www.woodmac.com/analysis/lng-seasonality

http://www.eia.gov/energyexplained/index.cfm?page=natural_gas_factors_affecting_prices