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Old 03-19-2012, 10:19 AM   #1
Sonny
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Default Is LNG The Best Way To Play Cheap Natural Gas?

By Keith Schaefer | Mon, 12 March 2012

There are 374 LNG carriers in the world. As recently as a few years ago, roughly one-third of these vessels were laid up, or out of use.

Today, every single LNG ship that is seaworthy is active. That means zero spare capacity, everywhere around the globe.

That begins to explain why the shipping of liquefied natural gas (LNG) has become the most profitable sector in the global shipping industry... and why investing in LNG shippers could be one of the most profitable plays of the next three years.

Fast-rising demand from Asia and tight supply – almost no new ships before the end of 2015 – will keep cash flows and stock prices high for investors.

Then consider this: one of the most abundant and cheap sources of natural gas in the world... U.S. Natural Gas... could extend investors' run right through to 2020.

Demand for LNG is soaring now—and dayrates for shippers are going up even faster. Industry analysts expect global LNG demand will jump 40% to 300 million tons between 2010-2015. But dayrates are already up more than 200%, to $147,000 per day.

Operating costs for these ships are as low as $14,000 per day. That equates to a greater than 90% margin for the top shipping operators... almost unheard-of in any sector today. And I expect these margins to stay strong for at least three years due to the lack of new ships. (This also helps explain the large Price:Earnings ratios this industry has.) All-in operating costs including amortization is closer to $60,000/day.

Industry observers suggest U.S. LNG export capacity will exceed 6 billion cubic feet per day (6 bcf/d). Six bcf/d is about 9% of the current U.S. daily gas production of 64 bcf/d, the largest output in the world.
This means there is demand for 85 to 100 more LNG carriers – just for the US export market.

And if even only one-third of the US LNG export terminal projects go through, Norway's Arctic Securities says the industry will still require 28-37 additional vessels – the equivalent of 50-60% of the current order book (which is roughly 64 new ships).

The US has actually already delivered its first LNG export—one ship has gone from Louisiana-based Sabine Pass LNG terminal owned by Cheniere Energy (NYSE:LNG) to the UK.

Last October, the United Kingdom's BG Group signed the first contract to export LNG from the United States once the first liquefaction terminal is ready in 2015. (Liquefaction is the process of turning gas into LNG—gas gets compressed to 600:1 in a liquid. A liquefaction plant IS an LNG export terminal; LNG import terminals are called Regasification plants.)

BG said they'll buy 3.5 million tons per year of LNG (1 million tons=0.12 bcf/d) over a 20 year period from Cheniere at Sabine Pass. Construction on the project is expected to start in April. Private equity fund giant Blackstone is helping to move the project along by providing $2 billion of the $5 billion needed for project financing (in exchange for an equity stake) to Cheniere subsidiary, Cheniere Energy Partners.

http://oilprice.com/Energy/Natural-G...tural-Gas.html
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Old 03-19-2012, 11:33 AM   #2
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SHAWN McCARTHY - The Globe and Mail
Royal Dutch Shell is doubling-down on its natural gas bet, despite a depressed North American market that has seen many producers shut in production.
..
Gas prices have sunk below $2.50 (U.S.) per thousand cubic feet (mcf) in North America. But only 15 per cent of Shell’s gas production is in North America, though it holds a vast resource base.

Europe and Asia aren’t experiencing a gas glut, and customers tend to purchase under long-term contracts tied to crude prices. In Europe, gas is selling for $11 (U.S.) per mcf in Europe and for $18 in Asia, where Shell is a rapidly growing provider of LNG.

The company has also partnered with state-owned PetroChina Co. Ltd. in LNG export facilities in Australia and British Columbia, and to develop promising shale gas fields in China itself.

--
It is also exploring the potential for a gas-to-liquids plant on the American Gulf Coast, essentially replicating the $19-billion (U.S.) facility it recently commissioned in Qatar that produces synthetic diesel and a slate of valuable liquids from the gas feedstock.

Shell is also working with Vancouver-based Westport Innovations Inc. to establish a corridor for natural-gas-powered trucks from the B.C. coast to Calgary to Fort McMurray.

Fuelling China’s gas hunger

China produces and consumes relatively little gas currently, but is expected to be a growing customer for LNG and a significant producer in its own right.

Beijing has set a goal of increasing gas’s share of primary energy demand to 10 per cent by 2020 from just 4 per cent now.

As a result ,Shell sees China as driving 50 per cent of the world’s growth in natural gas demand for the next 15 years – and that only represents growing commercial, industrial and residential use. If the country makes an effort to switch from coal or nuclear to gas in its power sector, the growth rate will only increase.


“Their own production will not fill that gap by 2020, it’s just logistically impossible,” Mr. Henry said.

Shell is working with PetroChina to develop the country’s own shale gas potential, which is seen as enormous. But it is in the early stages of exploration. Last year, Shell drilled 15 wells in China and will increase that to 20 wells in 2012.

As the country’s production grows, he expects a commensurate increase in Beijing’s appetite to encourage the use of gas in residential, industrial and power sectors.

And the Chinese – like other Asia consumers – are looking to Canada as a secure, politically stable supplier that, importantly for them, also welcomes foreign investment from Asian companies.

“We can help Canada develop its resources and new markets in a way that is good for the country, as well as good for us and for customers in Asia,” he said. “All of the customers in Asia see the huge potential for trade with Canada and we would love to be part of realizing that potential.”
http://www.ctv.ca/generic/generated/...le2373081.html

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Old 03-19-2012, 03:00 PM   #3
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In the future, I would expect to see China ramping up NG production and distribution pipelines as quickly as possible, and converting many of their coal plants to NG.
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Old 06-13-2012, 08:59 AM   #4
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Quote:
Originally Posted by Ought Six View Post
In the future, I would expect to see China ramping up NG production and distribution pipelines as quickly as possible, and converting many of their coal plants to NG.

China's energy policies have followed mostly rational and logical approaches that are motivated primary by their pursuit of profits. They are the Ferengi of planet Earth. China's use of coal for power generation has been doubling every 5 to 7 years, and is expected to continue increasing at least for the next twenty years. There are cheaper fuels than than NG to burn just to make electricity. and more profitable uses of NG, like petrochemicals and synthetic liquid fuel and lubricants for transportation.

~

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Old 06-13-2012, 09:11 AM   #5
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The Rush to LNG

http://www.maritime-executive.com/ar...he-rush-to-lng

June 1, 2012

It seems everyone these days is jumping on the LNG bandwagon. And why not?

By Jack O’Connell

It’s an anomaly. While most maritime companies lie drowning in red ink, plagued by an oversupply of ships and the lingering effects of the global recession, one sector stands tall. You guessed it – it’s LNG – those outer space-looking vessels with four or five bubbles on their decks that look like floating time bombs. All you need is a fuse sticking out of the top of one of the bubbles and someone to light it. Except they can’t explode. They’re carrying a liquid that is frozen down to minus 162oC (minus 260oF). The liquefaction process reduces the volume of the gas by 600 times so it can be shipped economically. When it reaches its destination it’s either transferred to storage tanks or regasified and transported by pipeline to the customer.




These behemoths of the seas carry the equivalent of 500,000 barrels of oil, like an Aframax tanker. Some of the newer ones can carry more. They command rates north of $150,000/day. Compare that to the average VLCC, which is making about $25,000/day, or a Capesize bulker, mired below $10,000/day and barely breaking even. Even better, there’s no oversupply of vessels and, if anything, there’s a shortage. The entire LNG fleet consists of just 374 vessels with only two scheduled for delivery this year. No wonder everyone wants to be in this business.

Leaders of the Pack
The first cargo of LNG sailed from the U.S. Gulf Coast to the U.K. in 1959 onboard the Methane Pioneer, operated by Shell Oil. The ship was aptly named since Shell was a pioneer in the shipment of LNG and today owns or operates one of the world’s largest LNG fleets. Through joint ventures and direct ownership, the energy giant has interests in nearly a quarter of the LNG vessels in operation and recently signed a partnership agreement with Nakilat Shipping in Qatar to manage Nakilat’s fleet of 25 of the world's largest LNG carriers.

Among independent operators, Japan’s Mitsui OSK Lines (MOL) is by far the largest with a fleet of 70 LNG tankers. MOL has decades of experience and ships LNG from all over the world to gas and energy-starved Japan, among other destinations. Teekay LNG Partners (NYSE: TGP), headquartered in Bermuda and majority-owned by Teekay Corporation (NYSE: TK), is another leader with a fleet of 27 LNG carriers including six recently acquired from Maersk through a joint venture with Japanese trading company Marubeni. The six new vessels are expected to generate approximately $40 million in cash flow for distribution to shareholders this year. The company currently has four newbuildings in the works and pays a handsome eight percent dividend.

Not to be outdone, Golar LNG (Nasdaq: GLNG) has no fewer than 13 new vessels on order for delivery through 2015. “Golar has the biggest newbuild program in the industry, a sign we take as the company’s strong view on the market,” Erik Stavseth of Arctic Securities in Oslo told Bloomberg recently. The newbuilds, costing an average of $200 million each, will more than double the size of Golar’s fleet, which now stands at nine LNG carriers and five FSRUs (Floating Storage and Regasification Units). The John Fredricksen-controlled company saw net income rise to $47 million last year and its stock price triple as LNG rates more than doubled. It is expected to earn close to $200 million this year and will reactivate four mothballed vessels to meet surging demand.

Global Supply and Demand
The March 2011 earthquake in Japan changed everything. It forced the shutdown of the Fukushima Daiichi nuclear plant and eventually shuttered all of Japan’s nuclear plants, which together contribute about 30 percent of the country’s energy supply. Japan was already the world’s biggest importer of LNG; it was about to get a lot bigger. Meanwhile, Germany and France put moratoriums on further nuclear investment and hinted at future shutdowns, and countries around the world began reevaluating the future of nuclear energy in the wake of the Fukushima accident. The preferred alternative? Natural gas.

Japan imported nearly one-third of all the LNG shipped in 2011. South Korea, the second biggest importer, was far behind at less than half of Japan’s 78 million tons. Chinese imports surged more than 20 percent in 2011, and China is now #3 on the LNG hit parade with India a close fourth. As a region, Asia accounts for about 60 percent of global LNG demand.

Who are the major exporters? Qatar is the leader, accounting for nearly 25 percent of global LNG supply. Much of it goes to Korea and the Far East, and a good chunk to France and Western Europe. The Japan earthquake was a lifesaver for Qatar and its two LNG exporting companies, Rasgas and Qatargas, which up to then had been struggling to find customers.

Other major exporting countries include the United Arab Emirates in the Middle East; Malaysia, Indonesia and Australia in the Far East; and Algeria, Angola and Nigeria in Africa. Even Israel is getting into the act. Israel? Yup. Its offshore Tamar, Dalit and Leviathan fields hold the potential to supply all of the country’s domestic gas needs, and a company called Levant LNG signed a letter of intent in March with the Russian giant Gazprom (this gets wilder and wilder) to produce LNG for export from a floating LNG plant, most likely an FSRU.

The Shale Effect
Fueling the rush to LNG is the flurry of shale gas discoveries in the U.S. and elsewhere. These have helped drive natural gas prices down to 10-year lows in the U.S. and created the regional price disparities that are part of the LNG business model. Whereas natural gas costs about $2.40 per mcf in the U.S. and Canada, it’s over $10 in Europe and up to $18 per mcf in Japan. It costs about $3 per mcf to liquefy natural gas and a small fraction of that to ship it (depending on distance), so do the math: As long as gas prices stay below, say, $5 or $6 per mcf, the economics are compelling. Of course if you’re Qatar and can produce natural gas at pennies per mcf, you can make money at any price.

Bottom line for the U.S.: For the first time in 50 years it could become an exporter of LNG as it finds itself awash in shale gas reserves.

Houston-based Cheniere Energy Partners (NYSE: CQP), which operates the country’s largest natural gas import terminal – now a white elephant given the surfeit of gas in the U.S. – has plans to construct the first LNG export terminal at its Sabine Pass, Louisiana location. Initial plans call for the construction of two liquefaction “trains,” each capable of producing 4.5 million tons of LNG a year, with two more to follow. For perspective, total global output of LNG in 2011 was approximately 240 million tons. Lending credibility to the project is a $2 billion investment by private equity giant Blackstone, which should ensure that the rest of the estimated $5 billion cost will soon follow from like-minded investors.

Cheniere has already lined up customers, including Korea Gas, BG Group (British Gas), and GAIL India Ltd., for nearly 90 percent of its output and expects to soon receive final approval from U.S. regulators to begin construction. Shipments are scheduled to begin in 2016. BG Group believes the U.S. could potentially supply nearly 10 percent of global LNG output by 2020.

A similar project is underway in Canada where Kitimat LNG, jointly owned by U.S.-based Apache Corp. and EOG Resources and Canadian giant Encana, is moving ahead with the construction of a five-million-ton per year liquefaction facility in British Columbia. Canada, too, is awash in natural gas and eyeing new markets in Asia for LNG exports, which are expected to commence in 2015.

LNG as a Clean Fuel
Savvy MarEx readers already know the clean-burning benefits of LNG and its ability to satisfy IMO Tier III and ECA (Emission Control Area) limits for SOx, NOx and CO2. Dual-fuel engines are already in use on a wide range of vessels, and last fall Wärtsilä, a major supplier, and Shell Oil Company signed an agreement aimed at accelerating the use of LNG as a marine fuel. Supplies of low-cost, low-emissions LNG fuel will be made available to Wärtsilä natural gas-powered vessel operators and other customers by Shell.

Dual-fuel engine technology allows the same engine to be operated on both gas and diesel fuel. This means that when running in gas mode, the environmental impact is minimized since NOx (nitrogen oxides) emissions are reduced by some 85 percent compared to diesel operation, SOx (sulfur oxide) emissions are completely eliminated as gas contains no sulfur, and emissions of CO2 are lowered by as much as 30 percent. Natural gas has no residuals, and thus the production of particulates is practically non-existent.

Harvey Gulf is leading the way in the U.S. with orders for four LNG-powered, dual-fuel offshore supply vessels. The vessels will have Green Passport Certification from the American Bureau of Shipping and will exceed the strictest emission-control standards. They will be built by Trinity Offshore at its Gulfport, Mississippi shipyard and powered by Wärtsilä engines. Deliveries are scheduled to begin next year.

One concern with LNG is the location of the fuel tanks. Since LNG is not as dense as petroleum, it requires double to triple the storage space. Norway has long been a leader in LNG-powered offshore vessels, and it has located some LNG tanks under accommodation spaces, building protective coffers to hold them, which is permissible under IMO regulations. The Harvey Gulf vessels will have tank placement under the work deck. Another option is on the deck, where they can vent in the event of a spill. This is what Washington State Ferries is considering for its LNG-powered vessels.

LNG Gas Stations?
In addition to the environmental benefits that LNG offers, it’s also cheap compared with diesel fuel. This has prompted not just maritime but trucking companies – that’s right, trucking companies – to consider its use. In the Ports of Los Angeles and Long Beach, Peterbilt day cabs are powered by LNG. In Waco, Texas, Peterbilt LNG trucks will deliver and remove water in fracking operations. In Frierson, Louisiana, Encana Corp. opened an LNG fueling station to service heavy-duty trucks operated by Heckman Water Resources, which recently ordered 200 of the big LNG-powered rigs. And in Seville, Ohio, Clean Energy Fuels dedicated a new LNG filling station in February to serve Dillon Transport’s expanding fleet of LNG trucks contracted to Owens Corning.

So don’t be surprised the next time you drive down the interstate to see a gas station marked “LNG.” You read the sign right. – MarEx
Jack O’Connell is Senior Editor of The Maritime Executive.

~

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Old 09-29-2012, 09:06 PM   #6
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Exxon Mobil Throws Its Weight Behind U.S. LNG Exports

The Exxon/QP application joins in the queue with over a dozen other LNG export permit filings with the federal authorities (the list and map below).

The US Application Backlog Has Grown to Over 20 Bcf/d of LNG, But Not All Proposals Will Go Ahead

(click to enlarge)

August 22, 2012

Exxon Mobil (XOM) officially joined the fast expanding list of contenders to export US abundant natural gas via LNG. Golden Pass Products, Exxon's joint venture with Qatar Petroleum International, announced on August 17 its intent to build a $10 billion, 2 Bcf a day natural gas export facility adjacent to the existing Golden Pass LNG receiving terminal.


http://seekingalpha.com/article/8213...-s-lng-exports

---------- Post added at 09:06 PM ---------- Previous post was at 09:03 PM ----------


http://thisbluemarble.com/showpost.p...88&postcount=1

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And if even only one-third of the US LNG export terminal projects go through, Norway's Arctic Securities says the industry will still require 28-37 additional vessels – the equivalent of 50-60% of the current order book (which is roughly 64 new ships).
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