A report published by Baker & McKenzie has said that last year the US government approved exports from a second terminal, and decisions on eight other applications for export approval are expected later this year.
Implications for Japanese LNG buyers and investors
The report stressed that expanded U.S. LNG exports represents an opportunity not only for Japanese LNG buyers to diversify their supply sources with shale gas but also at more competitive pricing linked to Henry Hub prices rather than oil prices. Japanese companies also could establish value chains in the U.S. by investing in projects to build export facilities and by acquiring interests in shale gas fields.
Since 1967 the Kenai LNG Plant in Alaska, which produced all eight of the LNG cargoes shipped from the U.S. to Japan in 2011, had been the only LNG plant with export approval. This changed last year when the Sabine Pass facility in Louisiana obtained export approval. Eight other applications for export approval are now pending.
Export approval process and outlook
Under the Natural Gas Act gas exports require permission from the federal government. Such permission is only granted if the Department of Energy (DOE) determines that the proposed exports are consistent with the public interest. Exports to 17 countries which have free trade agreements (FTAs) with the U.S. are deemed consistent with the public interest and the DOE must approve exports to these countries “without modification or delay”. In contrast, approvals for exports to non-FTA countries, including Japan, are subject to a lengthy public interest finding process which allows for comments, protests, and motions to intervene from interested parties.
The applicable legislation does not require the DOE to take action on applications within a certain timeframe. After Sabine Pass received approval for exports to non-FTA countries in May last year, the DOE suspended consideration of all applications pending the results of a study on the impact of exports on the domestic energy market. This followed complaints from some U.S. lawmakers who were concerned that exports might increase domestic prices. The domestic market impact study was initially scheduled to be completed by the first quarter of this year, but it is still pending and is now expected to be completed later this summer. Accordingly, none of the pending applications are likely to be approved until the fourth quarter of this year at the earliest.
There are, however, some reasons to believe there is political support for expanding LNG exports to non-FTA countries such as Japan. For example, on July 2, 2012, a bipartisan group of 21 members of Congress from states with shale gas deposits sent a letter to Energy Secretary Steven Chu urging the DOE to expedite the pending LNG export applications. In February, Secretary Chu said he supports LNG exports, and Prime Minister Yoshihiko Noda also said he discussed expanding LNG exports when he met with President Barack Obama on April 30, 2012.
Actions to consider
• Conduct preliminary due diligence on LNG projects with pending non-FTA export approval applications, as these projects are likely to be now seeking LNG buyers and equity investors.
• Monitor the DOE’s non-FTA export approval process.
• Investigate the compatibility of LNG produced from U.S. shale gas with regasification facilities and pipeline networks in Japan
Given the currently wide differential between the Henry Hub spot price used for trading on the New York Mercantile Exchange (NYMEX) and JCC pricing, expanded LNG exports produced from U.S. shale gas fields is a potential game changer for the gas market in Northeast Asia, and Japan in particular. From the Japanese buyer’s perspective, it is clear that approvals for further export terminals is an important development to monitor in order to position themselves as potential buyers and equity investors. For more information, please contact Colin Cook or Hiromitsu Kato.
Source: Baker & McKenzie via: Source
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“Whether Russia supplies us with Iranian liquid gas or from anywhere else is up to them,” Bahraini Energy Minister Abdul Hussein Mirza said. “We have a deal that they are our main supplier.”
Last year Bahrain terminated a gas deal with Iran, accused of supporting the Shi’ite revolt in the Gulf Cooperation Council kingdom.
- Bahrain Says Iran-Linked Terror Plot Uncovered (foxnews.com)
New Zealand Energy Corp. has initiated an extended production test of its Copper Moki-2 (CM-2) well and commenced drilling Copper Moki-3 (CM-3), its third well in the Taranaki Basin of New Zealand’s North Island.
The company has also entered into a farm-in agreement with L&M Energy Limited and will subsequently earn an additional 15% in the Alton Permit, increasing NZEC’s interest to 65%.
The CM-2 well commenced flowing on February 15 and is currently flowing at a rate of 1,000 barrels of oil per day and 820 thousand cubic feet of natural gas per day.
NZEC has commenced drilling CM-3, with the expectation of releasing well results by the end of March 2012. CM-3 will be NZEC’s first well to target the deeper Moki formation, and the company will collect information from both the Urenui and Mt. Messenger formations as CM-3 drilling proceeds. Immediately following the conclusion of CM-3 drilling, NZEC anticipates commencing drilling of the Copper-Moki-4 well from the same drilling pad.
- Coastal Energy Discovers Gas Onshore Thailand
- New Zealand Energy Announces Production Test for Taranaki Basin Well
- Bahrain Prefers Russia Over Iran for LNG
- Jubilant Energy Spuds Tripura Gas Well
- Talisman, Mitsubishi To Develop PNG Natural Gas
- Anadarko Strikes More Mozambique Gas (mb50.wordpress.com)
Myanmar recently awarded 10 onshore oil and gas blocks.
“We had bid for two blocks. They have offered us one, but we are keen for both. We are still negotiating,” Chief Financial Officer Vipul Agarwal told Reuters.
The production sharing contract for the block will likely be signed in two to three weeks, he said.
- Bangladesh: Looks to joint oil-gas exploration with Myanmar (Burma) (mb50.wordpress.com)
- Burma’s oil and natural gas sectors eyed by Malaysia (mb50.wordpress.com)
- ASEAN gambles on Myanmar’s regional leadership (mb50.wordpress.com)
InterOil and Pacific LNG said that they were working to complete the negotiation and finalise a binding sale and purchases agreement with Gunvor by second quarter of 2012.
The Gulf LNG Project in Papua New Guinea comprises the Elk and Antelope gas fields and the planned liquefaction and associated facilities in the Gulf Province of PNG to be developed by Liquid Niugini Gas Ltd., InterOil and Pacific LNG’s joint-venture project company.
- InterOil and Gunvor Sign Heads of Agreement for LNG Supply (prnewswire.com)
- InterOil, Pacific LNG sign supply deal with Noble Clean Fuels (mb50.wordpress.com)
- InterOil Seeks Strategic Partner for Papua New Guinea LNG Project (mb50.wordpress.com)
- Movers & Shakers: Friday’s biggest gaining and declining stocks (marketwatch.com)
- InterOil and Noble Sign Heads of Agreement on LNG Sale (prnewswire.com)
- Australia: UBS Says Woodside Faces LNG Delays (mb50.wordpress.com)
Myanmar is likely to consider the issue of gas exports to Bangladesh after meeting its domestic demand.
The two countries are considering bilateral talks regarding Bangladesh’s interest in exploring offshore blocks.
- Burma And Aung San Suu Kyi: Change In Tactics Or Colors? – Analysis
- Total To Wait On Burma Expansion
- Burma: Activists Ask For More
- Burma Government Hopeful Over End To US, EU Sanctions
- Burma: Fast Forward To Democracy – Analysis
- President Obama’s Speech On The New Cold War – OpEd
- Burma: Suu Kyi’s Party Re-Registers While By-Election Date Still Uncertain – OpEd
- Burma: Soon Will Be Legal To Hold Protests
- Court In Malaysia Finds Bush And Blair Guilty Of War Crimes
- Pro-Democracy Burmese Oppose ASEAN Chair For Burma
- ASEAN gambles on Myanmar’s regional leadership (mb50.wordpress.com)
- Burma Today (mb50.wordpress.com)
- Reuters: Clinton to weigh reforms in historic Myanmar visit (focus-fen.net)
- What will happen to China as Burma (Myanmar) gets closer with Vietnam, US? (csmonitor.com)
- China urgers closer Myanmar military ties (upi.com)
- Clinton to visit Burma, boost reform efforts (sfgate.com)
- Obama sending Clinton to Myanmar to explore new ties (theglobeandmail.com)
- China, Burma To Strengthen Military Cooperation (voanews.com)
- China and Burma reaffirm strained ties (dvb.no)
- ConocoPhillips starts gas search in Bangladesh in Oct (sayou.wordpress.com)
- Gazprom eyes Bangladeshi natural gas (upi.com)
- Bangladesh ‘Feared Attack’ From Burma: WikiLeaks (wakeupbd.wordpress.com)
Saudi Arabia has stopped $100bn expansion of its oil production capacity after reaching a target of 12m barrels a day and now plans to shift its spending priorities to natural gas, refining and the chemicals business, media reports said.
The kingdom is, therefore, not pushing ahead with an assumed expansion plan to produce 15 million barrels a day by the end of 2020.
- Saudis face waning power in North America (mb50.wordpress.com)
- Saudi Arabia: Shia Protests Against the State Intensify (ibtimes.com)
- Two dead in Saudi Arabia gunfight (bbc.co.uk)
- Iran oil targeted by Obama sanctions (money.cnn.com)
- Saudis plan for future of unconventional oil from oilsands and tight oil and more expensive Saudi oil (nextbigfuture.com)