EN­ERGY TI­TANS

Ri­val firms may col­lab­o­rate on pro­posed projects from Mozam­bique to Pa­pua New Guinea to lower costs

New Straits Times - - Business / World -

BRIS­BANE Wilkes, a Perth-based prin­ci­pal ad­viser at RISC Ad­vi­sory. “There are sig­nif­i­cant sav­ings to be made through col­lab­o­ra­tion, but peo­ple have to ap­proach it in a way that’s dif­fer­ent than the past.”

Mozam­bique’s gov­ern­ment is push­ing two com­pet­ing LNG projects to work to­gether to im­prove eco­nom­ics, ac­cord­ing to the part­ner in one of the ven­tures. ExxonMo­bil is spear­head­ing the com­bi­na­tion of ri­val projects in Pa­pua New Guinea.

In western Aus­tralia, Wood­side Pe­tro­leum Ltd is pitch­ing for com­peti­tors to use its ex­ist­ing liq­ue­fac­tion plant in lieu of build­ing their own.

Un­sanc­tioned projects in western Canada may also col­lab­o­rate, ac­cord­ing to IHS Markit Ltd.

En­ergy com­pa­nies have long part­nered to­gether on in­di­vid­ual projects to share costs and risk. The shift now to­wards com­bin­ing al­ready-planned projects is part of a larger cost-cut­ting ef­fort across an LNG in­dus­try that’s try­ing to snap more than two years with­out a ma­jor new project sanc­tioned.

About US$1 tril­lion in global en­ergy spend­ing was cur­tailed be­cause of the en­ergy crash, said Saudi Ara­bian En­ergy Min­is­ter Khalid Al-Falih at the Asia Oil and Gas Con­fer­ence in Kuala Lumpur on Mon­day.

Pro­duc­ers are un­der pres­sure to keep costs down as a spate of new LNG plants ap­proved ear­lier this decade come on­line over the next few years, threat­en­ing to over­whelm de­mand and keep a cap on prices. An­nual global pro­duc­tion ca­pac­ity will grow to 407 mil­lion tonnes by 2020, com­pared with pro­jected de­mand of about 274 mil­lion tonnes, ac­cord­ing to Bloomberg New En­ergy Fi­nance (BNEF).

“We’re see­ing a lot of peo­ple try to push down costs, and where they can col­lab­o­rate on projects they prob­a­bly will,” said Kit­tithat Promthaveep­ong, a gas an­a­lyst with in­dus­try con­sul­tant FGE, here. “This will prob­a­bly be the gen­eral way for­ward.”

If pro­duc­ers can’t find a way of af­ford­ing new projects, that sur­plus could even­tu­ally flip to a deficit as cheap LNG spurs more con­sump­tion. De­mand will out­pace sup­ply by 2026 with­out new de­vel­op­ments be­ing funded, ac­cord­ing to BNEF.

About 30 new liq­ue­fac­tion trains needed to be sanc­tioned by 2025 to stop a sup­ply squeeze, said Jack Fusco, chair­man of Amer­i­can LNG ex­porter Che­niere En­ergy Inc, in Tokyo last month.

In Mozam­bique, the gov­ern­ment is push­ing two ri­val LNG projects — one headed by Anadarko Pe­tro­leum Corp and the other by Eni Spa and ExxonMo­bil — to agree to a frame­work that would al­low them to de­velop in­de­pen­dently but even­tu­ally share on­shore liq­ue­fac­tion in­fra­struc­ture.

In Pa­pua New Guinea, ExxonMo­bil bought In­terOil Corp so it could take a stake in To­tal SA’s pro­posed Pa­pua LNG project. The Irv­ing, Texas-based com­pany al­ready op­er­ates one LNG plant in the South Pa­cific na­tion, and it’s ne­go­ti­at­ing with part­ners To­tal SA and Oil Search Ltd to com­bine the projects. Do­ing so could save US$2 bil­lion to US$3 bil­lion in con­struc­tion costs, ac­cord­ing to Oil Search.

Malaysia’s Petro­liam Na­sional Bhd, which is a part­ner in the Glad­stone LNG project on Cur­tis Is­land, said there were “missed op­por­tu­ni­ties” for the three projects to col­lab­o­rate on com­mon fa­cil­i­ties such as jet­ties, pipe­lines and roads.

Work­ing to­gether could be con­tentious and au­thor­i­ties prob­a­bly needed to help fa­cil­i­tate it, said Ad­nan Zainal Abidin, its act­ing vice-pres­i­dent for LNG as­sets, devel­op­ment and pro­duc­tion.

“We should learn from the lessons from Aus­tralia,” he said. “Projects in the same geo­graphic lo­ca­tion should con­sider the pos­si­bil­ity of shar­ing some of the same fa­cil­i­ties.” Bloomberg

Pro­duc­ers are un­der pres­sure to keep costs down as a spate of new liq­ue­fied nat­u­ral gas plants ap­proved ear­lier this decade come on­line over the next few years, threat­en­ing to over­whelm de­mand and keep a cap on prices. BLOOMBERG PIC

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