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