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The OPEC Deal: Here Are The Details

The OPEC Deal: Here Are The Details

Oil prices continued to surge…

$1 Trillion Money Manager Downplays The OPEC Deal

$1 Trillion Money Manager Downplays The OPEC Deal

Asset management group PGIM warns…

Gazprom Sees LNG As Key To Its Future

Russia’s Gazprom evidently believes there’s no such thing as too much gas.

Already the world’s leader in gas production, Gazprom is looking to expand its holdings to liquid natural gas (LNG), which is becoming a major factor in the worldwide gas trade. Yet Gazprom has only one LNG production plant, situated on Sakhalin Island in the Russian Far East.

The Sakhalin facility, which came on stream in 2009, has an capacity of producing 9.6 million tons of LNG per year. The company has three other such facilities in the works, but none has begun production yet.

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Now Gazprom has agreed to buy all the LNG from an export plant in Cameroon on Africa’s Gulf of Guinea. The plant is owned by the Anglo-French energy concern Perenco and is being developed by the Norwegian shipping company Golar LNG. The facility is expected to begin operations in 2017, according to various news reports based on anonymous sources. Gazprom Marketing & Trading (GM&T) will buy 1.2 million metric tons of LNG per year from the facility.

One of Golar’s LNG tankers is being converted into a sea-borne production platform where gas will be chilled into liquid form, making it ready for quick transfer to other tankers for transport to markets around the world. Reuters reports that its sources say Gazprom will sell the product to markets on the Atlantic coast, as well as to China.

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How profitable this will be isn’t yet clear. One of Reuter’s sources said, “It all depends on the oil price in 2017 when the [Perenco] supply starts flowing.” But Erik Stavseth, an energy analyst at Arctic Securities in Oslo, told the news agency that a deal with Gazprom could be beneficial to both Perenco and the Russian energy giant. “Despite a low price on the volumes from Perenco to Gazprom, we see the project as still delivering solid returns to Perenco – primarily due to the low cost of gas,” he said.

Gazprom’s contract with Perenco includes no restrictions on where the gas may be sold. Therefore any destination would be within the terms of the agreement, whether in Latin America, North Africa or even in East Asia, which Gazprom views as a rich source of customers.

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One leading Gazprom customer over the past five years has been India. But Kelli Maleckar Krasity, a senior analyst at IHS Energy’s LNG group, told Interfax that the company recently “has branched out to other markets – Egypt, Argentina, South Korea – to increase its trading role.” He believes that “One possibility for its Cameroon supply … would be Brazil, since Golar has started a power initiative to connect end-market consumers with suppliers, and it has contacts in the Brazilian market that suggest LNG could flow there,”.

Meanwhile, Gazprom says it is also conducting a feasibility study on the possible construction of an LNG plant on the Black Sea. Details are skimpy, and even the location of the plant hasn’t been named, but Gazprom envisions a facility starting with a capacity of a half-million metric tons of LNG, expandable to twice that volume.

Russian President Vladimir Putin says his government plans to triple sales of LNG on the global market, and to further expand gas sales in Asia. “We plan to increase our supplies in the Asian direction from 6 percent to 30 percent – to 128 billion cubic meters,” he told the Forum of Gas Exporting Countries in Tehran on Monday.

By Andy Tully of Oilprice.com

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