update needed, page-11

Ellaishani,

I don't know where the business spectator comes up with their info, but I can't see how on earth LNG ltd will wind up with gas from Origin or Shell.

Firstly as of July last year, Conoco signed off on their 9mt project with Origin and Sinopec and they are targeting first lng from a 4.8mt first train in 2016.. If they had any spare ramp up gas it will be needed (and would want to be stored somewhere) so they have enough gas to feed the 1st train. Given Origin is handling the upstream end and have significant commitments to other end users, such as it's own fairly mega Darling Downs power station, they are hardly going to sign any agreement to supply 20pj to LNG ltd for 2 let alone 5 years. It is just not feasible for them to do that.

Similarly Shell is scrambling to get enough gas ready to supply it's 8mt p.a first phase on Curtis Island. Which is why they need to build a pipeline linking Moranbah to Gladstone. They currently have very large commitments of supplying about 20 % of Qld's gas needs (to the various plants I outlined earlier)..They will be the last to get their LNG project running and may not be ready until 2020, but I still can't see how they would be in a position to deliver any meaningfull amount of gas to LNG ltd for more than a few years.

I have heard that the big LNG projects are looking to assist each other in iroming out the lumps and storage issues with ramp up gas, but these arrangements will be short term and set up on the basis that if one project gives another 50 pj in 2016, 2017, then it will be returned in 2019 etc..Point being they are considering swapping gas as it is mutually beneficial to do so when their projects come on stream one after the other, but they can't start giving away gas long term as none of them have yet shown they can produce in excess of
what they need for start up.

Just looking at Origin they will have to produce over 400 pj each and every year to run their 8mt plant..That is a staggering amount of csg when you think it through in terms of how many wells they need running reliably to keep that going for 20 years..But the money is committed so it has to happen.

If anything LNG ltd is in a very invidious position given all four major LNG projects are pushing forward and each if them is in a spot of bother when it comes to hitting the upstream supply timelines they've set. In such circumstances it really doesn't make it easy for LNG to strike any sort of long term supply deal, which is what they require, not a stop gap deal. If MEL were coming along quicker maybe they could get a spare 20pj p.a for two or three years until MEL can supply them in 2018, but to be honest MEL don't look like they'll hit that timeline, more like 2022 if LNG are lucky. And none of this is certain enough to sanction a $1.5 billion project.
MEL simply does not have enough runs on the board - they don't produce enough gas..
Whereas WCL are showing they can get to 60tj/ per day which gets them some of the way there. Mungi could provide another significant amount with work.

THe only company with potential to do some deal is AGL as it owns 50% of the greater moranbah project, but it would have to get shell to agree to let that gas go through it's pipe to Gladstone and what is the chance of that?

One thing I could see is Shell deciding to scale down it's 18 mt plant and start with Fish Landing...not an inconceivable idea. Could explain the link the Petrochina?
If this happens then LNG will be bought out...

Might be some short term downside for WCL is that happened (a big IF) but for all the reasons above I don't think it really matters if WCL can show they can produce they are sitting pretty with the outllook for gas prices to shoot up in a few years.

Chrs