A quote from our quarterly, " Efforts with select Asian counter...

A quote from our quarterly, " Efforts with select Asian counter parties progressed substantially in the period despite uneven trade discussion rhetoric ". This talk is very similar in tone with our quarterly back in March 2018, “ discussions had with potential off-takers during the 3rd Qtr of LNG’s fiscal year will prove to be extremely valuable towards finalising agreements. So even though it’s “ same old same old “ banter... I do strongly believe that if the IP theft & IP transfer issues gets resolved, with word out of China suggesting the law to ban such practices is on the verge of being passed by The National Peoples Congress https://www.reuters.com/article/us-china-economy-foreign-investment/china-fast-tracks-new-foreign-investment-law-as-u-s-talks-loom-idUSKCN1PO09R, a BTA or 2 or 3 will tumble by years end (conservatively thinking). China's rubber-stamp parliament will vote on the foreign investment law, which will replace 3 existing laws, during a session scheduled to open on March 5 , the official Xinhua news agency reported Wednesday (30th). It is sure to be approved. Beijing will do in 3 months what usually takes a year, after the first draft was drawn up on Dec 25.

My gut feeling tells me the company wouldn’t have bothered outlaying more precious bundles of cash, filing an expansion application with FERC, if chances of success to reach FID were diminishing. I still believe there is a dream correlation between the additional .8mt and China’s penchant for the lucky number 8!

In China's "13th 5 year plan for Economic & Social development 2016 - 2020", the plan clarifies the energy development outline and guidance, with aims to build a clean, decarbonised, safe and efficient modern energy system. During this period, granted total energy consumption grows by more than 2.5% per year - the plan proposes that by 2020 the total energy consumption should be controlled within 5 billion tons of coal, non fossil energy consumption increase should be more than 15%, natural gas consumption should reach 10% and a mandatory cap on coal @ 58%. Well, China's power generation mix % (consumption) from 2017 to 2015;

Coal... 1523.5mt 2017 (60.4%) - 1520.7mt 2016 (62%) - 1540.4 2015 (63.7%)

Oil... 489.7mt 2017 (19.4%) - 472.6mt 2016 (19.3%) - 452.2mt 2015 (18.7%)

Hydro... 210.5mt 2017 (8.3%) - 210.1mt 2016 (8.6%) - 203mt 2015 (8.4%)

Natural Gas... 166.3mt 2017 (6.6%) - 144.9mt 2016 (5.9%) - 141.1mt 2015 (5.8%)

Renewables... 85.8mt 2017 (3.4%) - 65.7mt 2016 (2.7%) - 51.8mt 2015 (2.1%)

Nuclear... 45.2mt 2017 (1.8%) - 38.8mt 2016 (1.6%) - 31mt 2015 (1.3%)

Total energy consumption 2017 2521.4mt - 2016 2452.9mt - 2015 2419.7mt 

* The volumes above were converted from MTOE.

In 2018 the country's natural gas consumption breakdown was;

118.7mt Domestic Production

48.1mt LNG

34.7mt Pipeline supply (fixed contracts over last 3 years with Turkmenistan, Uzbekistan, Kazakhstan).
2.4mt Pipeline supply Myanmar
6-7mt Spot LNG

Total 210mt

Will bring to light how rapidly natural gas consumption is growing in comparison to domestic production in which the latter won't keep up. Yearly production & % increase from year to year;

2005 - 37.7mt (18.9%) 2006 - 44.8mt (18.2%) 2007 - 52.9mt (16.1%) 2008 - 61.4mt (6.2%) 2009 - 65.2mt (12.4%)2010 - 73.3mt (10%) 2011 - 80.6mt (2.6%) 2012 - 82.7mt (9.4%) 2013 - 90.4mt (7.7%) 2014 - 97.3mt (3.5%) 2015 - 100.7mt (1.7%) 2016 - 102.4mt (7.9%) 2017 - 110.4mt (7.5%) 2018 - 118.7mt

Average production growth from 2005 - 2017 = 9.5%

2005 - 35.6mt (23.2%) 2006 - 43.8mt (23.2%) 2007 - 54mt (15.3%) 2008 - 62.2mt (10.2%) 2009 - 68.5mt (20.1%) 2010 - 82.2mt (24.2%) 2011 - 101.4mt (10.1%) 2012 - 111.6mt (14%) 2013 - 127.2mt (9.6%) 2014 - 139.4mt (3.4%)2015 - 144.1mt (7.7%) 2016 - 155.6mt (14.3%) 2017 - 177.8mt - In 2018, consumption grew by 18.1% to 210mt

Average consumption growth from 2005 - 2017 = 14.6%

As the following report ascertains, " IT WILL BE VIRTUALLY IMPOSSIBLE TO MEET PROJECTED DEMAND " if China sticks to its maximum target for switching from coal to gas! https://www.rfa.org/english/commentaries/energy_watch/china-lng-01142019140904.html

Now for the sake of backing up this article https://www.spglobal.com/platts/en/market-insights/latest-news/natural-gas/012819-europe-set-for-genuine-lng-demand-in-coming-years-industry in reference to “ Europe may need extra gas given the decline in domestic production from the Netherlands, UK and Norway, will give a rundown of each country’s pipeline sales + LNG exports (if any) + consumption which is totalled up Vs production + LNG imports (if any) + pipeline imports (if any) which is totalled up - the difference determining whether there’s LNG supply available (or not) for sale while also highlighting their dwindling reserves. Secondly, the article draws attention to Europe possibly needing 70BCM (= 52mt) by 2025.

In 2017, Europe’s Top 7 Natural Gas Suppliers were;

1 Russia 140mt

2 Norway 84.5mt

3 Algeria 34.7mt

4 Netherlands 32mt

5 UK 7.4mt

6 Iran 6.5mt

7 Libya 3.2mt

	Russia	2017	2016	2015
1
2	Austria	6.3	4.1	3.1
3	Belgium	0	4	8
4	Czech Rep	4	3.1	3
5	Finland	1.6	1.7	2
6	France	8.5	7.7	7
7	Germany	35.8	34	33.4
8	Greece	2	1.8	1.4
9	Hungary	6	3.7	4.3
10	Italy	16.5	16.8	17.7
11	Netherlands	6.3	10.8	1.7
12	Poland	8.2	7.5	6.5
13	Slovakia	10.1	2.5	2.7
14	Turkey	20.4	17.1	19.6
15	UK	2.9	0	0
16	Other EU	8.9	7.6	7.2
17	Rest Of Europe	2	0	0
18
19	Total Europe	139.5	122.4	117.6
20
21	Kazakhstan	2.4	2.6	3.7
22	Ukraine	0	0	5.1
23	Other CIS	3.7	3.3	3.2
24
25	Total CIS	19.2	18.1	24.4
26
27	Total Pipe Exports	158.7	140.5	142
28	+ Consumption	313.3	310.9	303.1
29	+ LNG Exports	11.4	10.3	10.7
30
31	Vs Production	470.3	436	432.4
32	+ Pipe Imports	13.9	16	12.5
33
34	Differential	.8 Supply Deficit	9.7 Supply Available	10.9 Supply Available

Russia can expand field production & sales greatly between 2020-25'... the Bovanenkov field is currently producing 61mt and slated to reach 85mt by 2020. Chayanda/ Kovykta fields will both produce 18.5mt each but 28mt of that capacity is already contracted to go to CNPC through the Power Of Siberia pipeline, to be completed early 2020. Kruzenshternsky field 24.4mt expected completion 2022-2024. South Kirinskoye field 15.5mt scheduled for 2023. Salmanovskoye/ Geofizicheskoye fields 6.1mt for the Arctic 2 LNG project scheduled for 2023.

	Norway	2017	2016	2015
1
2	Austria	0	1.2	1.2
3	Belgium	0.15	0.15	1.5
4	Czech Rep	2.2	2.4	0
5	France	12.6	12.2	12.7
6	Germany	19	21.9	25.8
7	Italy	0.6	4.3	5.1
8	Netherlands	16.7	13.7	13.2
9	Spain	1.9	2.3	1.5
10	UK	26.2	21.2	19
11	Other EU	0.6	1.2	0.8
12	Rest Of Europe	0.5	1.2	0.8
13
14	Total Pipe Exports	80.45	80.55	80.8
15	+ Consumption	3.3	3.2	3.3
16	+ LNG Exports	4.08	4.08	4.08
17
18	Vs Production	91.1	85.6	85.9
19
20	Differential	3.3 Supply Available	2.2 Supply Deficit	2.3 Supply Deficit

Norway has one new field to come online by end of 2018, Aasta Hansteen 5.1mt. Without new discoveries and commercial production, particularly in the Barents Sea, the Norwegian government sees gradual production declines beyond 2025.

	Netherlands	2017	2016	2015
1
2	Belgium	7.1	8	2.1
3	France	3.6	3.4	3.4
4	Germany	14.9	16.9	17
5	Italy	6	6.8	4.4
6	UK	0	3	2.3
7	Other Europe	0.37	0.44	0.66
8
9	Total Europe	31.97	38.54	29.86
10	+ Consumption	26.7	25.5	24.3
11
12	Vs Production	27	31	33.5
13	+ Pipe Imports	30	28.1	22.3
14
15	Differential	1.7 Supply Deficit	4.9 Supply Deficit	1.6 Supply Available

As you can see, the Netherlands is importing vast quantities of natural gas through pipeline just to cover their consumption & pipeline export sales. Europe's largest natural gas field in Groningen has seen production fall rapidly since 2013. In 2013 the field produced 50.7mt, 2014 42.8mt, 2015 32mt, 2016 29.7mt, 2017 17.7mt and expectations for 2018 is at 14.2mt. The Dutch government intends to cut production to 8.8mt by October 2022 then to 0 by 2030. The reductions is due to limiting the risk of earthquakes after decades of extraction has led to dozens of earthquakes each year. The Netherlands only has 2 other sources of domestic gas supply... Norg/ Grijpskerk fields 5.2mt and Bergermeer field 3mt.

	UK	2017	2016	2015
1
2	Belgium	5.8	4.3	5.4
3	Ireland	1.3	2	3.1
4	Netherlands	0.8	1.1	1.3
5
6	Total Pipe Exports	7.9	7.4	9.8
7	+ Consumption	58.3	59.9	53.1
8
9	Vs Production	31	30.9	30.1
10	+ LNG Imports	5.3	7.7	9.4
11	+ Pipe Imports	29.1	25.2	21.4
12
13	Differential	.8 Supply Deficit	3.5 Supply Deficit	2 Supply Deficit

No supply available for sale but the country is a relatively small exporter anyways. The emerging news from the UK is the critical state of proven gas reserves, down to 152.9mt (as of end 2016) and IF keep producing at their average yearly production rate of 30.3mt, thats 5 years remaining!!

Algeria, Iran, Libya have no LNG or pipeline gas available for sale.

Using a reserves/ production ratio (R/P) - if the reserves remaining at the end of any year are divided by the production in that year, the result is the length of time that those remaining reserves would last if production were to continue at that rate. The Top 6 worldwide countries with depleting reserves are;

	Denmark	3.3mt Production Per Year	2.9yrs Remaining (10.4mt)
1	UK	30.3	5yrs (152.9)
2	Mexico	34.9	5.2yrs (180.1)
3	Germany	4.8	5.3yrs (25.1)
4	Thailand	28.5	5.4yrs (152.9)
5	* Italy	3.9	6.6yrs (25.1)

Algeria, Iran, Libya had no LNG or pipeline gas for sale!

There's 3 remaining US Brownfield projects hoping to take FID;

Kinder Morgan’s Gulf LNG 11.5mt, expecting FERC authorisation by July 16 2019.

Shell’s Lake Charles LNG (15mt) is pushing back their construction deadline to November 1 2019 - formerly known as Trunkline, also an existing import facility which i drove past on my way to see Magnolia on October 25 2017.

Exelon’s Annova Terminal in Brownsville, Texas. 7mt, estimated project cost only $1.3B with initial start-up capacity 4mt I believe… expecting FERC authorisation by July 2019. Exelon completed the acquisition of the Everett LNG facility in Massachusetts last October and its the longest operating LNG import facility in the USA. It connects to 2 interstate pipeline systems, as well as a local gas utility’s distribution system and the Mystic Generating Station. Exelon purchased the facility from Engie.

After a quiet January, the highly touted “ greatest year ever for project FIDs “ prediction from respected energy research and analysis firm Woodmac, has sparked in-to life with Anadarko’s Mozambique project securing 3 BTA’s in quick succession, signing CNOOC for 1.5mt on Feb 1, Tokyo Gas/ Centrica for 2.6mt on Feb 5 & Shell for 2mt on Feb 5! These contracts are in addition to the SPA the company signed last Feb with EDF for 1.2mt brining their total sales to 7.3mt (seeking 12.9mt overall). Anadarko is also awaiting government approval for 2.6mt from Thailand’s PTT. And now with Golden Pass reaching FID….. 


2019 is primed to deliver on its promise!


JK.