The Oz & AFR articles - Trump impact on LNG

Double dose from both The Australian and AFR on the implications of Trump's pro-energy policies for the industry, in Asia, on Australian exporters and LNG Ltd with GV quoted.

Animal spirits awakening ... ?!

Donald Trump exports plans a heart to LNG Asia turf

12:00AM January 27, 2017

More than 10 of 17 ships that left the Sabine Pass LNG plant in Louisiana went to Asia, despite the big distances.


US gas export plans are gathering pace in the wake of Donald Trump’s election, as Woodside Petroleum expands a proposal for a Texas plant, LNG Limited signs up Indian buyers for its Louisiana plant and more than half of US LNG cargoes since December head to Asia.

The building momentum comes as Mr Trump pledges to throw even more support behind the already strong US shale gas industry, which is the biggest competitive threat to Australian LNG exports and prices.

Mr Trump’s energy secretary nominee says this support will include promoting more LNG exports.

In the weeks after Mr Trump’s election, Woodside’s US partner Sempra Energy applied to the Federal Energy Regulatory Commission for a licence to build and operate the planned Port Arthur LNG project on the Texas coast, a move confirmed by Woodside last week in its quarterly report.

The application is for a plant that can export 13.5 million tonnes of LNG a year from two big liquefaction trains from an unspecified date.

Of Australia’s planned or operating LNG projects Port Arthur would be smaller only than the Woodside-run North West Shelf, which can export 19 million tonnes of LNG a year and Chevron’s planned Gorgon project, which is targeting exports of 15 million tonnes a year.

But it would be the fifth-biggest planned US LNG plant.

In February last year, when Woodside signed a project development agreement with Sempra to develop Port Arthur, exports of just 10 million tonnes were being targeted.

No timeframe has been given for the plant, of which Woodside has said next to nothing since signing the February agreement.
Australia is expected to rapidly overtake Qatar as the world’s biggest LNG exporter by 2020 thanks to a $200 billion investment boom over the past decade.

But US gas prices kept low by shale gas production have overturned what was previously a tight market, sponsoring a wave of new US LNG projects, many of which are waiting federal government approval, including Port Arthur and Perth-based LNG Limited’s Magnolia project.

Within an hour of the inauguration of Mr Trump as President last weekend, a new “America First” energy plan was posted on the White House website, focusing on shale gas and oil production and reviving the coal industry.

Energy secretary nominee Rick Perry told a senate hearing the day before that Mr Trump supported more LNG exports, sparking concerns Australia’s producers would face more competition from US exports and lower US domestic prices. More US oil production would also weigh on the global oil prices to which Australian LNG sales contracts are linked.

The nature of the competition between Australian and the US has become evident in recent months as cold weather in China forced up spot LNG prices: Reuters reported that more than 10 of 17 ships that left the Sabine Pass LNG plant in Louisiana, which opened last year as the first LNG export plant in the lower 48 states, went to Asia, despite the big distances.

Just three vessels from Sabine Pass delivered LNG to East Asia between February and the end of November.

Illustrating the growing interest that the US holds for Asian buyers, which take practically all of Australia’s LNG exports, LNG Ltd this week said it had signed a non-binding agreement to send up to 4 million tonnes of LNG a year to India’s east coast.

The planned buyer, Vessel Gasification Services, plans a floating regasification terminal that would provide gas to crank up nearly 7000 megawatts of “near-idled” power stations in coastal Orissa and Andhra Pradesh.

“We look forward to working with the Magnolia team to bring a significant tranche of US-produced LNG to a key new market on the east coast of India,” VGS president Gaurav Tiwari said.

LNG Limited shares jumped as high as $1.01 after the Monday announcement but have since retreated to 84c — still up 56 per cent since Mr Trump’s election.

Private LNG proponent Texas LNG, whose chief executive Vivek Chandra is based in Melbourne, this month said it had signed non-binding term sheets with unnamed LNG buyers in southeast Asia and China for 3.1 million tonnes of LNG a year.

And from the AFR:

Donald Trump policies to help with LNG Ltd marketing push

LNG Ltd's Greg Vesey expects the Australian producers to provide stiff competition for the US. Supplied
The Trump administration's pro-energy policies have played into the hands of aspiring US gas exporter Liquefied Natural Gas Ltd as it seeks to get its $US4.35 billion Magnolia project in Louisiana back on track.

Managing director Greg Vesey said the stable price environment for gas in the US likely to result under the new administration should be attractive for LNG buyers, potentially attracting more interest to the project.

At the same time, policies under President Trump are likely to back the development of US LNG exports in line with the administration's focus on improving the trade balance.

"I do think that for buyers looking at North America and particularly the US it makes for a very, very attractive resource base with what would appear to be a very stable price environment," Mr Vesey said from Houston.

The crash in crude oil prices in 2014-15 and a glut in the LNG market derailed LNG Ltd's earlier schedule for developing its Magnolia project by eliminating the price advantage of US exports in global gas markets.

Shares in LNG Ltd are a fraction of their mid-2015 levels of $4-plus, but have gained more than 50 per cent since Trump's election victory. They closed down 6.1 per cent at 84.5¢ on Wednesday.

Mr Vesey said the project is now targeting start-up in about mid-2022, just as LNG markets should be moving back into balance. The Magnolia venture has all its approvals in place but still needs to sign up more customers for its planned 8 million tonnes a year capacity.

So far, Magnolia LNG has one firm 2 million tonnes a year agreement with privately owned Meridian LNG Holdings, which plans to ship the gas to a floating terminal in the UK to supply E.ON Global Commodities. While other earlier deals have since lapsed, an initial agreement was signed this week with Vessel Gasification Solutions for up to 4 million tonnes a year that would be shipped to a new terminal on the east coast of India.

"It's all hands on deck for selling the LNG ... so we can get the project financed and get the construction going," Mr Vesey said, adding a final investment decision is now targeted for late 2017 or early 2018.

Mr Vesey said he still expects the Australian LNG producers to provide stiff competition for sales into Asia given their investments have now been made and they will be looking to maximise cash flows.

"In those facilities you're going to have what I call the sunk cost discussion: it's already been spent so what can we do to generate cash flow," he said.

"So I think they will remain very competitive in the market: I don't look at them as though they are going to be intimidated by us and go away by any stretch."

Mr Vesey said LNG Ltd's key investors, including high-profile US funds Baupost Group and Valinor Management, understood the market changes that had delayed the Magnolia project and supported the company but wanted to see results.

"They are very supportive of what we are doing but they have a right to expect delivery – they have waited a long time and I understand that, that the urgency is on us now to deliver," he said.

On the question of the Trump administration's support for LNG exports Mr Vesey said the industry should be able to address any concerns that exports would mean less gas for the US and so higher prices.

"There's enough of an overhang that I think industry can prove it should be a pretty stable price environment," he said.

Go LNG !!!