Here are some charts and commentary re LNG and not NG. I accept this energy analyst/commentator is particularly bearish, but he has never wavered in over 2 yrs and charts show his forecasts to be pretty damn accurate. Hence, i concur with his findings. A supply glut in LNG has arrived and contracts under immense stress. Hence, i remain convinced OSH SP is over-priced and welcome reasoned view points showing why this is not the case.
The Brent oil price fell again last night to $48.53, largely on another big inventory build in the US, up 7.1 million barrels according to API. A little more on Iran today, too, from Bloomie:
Iran can boost oil exports by 500,000 barrels a day within a week after the removal of sanctions, Roknoddin Javadi, managing director of state-run National Iranian Oil Co., told reporters. The Persian Gulf nation can raise exports by 1 million barrels a day within six months once the curbs are lifted, he said.
It targets crude production of 4.7 million barrels a day by March 2021 and plans to produce 1 million barrels a day of crude condensates by the same date, Javadi said. The country pumped 2.8 million barrels a day of oil in September, according to data compiled by Bloomberg.
Iran also expects to complete its first terminal for exporting liquefied natural gas, known as LNG, within three years after sanctions are lifted, NIOC’s Javadi said. Gas producers can supply LNG by ship to customers beyond the reach of pipelines.
If that is true then oil is stuffed for years yet. As for LNG, well, we already know that. The indicative oil-linked contract price fell to $6.79mmBtu:
Meanwhile, spot continues to struggle despite the positive season, from Platts:
Prices of spot liquefied natural gas for November delivery to Asia averaged $6.700 per million British thermal units, according to latest Platts Japan/Korea Marker data for month-ahead delivery.
The marker fell 11.1% month over month, despite the fact that the market was moving into its traditionally stronger peak winter demand season. At $6.700/MMBtu, the JKM was 53.5% below prices seen for the same delivery month in 2014, marking the largest year over year change since April 2015.
The JKM had begun the assessment period at $7.00/MMBtu, before trending down steadily to reach $6.50/MMBtu by the beginning of October, as a slew of prompt supply tenders, mostly originating from projects in the Asia Pacific Basin, exacerbated extremely limited demand among end buyers in Northeast Asia.
Some 13 cargoes for prompt October and November delivery were offered out through various tenders during the assessment period. Meanwhile, buyers in South Korea, Taiwan and Japan continued to show no interest for cargoes. Indeed, several Japanese buyers were heard to be grappling with high inventories following lower-than-anticipated power demand during the summer and were reportedly trying to cooperate on deliveries where possible.
Similar sentiments were echoed in China, where buyer CNOOC had recently issued its first supply tender for two cargoes loading in Australia, marking a significant shift in the fundamental supply and demand balance of the LNG spot industry.
Expect more of this, much more, and the most important spread in the LNG market will continue to widen:
But, according to Fairfax, Browse has a sniff:
Joe Kang, director of Kogas’s energy resources research division, said “depending on the market”, the company could be interested in buying LNG from the proposed project. Taking an equity stake was also possible, he said, despite a tightening up in Korean government spending.
“It is about time” Kogas resumes considering equity investments in LNG projects after the recent slowdown, Mr Kang said on the sidelines of last Friday’s event marking the start-up of exports from Santos’s $US18.5 billion GLNG venture in Queensland, in which Kogas has a stake. The first cargo from GLNG is being shipped to Kogas’s LNG import terminal in Incheon.
The comments from Mr Kang come as federal Resources Minister Josh Frydenberg said feedback from meetings in Japan last week indicated support for the project from trading giants Mitsui and Mitsubishi, which own a stake in Browse.
“Conscious that the final investment decision has yet to be made, I was encouraged by the positive discussions I had with both the CEO of Mitsui and the president and CEO of Mitsubishi about Browse,” Mr Frydenberg said.
Mr Frydencoal needs a resource economics lesson. Korea has some incentive to go ahead as a vendor financing arrangement to build the ship and to keep the supply glut going, a bit like Roy Hill and Samsung. We should ask what’s in it for Australia, though. This is different to RIO and BHP expanding low cost iron ore into the glut because Browse is not cheap. There is no way it is viable at today’s prices so building stuff at the upper end of the cost curve is only going to hurt other also expensive Australian LNG projects by helping prices stay lower for longer. And given the construction phase benefit all goes to Korea you’ve got ask yourself what the Hell this project delivers to Australia.
Thankfully, hanging participation upon time and the state of the market is also the equivalent of telling WPL to stick it in the cupboard. It’s still got Buckley’s chance in the next five years, in my view.'
OSH Price at posting:
$7.26 Sentiment: Sell Disclosure: Not Held
