LNG pricing is wide ranging

[Tree]

I'm thinking XOM can get XOM's price again for the 3-4 train expansions.

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7/5/13

CNOOC fighting over Tangguh LNG prices

Jakarta: China National Offshore Oil Corporation (CNOOC) is fighting in Indonesia to get the price it is paying for LNG cut. The spat has turned ugly over CNOOC’s bid to renegotiate its contract with Tangguh LNG in West Papua and the matter could go to court, the national government in Jakarta has said.

The Tangguh LNG export contract with CNOOC was first signed in 2002 to deliver gas to China’s first import terminal in Guangdong. At that time, the agreed gas price reached was $ 2.4 per million metric British thermal units (mmbtu). The contract has since been the subject of renogotations twice, in 2006 and 2008 with the price now set at $3.35 per mmbtu.

A new price was meant to have been set in May this year by Indonesia but the two parties have not found agreement. Indonesia has been pushing for a $7 price, commensurate with where international oil prices stand today. CNOOC has baulked at this doubling of price.

If the stalemate continues an international arbitration is likely.

Other Indonesian gas clients, notably the Japanese pay up to $17.5 per mmbtu.

[Stavros]

When you post articles, please look into the details Tree. On this one, you'll find out that CNOOC is a major JV Partner in Tangguh LNG. That's why they get the gasfrom the project at a discounted "wholesale price" relative to the retail offtakers who pay on a slope + offset formula relative to the Japan Crude Cocktail.

The Tangguh project is operated by BP Indonesia with a 37.16% interest. Other partners are CNOOC (13.9%), MI Berau B.V. (16.3%), Nippon Oil Exploration (Berau) Ltd. (12.23%), KG Berau/KG Wiriagar (10%), LNG Japan Corporation (7.35%) and Talisman (3.06%).

Bink is Happy

EOM

[Palm]

And if the Chinese, Japanese etc think the US is the answer this info from the EIA says otherwise. It shows the LNG export price from the US. The most recent shows the April price at $11.36/mcf if LNG were being exported today. Not many bargains out there especially with no ownership.

http://www.eia.gov/dnav/ng/ng_pri_sum_dcu_nus_m.htm

[jft310]

Palm-Thats why I posted about LNG ownership with IOC. Yes the NG price received is good and important, yes there are condensate revenues for IOC but the most important is the LNG revenue. Thats where the cash flows will be for IOC. The details to be revealed. IOC mgt assures me they will have LNG revenue from this Exxon deal. No details.

[Palm]

The Chinese can squawk all they want, but near term they are forced to pay up. Their shale assets distinguish them from Japan and SK, but Chinese shale basins are generally smaller, deeper and more complex. They are also spread out across more than 150 separate basins and generally are distant from demand centers. And with limited existing infrastructure in many areas, as well as water supply issues, costs are expected to be substantially higher. Importantly, state regulation of
gas prices may defer risk-taking by non-NOCs, and more broadly, China generally lacks the community of incentivized risk-taking independents that essentially pioneered the technological changes in horizontal drilling and hydraulic fracturing. This may effectively slow down the pace of China’s shale evolution. IOC has the goods that these countries need to secure now.

[Tree]

When you post articles, please look into the details Tree. On this one, you'll find out that CNOOC is a major JV Partner in Tangguh LNG. That's why they get the gasfrom the project at a discounted "wholesale price" relative to the retail offtakers who pay on a slope + offset formula relative to the Japan Crude Cocktail. The Tangguh project is operated by BP Indonesia with a 37.16% interest. Other partners are CNOOC (13.9%), MI Berau B.V. (16.3%), Nippon Oil Exploration (Berau) Ltd. (12.23%), KG Berau/KG Wiriagar (10%), LNG Japan Corporation (7.35%) and Talisman (3.06%). Bink is Happy EOM

Not how it works.  LNG projects would not exist if you were correct.  CNOOC does not receive a below market LNG price as a 1/7th partner at the expense of the partners owning 87%.

LNG projects  'financed' by reaching market priced OTs of usually ~75% of production.  Those in the production JV share in the rich cash-flow LNG OTs produce proportionate to their ownership stake.  If an OTer is in the production JV they are in essence hedging their LNG costs with an highly profitable ownership stake.

[Tree]

When you post articles, please look into the details Tree. On this one, you'll find out that CNOOC is a major JV Partner in Tangguh LNG. That's why they get the gasfrom the project at a discounted "wholesale price" relative to the retail offtakers who pay on a slope + offset formula relative to the Japan Crude Cocktail. The Tangguh project is operated by BP Indonesia with a 37.16% interest. Other partners are CNOOC (13.9%), MI Berau B.V. (16.3%), Nippon Oil Exploration (Berau) Ltd. (12.23%), KG Berau/KG Wiriagar (10%), LNG Japan Corporation (7.35%) and Talisman (3.06%). Bink is Happy EOM

Not how it works.  LNG projects would not exist if you were correct.  CNOOC does not receive a below market LNG price as a 1/7th partner at the expense of the partners owning 87%.

LNG projects  'financed' by reaching market priced OTs of usually ~75% of production.  Those in the production JV share in the rich cash-flow LNG OTs produce proportionate to their ownership stake.  If an OTer is in the production JV they are in essence hedging their LNG costs with an highly profitable ownership stake.

The rest of the story and, as pointed out, it's nuttin to do with wholesale prices for major partners.  

End of a sweetheart deal era for ALL of the Tangguh Off Takers as the crude oil ceiling is raised from $38 to $100.  Seems like a slight screw up by BP with the low Oil price ceilings.  Note to Rex and Henry:  Remember to set the LNG OT oil ceiling at least $130 plus and re-negotiate each 2 years.  

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Indonesia determined to get market price for Tangguh LNG from CNOOC

Jakarta (Platts)--8Jul2013/517 am EDT/917 GMT

Indonesia is determined to get a market price for LNG exported from the Tangguh project to China's CNOOC, a senior official with upstream regulator SKK Migas said Monday.



"The new price cannot be below the market price. It has to be aligned with the market price," Widyawan Prawiraatmaja, SKK Migas' deputy chief for commercial control said, adding that assuming the Japan Crude Cocktail price is $100/barrel, the LNG price should be around $14/MMBtu.



CNOOC currently pays $3.50/MMBtu for Tangguh LNG, which is one of the lowest prices paid for Indonesian LNG.

Indonesia began price renegotiations with CNOOC in early May and energy minister Jero Wacik said then that the renegotiations would be completed within two months.



"The negotiation is taking time, but we expect to complete it as soon as possible," Prawiraatmaja said. He added that there were some disagreements between Indonesia and CNOOC on when the new price should take effect.



Indonesia wants the new price to be effective retroactively from January 1, 2013, but CNOOC wants the new price to take effect in January 2014, he said.



"We are still discussing the price and the effectiveness of the contract," he said.



This is the second time Indonesia has asked for a price review though the LNG contract states that the government can review the price of Tangguh LNG every four years if oil prices rise significantly.



The last time the LNG price was reviewed was in 2006, when Tangguh operator BP Indonesia and CNOOC amended their sales and purchase agreements by raising the ceiling crude oil price on the Tangguh contract to $38/barrel from the $25/b that was signed in 2002.



This allowed the average LNG price to rise to $3.50/MMBtu from $2.60/MMBtu on an FOB basis.



The Tangguh LNG project in Bintuni Bay at Indonesia's far eastern Papua province, comprises two trains with a total capacity of 7.6 million mt/year. The project is based on 14.4 Tcf of proven gas reserves in three neighboring production sharing contracts.



BP has a 37.16% interest in Tangguh. The other partners are CNOOC (13.9%), MI Berau BV (16.3%), Nippon Oil Exploration (12.23%), KG Companies (10%), LNG Japan (7.35%) and Talisman (3.06%).



Tangguh has five long-term supply contracts. They are with CNOOC for 2.6 million mt/year over 25 years; South Korea's Posco for 550,000 mt/year for 20 years; South Korea's SK E&S for 600,000 mt/year for 20 years; Sempra for 3.7 million mt/year for 20 years; and Japan's Tohoku Electric Power for 125,000 mt/year for 15 years.



Posco and SK E&S buy Tangguh LNG at an average price of $3.36/MMBtu and $3.50/MMBtu, respectively.



The Indonesian government in December gave BP the go-ahead for a $12 billion expansion plan for Tangguh, which would involve adding a third train, with a capacity of 3.8 million mt/year, at the plant. BP is looking to sell output from the third train to buyers in Japan and South Korea.

[Palm]

Exactly and if one reviews a graph of Asian LNG prices over the last 15 years you will see that prices were very low when that contract was entered into. They have made out well and now must pay the new market.

[Tree]

Exactly and if one reviews a graph of Asian LNG prices over the last 15 years you will see that prices were very low when that contract was entered into. They have made out well and now must pay the new market.

Think XOM can get XOM's price + in our expansion train???  Me do.

JP/SK likes XOM so much they just may pay premium prices.  There still isn't anywhere else for them to go.