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PNG’s gas industry could benefit from Japan’s move for a more secure supply base. Source: Supplied
THERE could be a silver lining for Papua New Guinea LNG producers in recent oil price slides and geopolitical instability, with Japan becoming increasingly interested in security of supply.
This is the view of Credit Suisse analysts who released a report over the weekend that said Japan, the world’s biggest LNG buyer, was no longer as interested in fostering LNG development from the US, Russia and East Africa as it had been a year ago.
“We believe we are moving into a new phase where the world’s largest LNG off-taker will de-emphasise its recent focus on US-linked LNG pricing and refocus on energy security in light of the geopolitical risks concerning gas supply (US-Russia) and marine disruptions in the South China Sea, which 60 per cent of Japanese LNG currently passes through,” Credit Suisse said.
This could see Japan underpin development of further LNG projects in PNG, and buoy the fortunes of Oil Search and Santos, which are partners in the recently started PNG LNG plant, and InterOil, which operates PNG’s biggest undeveloped gasfield.
“As we started 2014, Japan appeared keen to support greenfield LNG capacity in Russia and was interested in the East African developing opportunities in Mozambique and Tanzania,” Credit Suisse said.
“However, developments in Ukraine reminded Asian buyers that gas can be a geopolitical tool — and we suspect planning in Japan may have de-prioritised Russia as a greenfield LNG supply source.”
Sliding oil prices have also taken the gloss off Japanese plans to foster US LNG development. Credit Suisse estimates that at recent averages US LNG was no cheaper than oil-linked LNG from Australia and PNG.
A recent visit to Australia and PNG from Japanese Prime Minister Shinzo Abe was probably driven to some extent by a desire to build LNG supply relationships, the analysts said.
Unfortunately, the benefits are unlikely to foster New Australian LNG projects. “For Australia, Japan probably already has contracted as much as it would like to see — hence new capacity would likely need to find buyer interest outside of Japan,” Credit Suisse said.
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Nice find Tree. Low cost and stability is a tough combo to beat these days.
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'Palm' pid='53972' datel Wrote:Nice find Tree. Low cost and stability is a tough combo to beat these days.
20% return sounds kinda good.
As reported last week, Hession alluded to JP involvement.
Upstream : What equity level in the LNG project are you targeting?
Hession: Broadly, we’ll have about 27.5% after the government’s back-in. Total will have about 31% and Oil Search about 18%. We may bring in a buyer, which will involve selling LNG volumes. You sell a little bit of equity to an offtaker, I can see that happening.
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Spartina attended an RJ NYC Instututional Conference summer of 2007 ?. I think it was . Mailed me a CD recording . In that speech Phil Mulacek stated the Japanese had offered to finance Interoil's LNG plant at 1/2 of 1 percent interest in exchange for off take agreements . Somare signed an agreement with Japan where the Japanese requested all the LNG that PNG could produce . The PNG govt wanted 3 countries to supply gas for diversification . Thus Exxon sold to 3 countries .
Be interesting to see what type deal we get from the Japanese this time ?.
Spartina can add some color to the above for an historical look back .
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Critical to understand that our partner and their JP partners in a nearing completion bloated, cost over-run $34 Billion project is still profitable at these Oil prices. We likely see a full integration of JP companies as OTers and equity partners in our E/A LNG project. As foretold above by Hession.
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Total holds a 30% equity stake in the project. The other partners are:
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Inpex (66.7%)
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Tokyo Gas (1.575%)
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Osaka Gas (1.2%)
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Chubu Electric Power (0.35%)
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Toho Gas (0.42%)
- See more at: http://www.total.com/en/energies-experti...Jv5be.dpuf
*****
INTERVIEW-Japan's Inpex: Ichthys LNG project still above break-even-point despite oil plunge
BY OSAMU TSUKIMORI AND KENTARO HAMADA
TOKYO Fri Jan 9, 2015 11:32am GMT
Jan 9 (Reuters) - The $34 billion Ichthys liquefiednatural gas (LNG) project in Australia is still above its break-even-point despite a six-month plunge in global oil prices to around $50 a barrel, said the top executive of project operator Inpex Corp.
When Inpex made its final investment decision (FID) in 2012,Brent crude was hovering around $110 a barrel, but Inpex is not worried about the profitability of Ichthys even though global crude prices have lost more than 50 percent of their value since June last year, Inpex President and CEO Toshiaki Kitamura said in an interview with Reuters on Friday.
"We have confidence in the project's profitability," he said, adding that oil prices have not fallen below its break-even-point. Current oil prices are within the expected range, he said, without giving any specific details.
Most Australian LNG exports are sold under long-term contracts linked to global oil prices.
The Ichthys project, which was 58 percent complete as of last September, is progressing on schedule to start production by the end of 2016, Kitamura said.
The energy boom in Australia has led to labour shortages and cost blow-outs, and there's a risk of cost-overruns, but Ichthys is in a comparatively better situation with 75 percent of the project awarded on a lump-sum basis, he said.
The Australian dollar's 15 percent weakening against the greenback and the easing in the rapid rise of Australia's labour costs since FID was made should help to keep the project on budget, he said.
The project, which is to produce 8.4 million tonnes of LNG a year, will pipe gas off westernAustralia to two LNG trains and other infrastructure near the coastal city of Darwin in Australia's Northern Territory.
Inpex, 19 percent owned by the government, has a stake of more than 62 percent in the project, with Total and several other Asian energy companies are shareholders.
When Ichthys starts production in 2016, Inpex's output is expected to jump around 50 percent from its current 400,000 barrels of oil equivalent per day (boepd), with a goal for production to hit 1 million boepd in the early 2020s.
"We expect to raise production to about 700,000 bpd by around 2020," Kitamura said, adding that in the long term, the company is interested in acquiring stakes in Mexico,Norway, Africa and South America in particular.
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One of the reasons this project remains profitable is their off take contracts contain floor LNG prices . In order to get certainty of supply for a sovereign country like a Japan they must agree to a floor price to lock up the supply to them from an Australian type . The banks require that floor price which is why these deals are orchestrated at the highest levels . PNG and Japan have agreements at the highest level to get these deals done . A win for all parties.
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01-14-2015, 11:42 PM
(This post was last modified: 01-14-2015, 11:43 PM by Tree.)
http://www.interoil.com/iocfiles/documen...0FINAL.pdf
Back to slide 10.
Ichhys is project P5. Study the comparisons to E/A LNG.
E/A LNG vs Ichthys
Development costs $/boe: $11 vs $15
IRR%: 20+ vs ~13
breakeven $/mmbtu: $8 vs $12
connect the dots.......
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Breakeven at $8/mmbtu, that's roughly $48 oil. While we might undershoot that (indeed we are), it isn't likely to be the long-term equilibrium price.
While many other planned LNG projects will have far more compromised economics
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