Companies are looking to dramatically scale up their LNG businesses, seeing it as an opportunity to make a profit in the energy transition, writes Konstantin Rozhnov
Europe's largest oil and gas companies are talking up their bet on LNG as a pillar on which they can build themselves into broader energy firms and thrive in the world's transition to a lower-carbon future.
Italy's Eni has a strategy that envisages gas production making up 60pc of the firm's total output by 2030 and around 85pc by 2050, compared with 52pc last year. "Gas is still a very important contributor to the energy transition," the firm's chief executive Claudio Descalzi told this month's Energy Intelligence Forum. The world's shift from coal to gas "is still at the very beginning", he predicts, and many countries cannot rely on renewables alone because of continuity concerns. "Gas is really increasing everywhere," Descalzi says.
Eni's role in the development of Mozambique's 100mn t/yr LNG potential is central to the firm's LNG growth plans, thanks to the sector's lower cost base. The Eni-led 3.4mn t/yr Coral floating LNG project offshore Mozambique is due on stream in 2022. And a delayed final investment decision on the 15mn t/yr Rovuma LNG project that Eni has a stake in is likely within the next couple of years. "We need Mozambique gas," Descalzi says. This is despite significant new LNG capacity expected on stream elsewhere in the coming years, in particular from Qatar, where Eni hopes to secure a role partnering state-owned QP in its expansion plans.
Shell chief executive Ben van Beurden similarly sees "more opportunity for gas" in the near term. The market tends to value companies such as Shell as a collection of commodity-producing assets, but increasingly Shell — the world's biggest private-sector LNG seller — is also showing that "the integration at the customer-end of the equation actually unlocks superior value", van Beurden says. Shell's integrated gas business makes more money than "the collection of LNG plants" it has stakes in. "It is the whole optimisation and the customer value proposition that we build on the back of that that creates a very thick icing on the cake," he says.
Total and BP also revealed rising LNG sales targets in energy transition strategies unveiled last month. Total is targeting LNG production growth of more than 10mn t/yr by 2025 through its stakes in the 20mn t/yr Yamal LNG, 7.6mn t/yr Nigeria LNG expansion and the 13mn t/yr Mozambique LNG, all of which are due on stream in 2023-24. And the company sees further opportunities in integration, as it wants to double its LNG sales by 2030 to 70mn t/yr.
Customer service
Chief executive Patrick Pouyanne sees China's decision to attract private-sector investment to its pipeline and terminal systems as an opportunity. "We need to be proactive with them... to not only deliver LNG just to the terminal, but to develop the gas market," he says. Total has implemented a similar business model in India through its LNG venture with local firm Adani. "We cannot just be producers," Pouyanne says, emphasising the growing customer focus that his firm and its peers say will drive their transition from oil and gas producers to international energy companies. "If we forget that part, maybe our gas will not be able to develop all the LNG we want to sell."
BP's energy transition strategy envisages its oil and gas production falling by 40pc over the next 10 years, but over the same period it aims to double its LNG business from around 15mn t/yr to 30mn t/yr. With an LNG portfolio that is currently split roughly equally between equity and merchant supply, the company's expansion plans will remain more asset-light than those of its peers and focused on trading. In gas, BP will be "prioritising areas in which we have strong netbacks and therefore an opportunity to integrate downstream", BP's executive vice-president for strategy and sustainability, Giulia Chierchia, says.
