Golar sees LNG charter rates recovering in 4Q
A contango structure developing in LNG prices, coupled with increased fuel-switching potential, is expected to support charter rates for LNG carriers into the winter months, Bermuda-based shipowner Golar has said.
A combination of low near-term LNG prices, high summer inventories and an expected increase in US gas prices as a result of reduced oil production are expected to contribute to the formation of a contango structure in LNG prices, which could support charter rates for LNG carriers into the winter months, Golar said. Lower LNG prices, both in the spot market and in term contracts as a result of lower oil prices, could also facilitate a significant shift to gas-fired generation, bolstering demand for LNG and its freight, the firm said.
But the shipping market remains highly volatile, with an "increasingly unpredictable" inter-basin trade making tonnage demand per mile difficult to model, the firm said. Demand uncertainty related to the Covid-19 outbreak is expected to weigh further on LNG prices, raising the prospect of additional US cargo cancellations, Golar said, noting that more than 60 US LNG cargoes are believed to have been already cancelled this summer. LNG prices for delivery in November have already opened a sufficient premium to the October price to cover additional charter costs for using vessels as floating storage.
The firm's average time charter equivalent rose to $61,900/d in the first quarter of this year from $39,300/d a year earlier, but is expected to drop to about $40,000/d in the second quarter, based on fixtures to date and prevailing spot charter rates, the firm said. Golar's fleet utilisation rate rose to 94pc in January-March from 90pc in October-December, as none of the firm's vessels had to carry out dry-dock maintenance, but is expected to drop to about 80pc in April-June as a result of reduced tonnage demand, it said. The 170,000m³ Golar Tundra is also slated for dry-dock maintenance in June, the only LNG carrier in the firm's fleet with maintenance planned for this year.
The firm reiterated its strategy to reduce its exposure to the spot shipping market by seeking more term deals, although this may prove to be trickier in a low-prices environment, the firm's chief executive, Iain Ross, said. The firm still plans to spin off its tri-fuel diesel electric carrier business into a separate entity, although they "haven't quite landed on the right solution for this time" and are exploring new options at the moment, he said.
FLNG at the 'front of the queue' for new FID
Floating liquefied natural gas (FLNG) units may retain a cost competitiveness with more complex onshore projects, although no FLNG projects are expected to be ready for a final investment decision (FID) in the near future, Golar said.
Significant reductions in US associated gas production as a result of lower crude output, coupled with the high costs of non-associated gas production, are expected to result in higher Henry Hub prices from next year onwards, which may apply upward pressure on global LNG prices and discourage further investment in US export projects, Golar said. This may create opportunities for competitive projects elsewhere in the world, including in west Africa and specifically Cameroon, where the firm operates the 125,000m³ Hilli Episeyo FLNG. The facility is exporting its 39th cargo at present, having already been operating close to capacity over the past two years. But the firm does not expect any additional throughput this year as the Covid-19 outbreak has further depressed already-low LNG prices, Golar said.
Golar declined to comment on whether it plans to file any arbitration claims over the force majeure 12-months delay claim it received earlier this year from BP Mauritania. The firms are in discussions over a possible resolution following a procedure that was already included in the original contract between the two parties, Ross said, although he declined to provide an expected timeline for the current negotiations.
Golar is in "advanced and positive discussions" with building contractor Keppel and engineering subcontractor Black & Veatch, with the aim of revising the project's cost and time schedule, Golar said.
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Limited strike on Iran opens door to de-escalation
Limited strike on Iran opens door to de-escalation
Dubai, 19 April (Argus) — A limited aerial assault on the central Iranian city of Isfahan earlier today could mark the beginning of the end of the latest escalation in the Mideast Gulf. Iranian state media reported in the early hours of Friday, 19 April, several explosions over Isfahan at 04:00 local time. These were later confirmed by the Iranian military to have been the result of air defences bringing down three small drones over the city. Isfahan is the home to a number of strategically important facilities, among them the Shekari airbase that houses some of Iran's F-14 Tomcat fighter planes and SU-24 Sukhoi bombers, and a uranium conversion facility. There was "no impact or damage" to either, according to Iranian army commander-in-chief Seyyed Abdolrahim Mousavi. Other Iranian officials also sought to downplay the strike. Hossein Dalirian, spokesman for Iran's National Center for Cyberspace, said on social media platform X that it was so minor "it would not be considered an attack anywhere in the world." Ice Brent crude futures rose by nearly $3/bl earlier today, but are now trading below the previous settlement level. Iran and the wider Mideast Gulf region were on high alert as Israel weighed its options for a response to Tehran's assault on Israeli territory last weekend. That attack, involving more than 300 drones, ballistic missiles and cruise missiles, was the first ever direct assault on Israel from Iranian territory. As yet, there has been no official confirmation from either side that today's attack originated from Israel. Media reports quoted unnamed US and Israeli officials saying Israel had launched the drones, and Oman's foreign ministry condemned Israel "for its attack this morning on Isfahan". Iran's attack on Israel last weekend was itself in response to a suspected Israeli air strike on an Iranian diplomatic compound in the Syrian capital, Damascus, at the start of April. That killed seven members of Iran's powerful Islamic Revolutionary Guard Corps (IRGC), including two generals. Despite its magnitude, the Iranian retaliation was not only highly choreographed, but also telegraphed to key stakeholders beforehand in an effort to limit damage and casualties. Israel said immediately after the attack that almost all of Iran's drones and missiles were intercepted with the help of allied forces in the region and that there were no fatalities, only "light" damage to the Nevatim military base in Israel's Negev desert. De-escalatory strike The limited nature of Iran's strike prompted Israel's western allies to urge it to show restraint. The US appealed to Israeli prime minister Benjamin Netanyahu to "take the win" and claim victory for its defence. But as it became increasingly clear that a response without a military dimension would be unpalatable for Israel, the US and Europe turned their efforts to making sure whatever Israel chose to do was also limited and fell below a threshold that could trigger yet another escalation in tensions. "This was probably the level of attack that on one hand was necessitated by internal Israeli calculations within the security cabinet and broader political coalition, and by virtue of the pressure by allies and what the US was willing to countenance," said Geneva Graduate Institute senior research associate Farzan Sabet. "It was a limited strike with the message that we can hit you anywhere, anytime, and without having to resort to a major strike involving 300-plus missiles." In the days following Iran's attack on Israel, several key IRGC figures said Tehran had "decided to create a new equation with Israel" ꟷ specifically that Tehran would retaliate to any Israeli attack on its interests or citizens from Iranian territory. This would be a shift from the previous status quo, which would see Israel regularly target Iranian interest and officials in third countries, many times without response from Tehran. But the limited nature of Israel's latest attack, and the very concerted effort by Iranian officials, military personnel and media to downplay its severity and impact so far, suggests it could feasibly provide a de-escalatory off-ramp for Iran. "Should Israel's response be limited to this, the Islamic Republic will not be under pressure to retaliate," said Arab Gulf States Institute senior fellow Ali Alfoneh. But is too early to say whether today's incident is the totality of Israel's response. "We're running up to [the Jewish holiday of] Passover [on 22-30 April]. The Israelis may not have wanted to carry out a major retaliation ahead of Passover so as to avoid the threat of war hanging over the country during the holiday," Sabet said. "So it is very possible that more [retaliatory attacks] could come after Passover." By Nader Itayim Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
India mulls using more natural gas in steel sector
India mulls using more natural gas in steel sector
Mumbai, 19 April (Argus) — India's steel ministry is considering increasing natural gas consumption in the sector as it aims to lower carbon emissions from the industry. Steelmakers held a meeting with the steel ministry earlier this month, to discuss challenges and avenues to increase gas allocation to the sector, according to a government document seen by Argus . Steel producers requested that the government set gas prices at an affordable range of $7-8/mn Btu for them, to make their gas-based plants viable, as well as for a custom duty waiver on LNG procured for captive power. India's LNG imports attract a custom duty of 2.5pc. City gas distribution firms sell gas at market-determined prices to steel companies. Representatives from the steel industry also requested for the inclusion of gas under the purview of the country's goods and service tax, and to be given higher priority in the allocation of deepwater gas, which has a higher calorific value. Deepwater gas is currently deployed mostly to city gas distribution networks. Steelmakers are currently undertaking feasibility tests for gas pipeline connectivity at various steel plants. But a gas supply transmission agreement requires a minimum five-year period for investment approval. The steel industry is heavily reliant on coal, and the sector accounts for about 8-10pc of carbon emissions in the country. A task force of gas suppliers including IOC, Gail, BPCL, Shell, and HPCL and steel producers like Tata Steel, AMNS, All India Steel Re-roller Association and the Pellet Manufacturers Association has been set up, and the team is expected to submit a report on increasing natural gas usage and lowering carbon emissions by 15 May, the government document said. This team is one of the 13 task forces approved by the steel ministry to define the country's green steel roadmap. The steel ministry aims to increase green steel exports from the country in the light of the policies under the EU's Carbon Border Adjustment Mechanism (CBAM), which will take effect on 1 January 2026. Under the CBAM, importers will need to declare the quantity of goods imported into the EU in the preceding year and their corresponding greenhouse gas emissions. The importers will then have to surrender the corresponding number of CBAM certificates. CBAM certificate prices will be calculated based on the weekly average auction price of EU Emissions Trading System allowances, expressed in €/t of CO2 emitted. This is of higher importance to Indian steelmakers as the EU was the top finished steel export destination for Indian steelmakers during the April 2022-March 2023 fiscal year with total exports of 2.34mn t, and has been the preferred choice for Indian steel exports in the current fiscal year owing to higher prices compared to other regions. Indian steelmakers have started to take steps to lower their carbon emissions by announcing collaborations with technology companies to decarbonise, and are trial injecting hydrogen in blast furnaces, and increasing the usage of natural gas in ironmaking. By Rituparna Ghosh Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Karoon cuts 2024 guidance on lower US output
Karoon cuts 2024 guidance on lower US output
Sydney, 19 April (Argus) — Australia-listed oil producer Karoon Energy has cut its production guidance for 2024 to reflect lower production from its stake in the Who Dat floating production system in the US' Gulf of Mexico. Who Dat's weaker well and facility performance has led to the lower guidance, with Karoon now expecting to produce 29,000-34,000 b/d of oil equivalent (boe/d) in 2024, down from a previous 31,000-37,000 boe/d guidance. Karoon said it and joint-venture partner LLOG Exploration will continue to prioritise higher value oil production over gas for the remainder of the year. The firm's January-March output rose by 17pc against October-December 2023 . Who Dat's production on a net revenue interest (NRI) basis was 9,000 boe/d for January-March, with Karoon downgrading its forecast NRI production from 4mn-4.5mn boe in 2024 to 3-3.5mn boe. But output from Karoon's Bauna asset offshore Brazil was 15pc lower than the previous quarter because of continuing reliability problems with Bauna's floating production, storage and offloading (FPSO) vessel, the shut-in of the SPS-88 well for the full period and natural field decline. Production for January-March at Bauna was 24,000 b/d, down from 28,000 b/d the previous quarter. Karoon expects to resume production from the well during July-September following an intervention, assuming no delays in regulatory approval. Bauna's annual maintenance will take place next month with a three-week shutdown of the FPSO planned to boost reliability. By Tom Major Karoon Energy results Jan-Mar '24 Oct-Dec '23 Jan-Mar '23 y-o-y % ± q-o-q % ± Sales revenue ($mn) 197 209 144 37 -6 Production (b/d) 34,000 29,000 22,000 55 17 Sales volume (b/d) 30,000 28,000 22,000 36 7 Average prices ($/bl) Bauna oil price 76 83 73 4 -8 Who Dat sales gas ($/mn ft³) 2.95 2.22 n/a n/a 33 Who Dat oil, condensate, NGLs 78 73 n/a n/a 7 Source: Karoon Energy Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Australia’s Woodside records weaker Jan-Mar LNG output
Australia’s Woodside records weaker Jan-Mar LNG output
Sydney, 19 April (Argus) — Australian independent Woodside Energy's January-March output dropped against a year earlier and the previous quarter, as reliability fell at its 4.9mn t/yr Pluto LNG project offshore Western Australia. Woodside produced 494,000 b/d of oil equivalent (boe/d) across its portfolio for January-March, 5pc below the 522,000 boe/d reported during October-December and 4pc below its 2023 full-year figure of 513,000 boe/d. Lower production at its Bass Strait, Pyrenees and Pluto assets was partially offset by increased production at the 140,000 b/d Mad Dog phase 2 oil field in the US Gulf of Mexico, which hit peak production of 130,000 b/d during the quarter. Reliability at Pluto was 94.6pc for the quarter because of an offshore trip and an onshore electrical fault. Woodside made a final investment decision (FID) on the Xena-3 well to support Pluto production during the quarter. The 16.9mn t/yr North West Shelf (NWS) LNG achieved 97pc reliability for the quarter with NWS' joint-venture partners taking a FID on the Lambert West field, which will support continuing production. Lower seasonal market demand and offshore maintenance activity saw production drop at the firm's Bass Strait fields, while production ended at the Gippsland basin joint venture's West Kingfish platform because of slowing oil output from Kingfish field. The Pyrenees floating production storage and offloading vessel began planned maintenance in early March and will return to crude production for April-June, Woodside said. Two 550,000 bl cargoes of Pyrenees crude loaded each quarter during 2023. Revenue dropped by 31pc to $2.97bn from $4.33bn a year earlier and 12pc from $3.36bn during October-December. Woodside's total average realised price dipped to $63/boe, 6pc down on the previous quarter's $67/boe and 26pc below the year-earlier figure of $85/boe. Woodside's average realised price for LNG produced was $10.40/mn Btu or 10pc down on the previous quarter's $11.50/mn Btu. The firm is more heavily exposed to spot prices and gas hub pricing than fellow domestic LNG producer Australian independent Santos, with about 30pc of Woodside's equity-produced LNG sold at these spot prices. By Tom Major Woodside LNG production (mn boe) NWS Pluto Wheatstone* Total Jan-Mar '24 8.2 11.8 2.4 22.3 Oct-Dec '23 7.8 12.4 2.5 22.7 Jan-Mar '23 9.7 12.2 2.5 24.3 2023 32.8 45.6 10.2 88.6 2022 29.7 46.2 9.2 85.1 y-o-y % ± -15 -3 -4 -8 q-o-q % ± 5 -5 -4 -2 Source: Woodside *Woodside controls a 13pc interest in Wheatstone LNG Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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