Markets

Hard-nosed buyers are bargaining for cheap term LNG supplies as about one-third of active contracts are due to expire between 2020 and 2025. Contracting activity collapsed this year with only 35 bcm signed to date, giving buyers plenty of bargaining power to negotiate flexible pricing and delivery terms.

Operators of US energy infrastructure are on high alert as Hurricane Delta, a Category 4 storm in the Gulf of Mexico, will make landfall in Louisiana later today. Sempra is shutting down Cameron LNG and Cheniere may suspend Sabine Pass, leaving surplus feedgas that weighs on Henry Hub prices.

The pandemic has cut daily peakload in PJM, the largest US regional power network, by 13.5 GW and demand is unlikely to recover before 2023. Researchers at the Applied Economics Clinic warn of a “capacity surplus," suggesting the network is “over-reliant” on gas peaking power plants.

Japanese utility buyers have been busy to snap up US LNG, importing a total of 18 cargoes in both August and September, ahead of South Korea with 15 cargoes. Generating electricity from LNG remains vital for Japan, though Kyushu Electric aims to restart units 1&2 at its Sendai nuclear plant.

Slowing oil and gas consumption as a result of the global green energy transition may lower the credit profile of national oil companies (NOCs). Oil majors can reduce this risk, according to Moody’s, by increasing their exposure to LNG assets and less carbon-intensive energy sources.

Royal Dutch Shell’s margins on LNG sales are squeezed by low oil prices. Over 80% of the company’s term LNG sales are linked to oil with a 6-month price lag, dragging down margins in the third quarter. In consequence, Shell places greater emphasis on integrated power, biofuels and hydrogen.

Plans for debut trading in Hygo Energy at the US stock exchange NASDAQ have been shelved amid corruption allegations against the company’s CEO Eduardo Antonello. Hygo, a joint venture between Golar LNG and the U.S. private equity firm Stonepeak Infrastructure Partners, had plans to develop two LNG-to-Power projects in Brazil.

Asia’s largest LNG exporters, Indonesia and Malaysia, are stepping up domestic LNG deliveries. A flurry of decentralised gas power plants are under development in Malaysia and across the Indonesian archipelago, looking for steady and attractively-priced LNG supply.

erThough delivered prices for coal at US power plants keep declining, burning gas is more profitable. Fuel costs for coal power units fell from $2.25 per MMBtu to less than $2.00/MMBtu, but this is not enough to outcompete combined-cycle power plants running on cheap shale gas.

Shares in Siemens Energy have opened lower than anticipated on their first trading day in Frankfurt in what analysts called a “modest market debut.” Shares opened at 22.01 Euros apiece on Monday, giving the Siemens spin-off a market value of 16 billion Euros – less than the previously estimated 22 billion Euros.

The spin-off Siemens Energy has decided to locate is corporate headquarters in Berlin, where the mother company was founded in 1847. CEO Christian Bruch was quick to point out the choice of Berlin will not distract from the important functions of other locations across Germany – notably Mühlheim and Erlangen.

Investment in U.S. generating capacity is dominated by gas power units due to its cheap capacity costs. Though construction costs for solar PV more than halved to $1,848 and costs for onshore wind fell to $1,382, both lose out on gas-fired units which cost just $837 per capacity added.

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News in Brief

Mitsubishi produces methanol in Trinidad

Jan 20 – Mitsubishi Gas Chemical Company has launched commercial operations of a methanol and dimethyl ether plant in Trinidad and Tobago. The plant has an annual production capacity of one million tons of methanol and 20,000 tons of dimethyl ether, which can be used as an alternative fuel for cars and power generation.

First 8-cylinder B36:45 engine delivered

Jan 19 – Rolls-Royce has delivered the first 8-cylinder variant of its Bergen B36:45 gas engine to a tomato producer in Belgium. The medium speed genset is planned for delivery this spring and will drive an onsite power plant that generates 4700 kW electricity and 5520 kW heat. The new engine offers a 20% increase in power per cylinder and will replace an existing Bergen 12-cylinder B35:40 genset.

Moody’s upgrades Enel to Baa1

Jan 18 – Moody’s Investors Service has upgraded Enel’s long-term rating to Baa1, with a stable outlook. The upgrade reflects Enel’s progress in reducing its risk profile, analysts said, pointing at the Italian utilities ongoing investment in networks and renewables, growing geographical diversification and focus on centralised financing.

GE sues Siemens Energy

Jan 15 – General Electric has sued its German rival Siemens Energy over the alleged use of stolen trade secrets to win gas turbine contracts worth several billion dollars. GE told the US district court in Virginia that Siemens received the secret information from a Dominion Energy employee.

Orbital Energy launches Eclipse

Jan 14 – Nasdaq-listed Orbital Energy Group has launched a new subsidiary, Eclipse Foundation, a drilled shaft construction company. The new company specialises in providing services for power transmission and substations, communication tower and a disaster restoration through emergency power.

S’Korean coal and LNG imports slide

Jan 13 – South Korea’s imports of thermal coal and LNG have fallen 12% and 11%, respectively, as the government cracks down on fossil fuel usage to curb air pollution. Customs data shows that coal imports amounted to 10.2 million tons in December, down 1.4 million tons from the same month last year but up from November’s imports of 9.5 million tons.

SMC builds 1.7 GW CCGT in Batangas

Jan 13 – Excellent Energy Resources, part of SMC Global Power Holdings, is building a 1,700 MW combined cycle gas power plant in Barangay Dela Paz and Ilijan in Batangas City with investments of about 67.863 billion Philippine Pesos ($1.41bn). The project is estimated to be completed in 36 to 40 months.

UK’s National Grid issues supply warning

Jan 12 – Natural gas prices in the UK surged as National Grid issued warnings on supply deficit as LNG cargoes are being diverted to North Asia. Prices at the British NBP gas trading hub soared to the equivalent of $8.95 per MMBtu, while the JKM price for North Asian spot LNG cargoes for February 2021 was last at $19.700 per MMBt.

Fortistar invests in hydrogen

Jan 11 – Fortistar, a privately-held fund, has joined an equity investment of up to $157 million in hydrogen producer BayoTech. Cottonwood Technology Funds and the New Mexico State Investment Council also participated in the latest financing round. BayoTech’s systems produce local hydrogen close to the application, serving end users in the industrial gas and petrochemical segment as well as those who use of hydrogen to power fuel cells.

Ashtead appoints new CFO

Jan 5 - Ashtead Technology has appointed a chief financial officer (CFO) and five managers for newly created roles across its international team. The appointments are meant to cement the company’s position in the offshore energy market, including offshore wind and decommissioning of thermal power plants

NFE secures LNG for Puerto Rico, Mexico and Nicaragua

Dec 23 – New Fortress Energy (NFE) has agreed to purchase Henry-Hub-indexed LNG for its integrated gas and power businesses in Puerto Rico, Mexico and Nicaragua. The New York-based project developer said it now has covered 80% of its expected needs throughout Latin America, thus reducing its need for spot purchases and its exposure to changes in the market price for LNG.

China and Korea mandate coal-to-gas switch

Dec 22 – The Chinese government has launched a coal-to-gas boiler switching programme, targeting 7.1 million homes, which makes gas demand more weather-sensitive this winter. Similarly, South Korea mandated the closure of 15 coal-fired plants since the start of December in an effort to reduce air pollution. Analysts expect this will accelerate the drawdown of LNG terminal inventories going into Q1-2021.

GE repowers oil field in Brazil

Dec 21 – GE Power Conversion has been awarded a contract by Sulzer Pumps UK to supply motors for four water injection pumps of a Floating Production Storage and Offloading (FPSO) vessel. The 8,000 kW, two pole motors will run at 3,600 rpm with a limitation of the starting current at 300%, enabling the oil and gas field operator to optimise the generator which supplies electricity on the FPSO.

VELO distributes Sapphire Metal 3D-Printers in the US

Dec 18 – California-based VELO3D has formed a distribution partnership with GoEngineer for Flow pre-print software, Sapphire metal AM printer, and Assure quality assurance and controls. GoEngineer will be VELO’s only distributor in the United States.

Indian electric boats to achieve zero emissions

Dec 17 – Cochin Shipyard, India’s largest shipbuilder, has asked Siemens Energy to equip India’s first fleet of 23 boats with electric propulsion drive train, integrated with batteries and vessel automation. Combining the electric propulsion drive trains, energy storage, and automation systems is expected to significantly reduce fuel consumption.

Terna BESS auction six times oversubscribed

Dec 16 – A pilot auction, held by the Italian TSO Terna, for battery energy storage systems (BESS) to provide reserve grid services has been six times oversubscribed. The auction was held with an expectation that around 230 MW would be on offer, but Terna received 1,327 MW worth of bids and eventually awarded contracts for 249.9 MW.

New £150m link to UK’s Easington terminal

Dec 15 – National Grid has completed a gas pipeline under the River Humber, build in 18 months and at a cost £150 million, as new link to the import terminal at Easington. Following commissioning, the pipeline is now operational and can now transport between 70 to 100 million cubic metres - around a quarter of Britain's gas needs.

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