Gas industry sees strong demand and LNG shortfall post-COVID by mid-decade

Many in the industry said in the long run the fuel will be needed to back up wind and solar power, replace coal-fired power, and produce hydrogen globally. (Shutterstock)
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Updated 25 June 2020

Gas industry sees strong demand and LNG shortfall post-COVID by mid-decade

  • Long term gas demand seen intact in energy transition

MELBOURNE: The gas industry sees no change to the strong long-run outlook for demand following the COVID-19 crisis, but expects a supply shortfall in the next four years as the lockdowns and oil price collapse lead to delays on gas projects.

Gas producers, buyers, liquefied natural gas (LNG) developers and a major contractor said in the long run the fuel will be needed to back up wind and solar power, replace coal-fired power, and produce hydrogen globally.

“We see the need for substantial investment in new projects and new liquefaction,” Exxon Mobil Corp’s Australia chairman Nathan Fay said at Credit Suisse’s annual Australian Energy Conference.

However, lingering uncertainty following a crash in LNG prices to record lows this year below $2 per million British thermal units (mmBtu) means only the lowest cost LNG projects will go ahead, major producers said.

More than 140 million tons of projects worldwide have been deferred. In Australia and Papua New Guinea alone, five are on hold — Exxon’s expansion of PNG LNG twinned with Total SA’s Papua LNG, Woodside Petroleum’s Scarborough and Browse, and Santos Ltd’s Barossa.

“It’s everything to play for — so a very bullish outlook on gas,” said Martin Houston, vice chairman of US LNG developer Tellurian, which recently deferred a final investment decision on its US Driftwood LNG project to 2021.

Japan’s Chiyoda, a major contractor to LNG projects, said work has largely dried up and there would need to be stability in the market before developers move ahead with projects.

“To be perfectly honest, we don’t see any green shoots right now,” said Chiyoda Oceania’s president Andrew Tan.

Royal Dutch Shell sees short term concerns weighing on everyone’s decisions about new projects. Shell Australia chair Tony Nunan said: “I’m sure all companies, all operators or producers across the globe are going to be focused on that affordability question just because of the uncertainty they see in the macro markets.” 

Research firm Rystad Energy said with gas prices around the world still trading near $2 per mmBtu, LNG developers with all but the lowest costs will hold off on new projects.

“But that will again cause a shortfall for the LNG market four or five years down the road,” Rystad’s head of analysis, Per Magnus Nysveen, told the conference.


Iranian oil in perfect storm of storage shortage, low demand, sanctions

Updated 23 min 22 sec ago

Iranian oil in perfect storm of storage shortage, low demand, sanctions

  • Coronavirus, US economic action sees inventories reach bursting point

LONDON: Iranian oil production has reached its lowest point in almost four decades, according to industry experts, with the country’s storage facilities fast approaching full capacity.

The news comes amid a dip in Iran’s oil exports due to a crash in global demand, and in a period when its refineries have been hampered as a result of the coronavirus outbreak.

With over 11,000 confirmed fatalities, Iran has suffered the worst coronavirus outbreak in the Middle East, affecting all areas of industry. 

This has created a perfect storm for the country’s vital oil sector, with what little selling ability it has further disrupted by sanctions imposed by the US in 2018 following Washington’s withdrawal from the Iran nuclear deal.

Iran’s total liquid production dropped from 3.1 million barrels per day (bpd) in March this year to 3 million bpd in June, according to FGE Energy, which predicts that the figure will drop by an additional 100,000 bpd in July.

Crude production was as low as 1.9 million bpd in June, the lowest since the beginning of the Iran-Iraq war in 1981.

Exports also fell, with estimates varying depending on source — 100,000 bpd in May according to market intelligence firm Kpler, and around 210,000 bpd according to FGE — well under 10 percent of the 2.5 million bpd Iran exported in April 2018.

Iran’s onshore crude stocks, meanwhile, hit 63 million barrels in June, having been just 15 million barrels in January, according to FGE.

Kpler said Iran averaged 66 million barrels in storage throughout June, meaning that around 85 percent of the country’s total onshore storage capacity was full.

“However, it will technically not be possible to fill tanks to 100 percent, given technical constraints at storage tanks and potential infrastructure bottlenecks,” Homayoun Falakshahi, a senior analyst at Kpler, told Reuters.

Offshore the story is much the same, with options running out fast. Iran has 54 crude oil tankers, according to valuations specialist VesselsValue, and is thought to be using around 30 ships, mainly supertankers with a maximum capacity of 2 million barrels of oil each, to store over 50 million barrels of crude and condensate.

“The exact number of Iranian vessels on floating storage is a bit of a black box as they have all turned off their AIS (tracking transponder) signals,” said a spokesman for shipping group NORDEN.

“Storage is expected to continue as we do not see these vessels being able to trade anytime soon.”

The Iranian-American Harvard analyst Dr. Majid Rafizadeh told Arab News: “Thanks to the re-imposition of sanctions against Tehran by the Trump administration, the regime seems to have suffered a significant loss of revenue.
“Iran’s oil revenues and exports have been steadily declining since President Trump pulled out of the Joint Comprehensive Plan of Action and adopted a policy of ‘maximum pressure.’

“Consequently, the flow of funds to the Iranian regime has been cut off, thwarting the Iranian leaders’ efforts to fund and sponsor Bashar Assad’s regime in Syria and various terror groups.”