Asian LNG prices fall below $2 per mmBtu as spot offers flood market

[Tom Kirkman + 8,860]

It's an LNG bloodbath, losing money Hannover Fist.  This looming disaster scenario is uncharted territory for LNG.

GLOBAL LNG-Asian LNG prices fall below $2 per mmBtu as spot offers flood market

* Price falls below $2/mmBtu

* Around 20 U.S. cargoes cancelled for June loading

* China received first U.S. LNG in 13 months

(Reuters) - Asian spot prices for liquefied natural gas (LNG) tumbled this as week as sellers around the world flooded the market with cargo offers, while demand remained subdued amid coronavirus-related lockdowns.

The average LNG price for June delivery into northeast Asia LNG-AS was estimated at around $1.95 per million British thermal units (mmBtu) on Friday, $0.35 per mmBtu lower than the estimate last week.

A wave of supply tenders has hit the market as a number of buyers are rescheduling long-term deliveries, leaving suppliers with excess cargoes, an LNG trader said.

“There’s some flexibility in long-term contracts. If the long-term buyer nominates (volumes) down, then the surplus cargoes are offered on the spot market,” another industry source said.  ...

 

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Just a reminder, Petronas FLNG1 break even cost is around USD $10 / mmBtu, and Shell Prelude in the same range, $8 to $12 / mmBtu.  Old article:

https://www.rigzone.com/news/oil_gas/a/139963/Industry_Counts_on_FLNG_to_Beat_the_Odds_and_Live_Up_to_Promise/?all=HG2

... Meanwhile, PETRONAS is looking at designing and building one FLNG for redeployments across multiple stranded fields off Malaysia. Without commenting directly on the project cost, PETRONAS Senior Vice President Colin Wong told reporters that the cost of the first unit, the PFLNG-1 to be installed in the Kanowit field, works out to within $10 per MMBtu.

That is slightly above the $8.16 per MMBtu breakeven price for Prelude FLNG projected by a Massachusetts Institute of Technology paper, which however indicated that Prelude FLNG’s breakeven level could exceed $12 per MMBtu if production of lean natural gas is included in the calculation.  ...

 

[NickW + 2,714]

At these prices I doubt the Australian LNG industry will ever make a cent given the cost overheads- basic process operators on >$200,000 for a 26 week working year. 

[0R0 + 6,251]

They should be able to do far better than that these days. LNG liquefaction is quite a bit cheaper than it was just a few years ago, let alone 5. 

[dukeNukem + 80]

20 hours ago, NickW said:

At these prices I doubt the Australian LNG industry will ever make a cent given the cost overheads- basic process operators on >$200,000 for a 26 week working year. 

Santos barely survived through first downturn (2015-2016)...

Do you have any info about break - even of Australian LNG projects?

I think most of these projects got FIDs in 2010-2013 (high oil/gas spot prices) therefore their break even should be quite high.

 

Edited April 28, 2020 by dukeNukem

[NickW + 2,714]

1 hour ago, dukeNukem said:

Santos barely survived through first downturn (2015-2016)...

Do you have any info about break - even of Australian LNG projects?

If think, most of these projects got FIDs in 2010-2013 (high oil/gas spot prices) therefore their break even should be quite high.

 

The Conoco / ENI plant at Darwin was built before the resource super boom. The rest were built on silly money. 

 

I worked in Oz - 2012-2016 in both mining and O&G. (My background is health / environmental) and a major issue was both industries failed to control relatively small - medium scale costs because 'they were not worth the effort'. The lost opportunities across the sector are countless. 

One example I found at a very large operator (mining) . 

Vehicle wash systems used recycled water (of which there were a number of health issues) however the systems massively over produced clean water and when the storage tanks were full they overflowed into the dirty water lagoon. The systems only needed to be run about 2-3 hours a day.

Cost across the estate was approx. $50,000 in wasted electricity plus the fact the equipment would wear out quicker. Simple resolution - time switches or float switches on the storage tanks. An electrician I worked with reckoned the cost, even by inflated Pilbara standards was about $250 per system including labour. So basically $3000 spent to save $50,000 a year in electric costs. Jeez how many business investments give you that sort of return????

No one interested

I presented the cost bottom line

I presented the environmental* bottom line (approx. 94 tonnes of Carbon per annum)

I presented the energy security bottom line as we suffered frequent brown / black outs and the systems could be run off peak. Ok small contribution but every little helps. 

* in other areas the company raving about its environmental commitment 24/7

 

OIl- NORMS.

A company I worked for were sitting on a $500,000 a year liability. I worked out a disposal plan by testing and isolating barrels of scale under the limit and then agreed to buy a disposal cell at a local tip. Total cost $120,000 one off which would have reduced the liability by about $170,000 a year. As far as I am aware the company are still sitting on that $500K liability. 

 

Edited April 28, 2020 by NickW

[Coffeeguyzz + 454]

Prelude has been offline for 3 months now with issues that - at the outset,  anyway - were safety related.

All the Aussie LNG operations are very vulnerable, both now and ongoing, due to their very high cost structure.

The Malaysian, Indonesian, African, heck ... even the Algerian and Egyptian piped products ... are on very shaky grounds right now.

The Al Thani regime is pressing hard to maintain - even extend - LNG contract pricing to Pakistan, India, et al tied to oil indices.

Prior to the recent crash, Qatar was getting $7+/mmbtu.

As major social and political forces rely upon these revenue streams for their very viability, things could get mahtee innerestin' right shortly.

 

The International Gas Union just released its 2020 LNG report.

This 68 page pdf is so full of data that it needs to be studied rather than simply read. Outstanding piece of work.

 

Somewhat surprisingly, US Appalachian Basin top operators might benefit from current conditions as their costs to produce are plummeting while their per well output continues to rise. (3 pairs of Chesapeake wells have produced over 47 Billion cubic feet - combined - in under 6 months' production. These are simply staggering  numbers).

Crazy, crazy times in which we are living ... and it ain't over yet.

[Keith boyd + 178]

13 hours ago, NickW said:

The Conoco / ENI plant at Darwin was built before the resource super boom. The rest were built on silly money. 

 

I worked in Oz - 2012-2016 in both mining and O&G. (My background is health / environmental) and a major issue was both industries failed to control relatively small - medium scale costs because 'they were not worth the effort'. The lost opportunities across the sector are countless. 

One example I found at a very large operator (mining) . 

Vehicle wash systems used recycled water (of which there were a number of health issues) however the systems massively over produced clean water and when the storage tanks were full they overflowed into the dirty water lagoon. The systems only needed to be run about 2-3 hours a day.

Cost across the estate was approx. $50,000 in wasted electricity plus the fact the equipment would wear out quicker. Simple resolution - time switches or float switches on the storage tanks. An electrician I worked with reckoned the cost, even by inflated Pilbara standards was about $250 per system including labour. So basically $3000 spent to save $50,000 a year in electric costs. Jeez how many business investments give you that sort of return????

No one interested

I presented the cost bottom line

I presented the environmental* bottom line (approx. 94 tonnes of Carbon per annum)

I presented the energy security bottom line as we suffered frequent brown / black outs and the systems could be run off peak. Ok small contribution but every little helps. 

* in other areas the company raving about its environmental commitment 24/7

 

OIl- NORMS.

A company I worked for were sitting on a $500,000 a year liability. I worked out a disposal plan by testing and isolating barrels of scale under the limit and then agreed to buy a disposal cell at a local tip. Total cost $120,000 one off which would have reduced the liability by about $170,000 a year. As far as I am aware the company are still sitting on that $500K liability. 

 

I have worked for lots of companies like this. They spend a million dollars to save a thousand dollars. They could care less about multi million dollar inefficiencies but they bust your balls if you ask for 2 pairs of gloves in the same day, and they are out of other needed PPE half the time forcing you to re use filthy gross stuff and no matter how often you remind them they cant seem to ever order basic supplies. But meanwhile as they cant provide you with safety glasses there is machinery idling off thousands of dollars of fuel a day like light plants left on 24/7 because no one can be bothered to turn them off in the day. Or another example we were pumping out a lagoon and the main pump was barely able to pump uphill with barely a trickle coming out. They had a boost pump but couldn't be bothered to hook it up because of a missing fitting and the supervisor wouldn't approve buying one. 40 days of this later with a full crew day shift and night shift as the lagoon dropped in water level the pump on full RPM hit the dead zone where it couldn't pump no more on it's own. Boost pump still sitting on top of the hill not hooked up because of $150 fitting. Company up to a quarter million dollars in wages and fuel now and far behind schedule. They send me up there to see if I can find the problem. Yep, dog fuckers milking hours, problem identified. Fitting purchase approved, resistance and grumbles from crew dont want to break the line. Grudgingly install boost pump. Lagoon is empty 3 days later. 

I tell the owner Ur saving so much money hiring riff raff and paying them less that's for sure. 

 

[Coffeeguyzz + 454]

The single graphic on today's (April 29) 'Today In Energy' piece from the EIA is worth the 1 minute's time to pull it up.

The convergence of JKM (Asia), NBP (UK), and Henry Hub at the ~$2/mmbtu price point is absolutely astounding.

Going forward, ALL exporters of natty will face crushing economic forces as they are competing amidst ferociously emerging technologies/supplies.

A single example being Prelude ... ~$12/$14 billion cost to produce ~3 1/2 million tonnes per year (MTPA).

Virtually all the new US LNG plants are projected to cost between one half to three quarter billion dollars per one MTPA. 

The Curtis Island plants also carry high construction costs along with the relatively expensive Coal Seam Gas (comparable to US CBM) providing the feedstock.

Globally, the low cost producers should assume a significant commercial advantage as these markets experience unprecedented upheaval.

[BenFranklin'sSpectacles + 762]

On 4/28/2020 at 3:40 AM, NickW said:

The Conoco / ENI plant at Darwin was built before the resource super boom. The rest were built on silly money. 

 

I worked in Oz - 2012-2016 in both mining and O&G. (My background is health / environmental) and a major issue was both industries failed to control relatively small - medium scale costs because 'they were not worth the effort'. The lost opportunities across the sector are countless. 

One example I found at a very large operator (mining) . 

Vehicle wash systems used recycled water (of which there were a number of health issues) however the systems massively over produced clean water and when the storage tanks were full they overflowed into the dirty water lagoon. The systems only needed to be run about 2-3 hours a day.

Cost across the estate was approx. $50,000 in wasted electricity plus the fact the equipment would wear out quicker. Simple resolution - time switches or float switches on the storage tanks. An electrician I worked with reckoned the cost, even by inflated Pilbara standards was about $250 per system including labour. So basically $3000 spent to save $50,000 a year in electric costs. Jeez how many business investments give you that sort of return????

No one interested

I presented the cost bottom line

I presented the environmental* bottom line (approx. 94 tonnes of Carbon per annum)

I presented the energy security bottom line as we suffered frequent brown / black outs and the systems could be run off peak. Ok small contribution but every little helps. 

* in other areas the company raving about its environmental commitment 24/7

 

OIl- NORMS.

A company I worked for were sitting on a $500,000 a year liability. I worked out a disposal plan by testing and isolating barrels of scale under the limit and then agreed to buy a disposal cell at a local tip. Total cost $120,000 one off which would have reduced the liability by about $170,000 a year. As far as I am aware the company are still sitting on that $500K liability. 

 

I've heard the oil industry operated at this level of inefficiency. Makes me wonder what the breakeven price of shale oil would be if they operated like a lean manufacturing firm.

[Tomasz + 1,608]

Well todays spot price in Europe according to TTF

https://rynek-gazu.cire.pl/st,43,510,me,0,0,0,0,0,ttf---day--ahead.html

12  euro per MWh - 4,22 $ per mbbtu

European market is now in much better shape than half year ago.

A month ago it was about 8-9 euro per MWh. Six months ago about 6 euro per MWh.

Edited October 4, 2020 by Tomasz

[Tomasz + 1,608]

So lets summarize

April 2020- JKMC spot price below 2 $ per mbbtu

January 2021 JKMC spot price about 15 $ per mbbtu

5th January cargo contract for February - 20,8 $ per mbbtu

 

So surely LNG is a very flexible market 😉

[Coffeeguyzz + 454]

There are, reportedly, no LNG carriers available for charter in the coming months.

If true, it will have an interesting impact on the LNG market.

Supposedly, lifting cancelations are expected at US LNG plants due to no transport availability.