The Top 10 Global Gas Stories of 2011 By Susan L. Sakmar, Adjunct Professor of Law, University of San Francisco School of Law, Independent Consultant, and Global Shale Gas Course Instructor, CWC School for Energy About the author Susan L. Sakmar This Top 10 list is admittedly subjective but was compiled with thought given to the stories throughout 2011 that may have significant impact on the global gas industry going forward. Whereas most Top 10 lists focus on all aspects of energy, this list only includes stories related to the global gas industry since, in the writer’s opinion, natural gas was THE story of 2011!
There’s no doubt that 2011 was quite a year for global gas markets and with the year now behind us, it seems fitting to reflect on the Top 10 Global Gas Stories of 2011 with a view to thinking ahead of the stories to watch for in 2012.
Japan’s Fukushima disaster soaks up excess LNG In 2011, LNG prices surged to a three-year high after Japan imported record amounts of LNG to replace lost nuclear power after the March 11, 2011 earthquake and tsunami led to the Fukushima Dai-Ichi nuclear disaster.
Japan imported record amounts of LNG to replace lost nuclear power
For a good summary, see Dinakar Sethuraman, “LNG Surges as Japan Vies With China, Exxon’s Shipments Grow,” Sep 19, 2011, Bloomberg, available at: http://www.bloomberg.com/news/2011-09-19/lng-price-boom-seen -as-japan-vies-with-china-while-exxon-s-shipments-grow.html
The 21st Century Could Be The Golden Age of Gas The 21st century could be the “Golden Age of Gas” according to a special report of the International Energy Agency (IEA) that was released on June 6, 2011 and titled “Are We Entering a Golden Age of Gas?” The report presents an illustrative “high gas scenario” - the Golden Age of Gas Scenario - which incorporates a combination of new factors that could support a more positive future outlook for gas. These include ample availability of gas (much of it unconventional), which lowers average gas prices, implementation by China of an ambitious policy for gas use, lower growth of nuclear power and more use of natural gas in road-transport. However, the report also strikes a cautious note on the climate benefits of such an expansion, noting that an increased share of gas in the global energy mix is far from enough on its own to put the world on a carbon emissions path consistent with a global temperature rise of no more than 2 degrees Celsius. The IEA’s Special Report “Are We Entering a Golden Age of Gas?” is available at: http://www.iea.org/weo/docs/weo2011/WEO2011_GoldenAgeofGasReport.pdf
continued....
The Top 10 Global Gas Stories of 2011 By Susan L. Sakmar, Adjunct Professor of Law, University of San Francisco School of Law, Independent Consultant, and Global Shale Gas Course Instructor, CWC School for Energy
The first US LNG Export project in over 40 years - Cheniere’s Sabine Pass Liquefaction - gains traction with DOE approval and two major contracts
Cheniere’s Sabine Pass Liquefaction project received authorisation from the DOE to export LNG to non-free trade agreement nations
On May 20, 2011 Cheniere’s Sabine Pass Liquefaction project received authorisation from the Department of Energy (DOE) to export LNG to non-free trade agreement nations (DOE Order No. 2961), which effectively allows Sabine Pass to export LNG to almost any country. However, the real boost to the project came in the 4th Quarter when Sabine Pass secured two foundation customers (BG Group and Gas Natural Aprovisionamientos, a subsidiary of Gas Natural Fenosa) to underpin the contract capacity target of 7.0 mtpa. With the two foundation contracts in place, Cheniere now plans to proceed towards making a final investment decision (FID) in order to start construction on the first two liquefaction trains in early 2012. Cheniere Partners has placed documentation pertaining to the Sabine Pass Liquefaction Project, including regulatory filings, supporting studies, and press releases, on its website at: http://www.cheniereenergypartners.com
Kenai LNG announces it will close With not just a “little irony,” while most North American import terminals are attempting to convert to exports, the US’s first and only export terminal, Kenai LNG, announced in February 2011 that it would close. Warren R. True, “Alaska LNG plant to close after 40 years,” Oil&Gas Journal, Feb. 10, 2011, available at: http://www.ogj.com/articles/2011/02/alaska-lng-plant-to.html
Today’s global LNG industry owes its beginning to the now 40 plus year relationship between Japan and Kenai, Alaska
The announced closure of Kenai LNG has some historical significance since today’s global LNG industry owes its beginning to the now 40 plus year relationship between Japan and Kenai, Alaska. The development of LNG technology coincided with the discovery of major natural gas discoveries in the Cook Inlet Area of Alaska in the late 1950s and early 1960s. The lack of local demand for the gas led Phillips Petroleum (now Conoco Phillips) and Marathon to consider international LNG projects as a means of securing a home for the newly discovered natural gas. At the time, Japan was beginning to consider LNG as a means to secure significant energy supplies to compensate for its almost total lack of indigenous energy resources. Phillips and Marathon drew up plans for the Kenai LNG project and in 1967, Phillips and Marathon signed an agreement with Tokyo Electric and Tokyo Gas to supply LNG to Japan and received authorisation from the US to export LNG to Japan. The first LNG tanker docked in Japan two years later, in November 1969, and marked the first LNG export from the Western Hemisphere and the first LNG imported into Asia.
continued....
The Top 10 Global Gas Stories of 2011 By Susan L. Sakmar, Adjunct Professor of Law, University of San Francisco School of Law, Independent Consultant, and Global Shale Gas Course Instructor, CWC School for Energy
At the time, the Kenai LNG plant was only the second LNG plant in the world and the project was the largest undertaking in Phillips’ history, completed in 1969 at a cost of $200 million. Kenai LNG also resulted in the development of significant LNG technology - namely the ConocoPhillips Optimized Cascade® process - which has been used on many LNG projects since.
Today, Japan is the largest importer of LNG in the world
Over the course of four decades, Kenai LNG would ship more than 1,300 LNG cargoes to Japan, successfully filling two 20-year contracts. Today, Japan is the largest importer of LNG in the world, and while in recent years, the tiny Kenai LNG terminal has supplied only a fraction of Japan’s LNG imports, there was a time when Kenai LNG was Japan’s ONLY supplier!
BHP Billiton gets off the side-lines and invests big in US shale On February 22, 2011, BHP announced the US$4.75 billion acquisition of all of Chesapeake Energy Corporation’s Fayetteville shale assets, marking BHP Billiton's entry into the US shale gas business and immediately making the company a major North American shale gas producer.
BHP announced the US$4.75 billion acquisition of all of Chesapeake Energy Corporation’s Fayetteville shale assets
BHP Billiton Press Release, “BHP Billiton Announces Acquisition Of Chesapeake Energy Corporation's Fayetteville USA, Shale Assets,” Feb. 22, 2011, available at: http://www.bhpbilliton.com/home/investors/news/Pages/Articles/BHP%20Billiton%20Announces%2 0Acquisition%20Of%20Chesapeake%20Energy%20Corporation's%20Fayetteville%20USA,%20Shale %20Assets.aspx
The world has a lot of shale gas! In April 2011, the US EIA released its study titled “World Shale Gas Resources: An Initial Assessment Of 14 Regions Outside The United States,” finding that the international shale gas resource is vast, with an estimated technically recoverable shale gas resource of 6,700 Tcf. The US EIA Study, “World Shale Gas Resources: An Initial Assessment Of 14 Regions Outside The United States”, is available at: http://www.eia.gov/analysis/studies/worldshalegas/pdf/fullreport.pdf
France bans hydraulic fracturing Although the world may have a lot of shale gas, with some countries such as Argentina, China and Poland eager to develop their resources, other countries have not embraced the shale gas revolution due to concerns about the environmental impact of shale gas development. In July 2011, France became the first country to ban hydraulic fracturing, effectively halting shale gas development in that country. Tara Patel, “France Vote Outlaws ‘Fracking’ Shale for Natural Gas, Oil Extraction,” Bloomberg, July 1, 2011, available at: http://www.bloomberg.com/news/2011-07-01/france-vote-outlaws -fracking-shale-for-natural-gas-oil-extraction.html
continued....
The Top 10 Global Gas Stories of 2011 By Susan L. Sakmar, Adjunct Professor of Law, University of San Francisco School of Law, Independent Consultant, and Global Shale Gas Course Instructor, CWC School for Energy
Australia approves carbon tax - the first among major western nations In November 2011, Australia's plan to tax carbon emissions cleared its final political hurdle with Prime Minister Julia Gillard describing the legislation passed by Australia's Senate as “historic” after years campaigning for what is hoped will create a new platform for companies to trade carbon credits and cut pollution. Enda Curran and Ray Brindal, “Australia's Carbon Tax Clears Final Hurdle,” Wall Street Journal, Nov. 8, 2011 available at: http://online.wsj.com/article/SB10001424052970204554204577025153789673004.html
Shell takes FID on Prelude - the world’s first FLNG facility Shell’s FLNG facility will be the largest floating offshore facility in the world
On May 20, 2011, Shell announced it had taken the final investment decision (FID) on the Prelude Floating Liquefied Natural Gas (FLNG) Project in Australia and build the world’s first FLNG facility. From bow to stern, Shell’s FLNG facility will be 488 metres long, and will be the largest floating offshore facility in the world - longer than four soccer fields laid end to end. Shell Press Release, “Shell decides to move forward with groundbreaking Floating LNG” May 20, 2011 available at: http://www.shell.com/home/content/investor/news_and_library/2011_media_releases/fid_flng_2005 2011.html
Shell’s Pearl GTL comes on-line representing a breakthrough in GTL technology On June 13, 2011, Qatar Petroleum and Shell announced that the Pearl gas-to-liquids (GTL) plant, located in Ras Laffan Industrial City in the State of Qatar, sold its first commercial shipment of GTL Gasoil. The sale marked the start of production of GTL products with the plant is expected to reach full production capacity by the middle of 2012. The Pearl GTL project is the largest energy project ever launched in the State of Qatar. Shell Press Release, “First cargo of Pearl GTL products ship from Qatar,” June 13, 2011 available at: http://www.shell.com/home/content/media/news_and_media_releases/2011/first_cargo_pearl_1306 2011.html
www.cwcschool.com
BAC
AC CR EDITED