February 2018

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CONTENTS FEBRUARY 2018 03 Comment 47 A compressor revolution Steve Lindsey, Lontra, UK, explains why clean sheet air compressor technology 05 LNG news will be the next revolution in the LNG industry. 49 The compressor conundrum Jason Castillo and James Simpson, Kobelco Compressors America Inc., USA, 12 To be or not to be... an LNG evaluate compressor options for small scale LNG projects. world leader? Bernadette Cullinane and Nye Hill, Deloitte, Australia, provide an 55 Is there a way? update on the Australian LNG industry. Peter Hansen, Dayton Land Company, USA, evaluates the future of North American West Coast LNG exports. 59 Full steam ahead Diana Sorace, FortisBC, Canada, reviews a first in LNG marine bunkering technology and global exports. 63 Seting the bar high Marsh Energy Global Risk Engineering, UAE, discuss LNG benchmarking and strategies for improving risk quality in the industry. 67 A magic bullet? Brian Bradshaw, Sidley Austin LLP, discusses the benefits of the use of common infrastructure in small scale LNG. 12 70 Simulating the future Michael Schwartz, Eka Software, USA, describes how simulation technology enables organisations to explore and test multiple scenarios to foresee and act 18 A history of pumps in LNG on challenges. Enver Karakas and Eric Wonhof, Ebara International Corporation, USA, review the evolving history of submerged electrical motor pumps in the 75 Resolving the reliability challenge LNG industry. Børge Nogva, Høglund, Norway, discusses why automation specialists are branching into fuel gas supply systems to increase the reliability of an LNG fleet. 25 Putting vibration data where it belongs 80 15 facts on... Australia Steve Sabin and Randy Chitwood, Brüel & Kjær Vibro, USA, describe a method that allows complete vibration data to be placed in a process historian, and the benefits of this data integration to machinery engineers. ON THIS MONTH’S COVER 31 SSRU pump configurations Maksym Kulitsa, Independent FSRU consultant, and David Wood, DWA Energy Limited, UK, explain how improved regasification pump integration reduces boil-off gas during FSRU operations. A 9-stage submersible 37 When safety systems add risk LNG send-out Ahmed Adel El Shaer, Mohamed Mostafa and Shreef Elaraby, pump on test at CCC, Saudi Arabia, emphasise the critical importance of safety Ebara Cryodynamics’ in an industry motivated by growth and cost reductions. cryogenic test stand in Sparks, Nevada, 42 Safeguarding the future USA. This pump is of LNG now in operation at Friedhelm Best, HIMA, Singapore, outlines the best a South Korean LNG ways to protect LNG operations in the modern terminal. age.

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LNG_NEA-Terragni-2018-01_rev1.indd 1 20.12.17 15:44 JOSEPH GREEN COMMENT EDITOR n 14 February, every year, chocolates, flowers, and other gifts are exchanged between loved ones, all in the name of St. Valentine. with the weather, before again resuming its course towards Boston. O Much of the history of Valentine’s Day, and the story of its The route generated intense speculation among energy analysts. patron saint, is steeped in mystery. The Catholic church recognises at least The US$27 billion Yamal gas plant opened in December, three saints named Valentine or Valentinus, all of whom were martyred. and some of its first output will be used to heat homes and Some stories suggest that Valentine may have been killed for attempting generate electricity in the Boston area. Novatek is the majority to help Christians escape Roman prisons. Others insist that Valentine was owner of the plant, whose shareholders include an ally of Putin, a priest who performed marriages against the will of Emperor Claudius II, Gennady Timchenko. The US Treasury initially imposed sanctions that who decided single men made better soldiers. My preference is for the prohibited US companies from providing new financing to Novatek story of an imprisoned Valentine, falling in love with a girl, and sending and another Russian energy company in 2014. the first ‘valentine’ greeting. Before his death, it is alleged that he wrote This bizarre and controversial delivery reflects the realities of her a letter signed ‘from your Valentine,’ an expression still in use today. the globalising natural gas market and stems from the growth of What we do know for sure is that February has long been celebrated LNG trade, opposed to traditional natural gas exports that rely on as a month of romance, and that St. Valentine’s Day, as we know it today, long-term contracts. contains traces of both Christian and Roman tradition. With this globalised natural gas market, LNG supplies can In slightly less romantic fashion to the martyred saints who increasingly be shipped from one part of the world to another to gave up their life for love or kindness, I am deliberating over which handle fluctuations in demand. In this instance, the cold temperatures Valentine’s Day supermarket meal deal to select this year. The Waitrose that hit the East coast of the US increased natural gas demand to offering is the priciest of the lot but does offer a box of chocolates so record levels, and the Russian gas was on hand to help. It is a real that may well swing it this year. possibility that Russian gas could once again land on US shores in the It is still unclear whether Trump and Putin will be exchanging cards future. Maybe Trump and Putin are celebrating Valentine’s Day after all. this Valentine’s Day. In this month’s issue we are showcasing features on pumps, For months, the US government has been promising to bring about turbomachinery, compressors, pipelines, and more. This month’s a new era of energy dominance1, largely based on booming oil and regional report is provided by Deloitte and focuses on Australia. natural gas production. It was therefore surprising to learn that the US Bernadette Cullinane and Nye Hill provide an update on the industry will continue importing LNG this winter. It was an even greater surprise and detail how Australia is facing up to increased competition from to learn that the US is importing its first Russian LNG produced by overseas. Yamal LNG, a plant subject to US financial sanctions. I hope you enjoy this issue of LNG Industry and if you picked The LNG cargo, carried by the French tanker Gaselys, finally arrived up a copy at either the Australasian Oil & Gas Conference or the in Boston in late January, after various delays and a particularly unusual US LNG Summit, be sure to visit www.lngindustry.com to subscribe course. and receive the latest updates from the industry. First Gaselys stopped at the tip of Spain, then passed through the 1. https://www.reuters.com/article/us-grigas-davos-gas- Canary Islands. On 19 January, after traveling halfway across the Atlantic, commentary/commentary-a-tale-of-a-tanker-russian-gas- Gaselys made a U-turn towards Spain in what was put down to problems sanctions-and-energy-politics-idUSKBN1FC2WK

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France China Ince & Co France advises LNG carrier CESI Wenzhou EDF on the chartering of a delivered for SINOPEC LNG LNG carrier with NYK transport project

DF LNG Shipping, a subsidiary of EDF group, signed itsui O.S.K. Lines, Ltd. has announced that the LNG Ea long term charter contract with the Japanese Mcarrier CESI Wenzhou, which was ordered by the joint shipowner NYK on 26 January 2018. The vessel, with a venture of China COSCO Shipping Corporation Limited (CCSC) capacity of 174 000 billion m3, will be built by the shipyard and China Petroleum & Chemical Corporation (SINOPEC), was Hyundai Heavy Industries with delivery expected by spring delivered to the Hudong-Zhonghua Shipbuilding (Group) Co., 2020. Ltd. (Hudong) on 31 January 2018. Ince & Co supported EDF LNG Shipping in the The CESI Wenzhou is the fifth vessel to serve negotiation and drafting of the time charter contract the LNG transport project for SINOPEC announced in providing for an initial charter period of seven years which April 2013, and will sail under a long term charter contract can be further extended to 20 years. to transport LNG that SINOPEC will purchase from the This major operation has been made possible through Australia Pacific LNG Project. the set-up of a dedicated team composed of legal experts A total of six LNG carriers have been built at from EDF group and lawyers from Ince & Co, dually Hudong for the transport project and this follows the qualified in England and France. The close cooperation of ExxonMobil LNG project, announced in March 2010, for this team made the operation a success. which four newbuilding LNG carriers were delivered Alexandre Besnard and Aymeric de Tapol, both of them from Hudong by April, 2016. Cooperating with CCSC, MOL partners at Ince & Co France and in charge of the English has assigned engineers to Hudong since 2013 to ensure law practice of the firm, commented: the safe construction of high-quality LNG carriers, and “Our team is glad to have supported EDF group on this organised a multi-national shipbuilding supervision team, project which demonstrates the dynamism of the French mainly Japanese and Chinese, with nearly 50 members at its energy company in the emerging LNG market and the unique peak. expertise of our firm on chartering and shipbuilding projects.” Starting with the delivery of the first vessel in For this operation, Ince & Co’s French team October 2016, the project has proceeded smoothly so far. was composed of partners Alexandre Besnard and The shipbuilding supervision team and business division are Aymeric de Tapol, and associates Stephen Love and united in ensuring the success of this project, while drawing Audran de Carné. upon the relationship it has developed with its Chinese NYK was advised by Watson Farley & Williams. partners.

USA Andeavor acquires Kenai LNG facility in Alaska from ConocoPhillips

ndependent US refiner Andeavor announced on Cook Inlet region and will allow ConocoPhillips Alaska to direct i2 February that it had acquired a LNG plant in Kenai, its full attention to operations in North Slope region where it is Alaska, from ConocoPhillips. investing in new projects. ConocoPhillips said that the sale of the facility had closed The facility, which entered service in 1969, last exported and the operation had been transferred to Andeavor on LNG in 2015. It has the capacity to liquefy 0.2 billion ft3 per day 31 January. of gas. Sale of the plant completed the company’s exit from the Andeavor also operates a 62 700 bpd refinery in Kenai.

February 2018 5 LNGNEWS

The Netherlands Russia Van Oord launches first Eilbeck Cranes supplies LNG powered vessel explosion proof jib cranes to Yamal LNG he Werkendam, Van Oord’s new crane vessel, has Tbeen successfully launched in the Waalhaven amal LNG reached a major milestone with the in Rotterdam, the Netherlands. It is the first LNG YDecember announcement of the first cargo of powered vessel in the Van Oord fleet. LNG ready to leave Sabetta. The vessels will contribute to the further The nameplate capacity of the first train now modernisation of Van Oord’s fleet and therefore in production is 5.5 million tpy with a further mark the start of a new generation of dredging two trains expected to be in production over vessels. 2018/2019. Jaap de Jong, Staff Director of the Ship Eilbeck Cranes has supplied a total of eight Management Department at Van Oord, explains: explosion proof jib cranes each designed to cope “Energy efficiency is one of the top items on with the extreme conditions faced on such a plant our sustainability agenda. To reduce our carbon operating inside the Arctic Circle. footprint, we are researching the use of alternative With all cranes now fully installed, fuels, such as LNG and biofuel. With this commissioned and load tested they are now investment, we will be gaining experience of LNG operational to carry out their designated lifting powered vessels and the related benefits.” tasks as required. The Australian made heavy-duty The delivery of the vessel and its christening cranes underwent an exhaustive design process to are scheduled for April 2018. It will generally be ensure that not only the cranes’ structure but all deployed to Netherlands-based projects executed components were able to operate in the extreme by subsidiary Paans Van Oord. weather conditions.

News Highlights

XX March price eases but bitter cold arrests decline XX Next generation LNG terminals set to get smaller to offer greater flexibility XX Egypt to fast-track Zohr gas output

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170713_LabyGI_210x297_RA_RZ.indd 1 13.07.2017 10:27:31 LNGNEWS Sweden Australia Volvo Trucks sees potential Origin Energy releases Q4 for 10% of Swedish sales in 2017 results LNG trucks

rigin’s production for the first half of the 2018 financial ars Martensson, director of environment and innovation Oyear was 172.6 petajoules equivalent (PJe), or 12% higher Lat Volvo Trucks, announced at a gas conference in Vienna than the prior comparable period, driven by a 15% increase in on 31 January that he is upbeat about the potential of using production from Australia Pacific LNG with a full six months’ LNG for long-range trucks. contribution from Train 2. “We have made an estimate for the Swedish market – it Sales revenue for the half year to 31 December 2017 is a good indication of the potential that we see – for increased by AUS$391 million to AUS$1365 million, an Sweden we have stated that ... within the next (two to improvement of 40% compared to the same period in 2016. three) years we believe that about 10 percent of our sales This increase is a result of both increased LNG sales and higher will be LNG trucks”. average prices realised across all products. “When I say 10 percent for the Swedish market, then we Q4 2017 production of 83.5 PJe was 5.6 PJe lower than say for Sweden we speak about several hundred trucks ... the previous quarter, reflecting lower customer demand and If we would take that as an indication of Europe, then we planned maintenance at the Lattice Energy operations in speak of many thousand trucks in Europe using LNG.” Otway. “In some countries where LNG trucks exist already Total Australia Pacific LNG production for the quarter was today and where there’s a good infrastructure like in Spain, stable at 63.4 PJe. Revenue for the December quarter was (Britain), the Netherlands, of course there the potential is AUS$686 million, an increase of AUS$8 million compared to higher than other countries ... like Germany where we’re the previous quarter, with lower volumes from Otway more starting from another level, so there we have bigger than offset by increased LNG sales by Australia Pacific LNG. challenges in order to reach 10%.” Origin CEO, Frank Calabria, said: “Australia Pacific LNG “We have customers who are interested in replacing all continued to perform well, delivering reliable upstream and their existing diesel vehicles with LNG and those customers downstream production in Q4 2017. This is demonstrated by a in some cases are operating several hundred trucks. So, it is total of 35 LNG cargoes loaded and shipped from Curtis Island, definitely big volumes we are speaking about.” with the milestone of our 200th LNG cargo successfully loaded “The price is set country by country ... It will be on 1 January 2018.” more expensive but with 30 – 40% lower cost for energy During Q1 2018 Australia Pacific LNG expects to complete compared with diesel the pay-back will be good for a planned maintenance programme with one train outage for customers and by pay-back we speak about maybe two to approximately 16 days. three years.”

20 February 2018 14 - 16 March 2018 04 - 05 June 2018 Small-Scale LNG Summit Australasian Oil & Gas 4th International LNG Congress Milan, Italy Exhibition & Conference Berlin, Germany www.lngevent.com Perth, Australia lngcongress.com aogexpo.com.au

27 - 28 February 2018 25 - 26 April 2018 04 - 08 June 2018 LNG US Summit 3rd International LNG Summit Posidonia Houston, USA Hamburg, Germany Athens, Greece lng-usa.com www.lngsummit.org posidonia-events.com

8 February 2018 At the Core of LNG

Chart brazed aluminum plate fin heat exchangers (BAHX) are highly efficient, custom engineered, compact units that have been at the heart of LNG liquefaction processes since the 1970’s and are facilitating the export of North American shale gas today.

E-mail: [email protected] www.chart-ec.com LNGNEWS Philippines Australia ADB to advise on Philippines’ Dominion announces that first LNG hub project Cove Point LNG plant has he Asian Development Bank (ADB) has signed an agreement begun production Twith the Philippine National Oil Company (PNOC) to act as transaction advisor for the Philippines’ first LNG hub project in ominion Energy Cove Point (DECP) has begun producing Batangas. DLNG with its newly constructed liquefaction facility The transaction advisory services agreement was undergoing commissioning in Lusby, MD. All major equipment signed by Takeo Koike, Officer-in-Charge of ADB’s Office of has been operated and is being commissioned as expected Public-Private Partnership (OPPP), and Reuben Lista, President following a comprehensive round of testing and quality and Chief Executive Officer of PNOC at a ceremony in Manila. assurance activities. “The Philippines’ first LNG hub will help in ensuring Shell NA LNG is providing the natural gas long-term energy security to the Philippines and source a needed for liquefaction during the commissioning process and cleaner energy resource,” said Siddhartha Shah, Principal PPP will off-take by ship the LNG that is produced. Specialist. “It will also increase energy access and create new When commissioning is complete, DECP will produce demand in the power, transportation, and industrial sectors in LNG for ST Cove Point, which is the joint venture of Luzon and in neighbouring islands.” Sumitomo Corporation and Tokyo Gas, and for GGULL, the Given the imminent depletion of domestic gas reserves US affiliate of GAIL (India) LTD under 20-year take-or-pay at the Malampaya gas field in Palawan, which provides a contracts. DECP’s liquefaction facility has a nameplate substantial amount of power supply in the country, PNOC is capacity of 5.25 million tpy of LNG. developing a robust and sustainable gas supply strategy through The facility is expected to enter commercial service in the establishment of an LNG hub in Batangas. early March. Under the agreement, ADB’s OPPP will advise and assist Construction of the liquefaction facility began in PNOC in all aspects of the project, including the award and October 2014, following more than three years of federal, execution of the final project agreements. The project, which state and local permit reviews and approvals. With a cost of could cost up to US$2 billion, will consist of a regasification US$4 billion, it is the largest construction project ever thus terminal, storage, power plant, and other related infrastructure. far for Maryland and for Dominion Energy. Construction has It is in line with the Government of the Philippines’ Energy involved more than 10 000 craft workers and a payroll of Plan and supports ADB’s increasing focus on environmentally more than US$565 million. sustainable infrastructure and private sector participation.

Global Next generation LNG terminals set to get smaller to offer greater flexibility

hile the LNG market is growing year on year, LNG to mid-scale liquefaction or regasification plants that can be wexport and import terminals are shrinking. Indeed, the expanded if and when demand grows. LNG sector’s next-generation infrastructure is being designed These facilities, with far smaller liquefaction units – known for customers looking to purchase smaller quantities and as trains – are “more consistent with market conditions,” said sign shorter, more flexible contracts. John Baguley, chief operating officer of Australia-based LNG Ltd, LNG export terminals have traditionally been large-scale, which has proposed mid-scale LNG plants in the US and Canada. custom-built facilities costing tens of billions of dollars. As a In 2008, the average contract was for 18 years and more result, to justify the investment, they typically required equally than 2 million tpy. By 2016, it had dropped to less than large, long term supply deals (often lasting a decade or more). eight years and less than 1 million tpy. In contrast, future projects are featuring new modular-style This impact on LNG terminal design is further evidence to designs built to snap together like Legos. This allows for small suggest this will be a long term shift for the industry.

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12 an LNG world leader?

Bernadette Cullinane and Nye Hill, Deloitte, Australia, provide an update on the Australian LNG industry.

rojected to be the biggest exporter of LNG by 2019, However, questions remain regarding how Australia will Australia is facing some serious competition from balance domestic energy security and world-leading LNG Poverseas, and energy security challenges on the production. home front. Australian gas production is increasing, but as The state of Australian gas LNG exports continue to rise, the Australian Energy Market production Operator (AEMO) is predicting a domestic gas shortfall on Total natural gas production in Australia grew 19.3% the east coast.1 To counter this, LNG producers have agreed year-on-year to reach 105.2 billion m3 in 2017.2 to divert more gas for domestic consumption to address the Over the next two years, growth in gas production will gas scarcity. be driven by major LNG export projects in Western Australia and the Northern Territories (collectively, the western market) transitioning from construction into operations. However, there is a risk to supply in the western market

13 after 2021 if investment in development of gas reserves is In eastern and south-eastern Australia, there is not sustained3. If exploration remains low, new gas projects potential for an annual energy shortfall in the domestic may not be developed and existing domestic gas gas market of 54 PJ in 2018 and 48 PJ in 2019. Widespread production facilities may cease production due to a lack of power shortages are predicted to hit New South Wales and gas feedstock. South Australia first, then Victoria in 2021, and Queensland At the current production rates of domestic gas and between 2030 and 2036.8 LNG, proved and probable reserves can last until 20354, but To avoid being hit by looming shortages of gas in 2018 a large proportion of these reserves are held by LNG and 2019, the Federal government and LNG exporters have exporting companies and joint ventures. These suppliers inked a deal to secure additional supply over the next two may only make gas available beyond their domestic market years. obligation quantities if the price is commercially viable. Under the new Australian Domestic Gas Security For the eastern market, annual domestic gas production Mechanism, which is due to enter into force on 1 July 2018, is projected to decline from 600 petajoules (PJ) in 2017 to the Australian government will be able to restrict exports 478 PJ in 2021. Most of this production decline is projected when it identifies a lack of secure domestic gas supply. In to occur in offshore Victoria, where production is forecast case such a scenario arises, an exporter who is not a net to reduce by 38% over this period. Unless gas production contributor to the domestic market will be required to increases, domestic gas shortfalls between 10 PJ per year outline how they will fill the shortfall of domestic gas. At and 54 PJ per year are forecast.5 which point it will be the responsibility of the exporter to Australian LNG export volumes will be underpinned by find a solution – such as swapping cargoes out of the recent completion of trains at Asia Pacific LNG in portfolios or on the spot market. Queensland and Western Australia’s Gorgon project, as well There are plans to strengthen linkages or improve as the completion of the three remaining LNG projects connectivity via pipeline development between the east under construction — Wheatstone, Ichthys and Prelude. The coast energy network and the Northern Territory’s gas three projects will add around 21 million t to Australia’s fields. The North Territory state government is progressing LNG export capacity, bringing total capacity to around plans for the construction of a AUS$800 million gas 87 million t. pipeline connecting the northern and eastern gas markets9, However, Chevron has signalled the end of major new known as the North East Gas Interconnector or the LNG projects in Australia and is unlikely to sanction an Northern Gas Pipeline, with first gas due next year. Other expansion of Gorgon and Wheatstone export capacity as gas pipelines are being proposed, for example one which the company focuses on boosting returns from its connects the Queensland gas fields with the customer multi-billion dollar investments.6 The mega-projects of the markets in Victoria and South Australia10 and a past decade are giving way to smaller, more targeted multi-billion dollar transcontinental pipeline from investments with quicker economic returns. West Australia’s gas fields in the north-west to the east.11 New Queensland gas sources are due to come online Impending energy security before the end of the year and LNG producers have now concerns provided a guarantee to the government the domestic gas According to AEMO, eastern Australia might well be facing market will remain supplied for at least the next two years natural gas shortages as early as 20187, posing a risk to – fending off a threat to limit their ability to sell cargoes electricity supply, security, and reliability, particularly as into the spot LNG market. While this has now shifted some more renewable load is added to the system and ageing of the focus from the LNG producers, the government is yet coal plants retire. In the transition towards cleaner energy to formally declare whether it will trigger the sources, gas plays a critical balancing role that supports Gas Security Mechanism for 2018. intermittent renewable generation. Gas supply shortages To boost gas supply into the market, the Australian and the impact this will have on gas prices are likely to government has released 21 new areas for oil and gas impede the ability of gas to perform this essential role. exploration under the 2017 Offshore Petroleum There are three main factors affecting the east coast’s Exploration Acreage. The areas are situated across eight gas supply: basins off the Northern Territory, Tasmania, Victoria, zz Producers in Queensland are fulfilling their long term Western Australia, and in the Territory of Ashmore and overseas export commitments by buying gas from the Cartier Islands. gas-strapped southern states in the face of lower than There are 20 areas available for work programme expected CSG supply. bidding, where petroleum companies need to submit comprehensive exploration plans, across a mixture of zz Intensifying the problems on the supply side, the mature and lightly explored basins. However, this strategy New South Wales and Victorian governments have has not been successful in the last few years. Of the 28 restricted onshore exploration and production. The offshore blocks offered in 2016, only eight were awarded, states have imposed blanket bans on fracking gas from down from 12 in 2015 and 19 in 2014. shale rock, based on environmental concerns. zz Unlike Western Australia, which has long had a policy Intensifying competition from requiring 15% of gas produced to be quarantined for overseas domestic use, the eastern states have no such rules While Australia is grappling with complex energy policy demanding locally produced gas be held back for issues at home, the international gas market is developing domestic use. rapidly.

14 February 2018

The impending threat of losing its dominant market the investment seen in 2014. The decline continued into share has forced Qatar to lift its moratorium on 2017 with the total expenditure on petroleum exploration development in the North Field, the world’s largest in the first half of 2017 standing at AUS$350 million, conventional gas field. Qatar plans to increase its output 4% lower than a similar period last year. However, total from 77 million tpy to 100 million tpy by 2024 – equivalent petroleum exploration expenditure during the June to a third of current global supplies.12 This 30% boost in quarter was up 4.7% at AUS$355.6 million on a seasonally LNG output might open up a price war for customers in adjusted basis, with a 24.3% quarter-on-quarter increase Asia pitting the Gulf state against competitors, Australia in activity in Queensland responsible for much of the and the US. growth.14 Qatar’s location makes it well positioned geographically The Queensland petroleum data in particular suggests to be competitive and earn attractive returns supplying the industry has responded to the gas market concerns on both Asia and Europe. It also benefits from low production the east coast by increasing its exploration activity.15 The costs and infrastructure already in place, all of which create Australian Domestic Gas Security Mechanism has a major implications for future Australian LNG developments. role to play. Fearing regulation would allow the Flooding the market with more LNG will help defend its government to limit LNG exports if they fail to supply place as the world’s top exporter, a position challenged by enough to the domestic markets, producers are presumably Australia. exploring more. The apparent lift in Queensland gas Qatar is a serious competitive threat given the nature exploration follows a string of recent announcements from of its projects – low capital intensity, flexible and low cost east coast gas companies looking to improve deliveries into brownfield expansions which Australian greenfield LNG the domestic market. will really struggle to compete against. Hence the current With a potential shortfall of up 465 PJ by 203016, the focus on lower cost LNG project designs and lower capital east coast of Australia faces a gas shortage over the next expenditure solutions like backfilling existing facilities. 15 years, keep gas prices as competitive as possible, east In North America, within a year of the Panama Canal Australia needs to develop more supply or reduce gas expansion, the US has already made inroads into demand. To ensure energy security, affordable prices for Asia – Australia’s biggest market. US exports of LNG to Asia consumers, and maintain system reliability, Australia needs jumped 12 times on the year in the first seven months of its gas industry to function effectively; more needs to be 2017. As part of the US-China 100-Day Action Plan, US and done to encourage gas supply development. The country China have agreed to allow Chinese buyers to secure long will need an additional investment of AUS$50 billion in term contracts and purchase LNG supplies from US directly new natural gas development by 2030 to meet its rather than through third parties. A move which could move demands.17 prove to be a game changer in the LNG market, as China is expected to be the fastest growing LNG demand centre. References Elsewhere, Russia is already advancing into the global 1. AEMO, September 2017, Update to Gas Statement of LNG market with the launch of its new Yamal LNG venture, Opportunities the first phase of which came online at the end of 2017. 2. Resources and Energy Quarterly, September 2017 With potentially half of the Yamal LNG project’s 3. AEMO, December 2016, WA Gas Statement of Opportunities 16.5 million tpy of capacity likely to go to Asia, the fight 4. AEMO, December 2016, Development required to maintain would get tougher for Australian LNG. Russia also has sufficient gas reserves in WA another LNG project, the Arctic LNG 2, waiting for FID.13 5. AEMO, March 2017, Gas Statement of Opportunities, March There are even bigger concerns for Australian LNG 2017 producers. Trying to cement its market share and cash in on 6. Bloomberg, 20 March 2017, Chevron Calls End of LNG Mega Project After $88 Billion Spree the growing Chinese demand, Russia’s Gazprom has decided 7. AEMO, September 2017, Update to Gas Statement of to fast-track its schedule to pump gas to China through its Opportunities new Power of Siberia pipeline to late 2019, earlier than 8. ABC News, 9 March 2017, Gas supply shortage will threaten many expected. The onset of Russian gas adds another nation’s power supplies, AEMO forecasts degree of supply competition for Australian LNG making it 9. NT News, 12 July 2017, Work on $800 million Northern harder to win customers. Territory gas pipeline to east coast to start today Australia will not have it easy even in Europe either, 10. SBS, 20 June 2017, APA considers new Queensland gas pipeline which is being considered as the ‘clearing grounds’ for LNG. 11. Australian Financial Review, 19 April 2017, Canberra dusts To counter the impending competition of US and potential off WA to east coast gas pipeline Australian LNG imports in the European market, Russian 12. Reuters, 4 July 2017, Qatar plans to boost gas output state-run energy companies are already lowering prices and capacity amid Gulf rift changing sales methods. Russia is also charging ahead with 13. Bloomberg, 26 October 2017, From Russia With Love: A a plan to build Nord Stream 2, a Gazprom project to Super-Chilled Prize for China transport gas into Europe through a 750-mile pipeline 14. Australian Bureau of Statistics, 8412.0 - Mineral and beneath the Baltic Sea. Petroleum Exploration, Australia, Jun 2017 15. The Australian, 5 September 2017, East coast gas crisis spurs rise in exploration drilling Australian LNG investment 16. McKinsey, March 2017, Meeting east Australia’s gas supply outlook challenge Australian petroleum exploration investment reached a 17. APPEA, 11 August 2017, Gas supply debate must not lose decade low of AUS$1.4 billion in 2016, almost a third of sight of economic benefits

16 February 2018

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