Page 7 - Euroil Week 44 2019

EurOil COMMENTARY EurOil
Final nail in the coffin?
This is the second time the UK has imposed a moratorium on fracking. The first ban was intro- duced by the Conservative-Liberal Democrat coalition government in 2011, after a series of large tremors at Cuadrilla’s PNR site.
Given its past support for fracking, it is hard to see the government’s decision as anything more than an attempt to lure voters away from Labour in next month’s election. Its policy rever- sal also comes after recent research, including a report by the National Audit Office, has shown that public support for shale gas has fallen steeply in recent years. In any case, the impact of the U-turn on the UK’s shale gas prospects will be the same.
Cuadrilla was finally able to proceed with development at PNR last year, after the previ- ous moratorium on fracking expired. In Febru- ary, it confirmed commercial flows at the UK’s first-ever horizontal shale gas exploration well. It is targeting the Bowland shale, previously esti- mated by the British Geological Survey (BGS) to hold 37.7tn cubic metres of gas.
However, Cuadrilla’s work has been impeded by legislation requiring fracking to
be halted whenever a tremor with a 0.5 mag- nitude or above is recorded. The company claims this legislation is overly severe in com- parison to levels permitted at US fracking sites. After multiple stop-starts it was forced to bring operations to a close at its second PNR well in August after causing a 2.9 magnitude earthquake. Cuadrilla has since packed up its fracking gear, and its owners are rumoured to be considering a sale of the company. The ban could swing this decision.
Apparently in a last-ditch attempt to convince the government to maintain its pro-shale stance, Cuadrilla on October 30 once again stressed the commercial value of its project. Initial shale gas flows from its second well had been “very encouraging,” it said.
“Further testing and analysis will be required to validate sustained gas flow rates and this work is ongoing,” it said. “There can be no doubt, how- ever, that the UK is sitting on a huge natural gas resource of the highest quality.”
Given the current political climate and grow- ing public hostility to shale gas and fracking, though, this resource is likely to remain locked up for the foreseeable future.™
PIPELINES & TRANSPORT
Lithuania to acquire its own LNG FSRU
LITHUANIA
Lithuania is looking to make savings on its LNG imports.
LITHUANIA is looking to buy its own floating, storage and regasification unit (FSRU), at a time when its imports of LNG are at an all-time high.
The board of state-owned Klaipedos Nafta (KN) said it supported a plan to either buy the Independence FSRU it is currently leasing from Norway’s Hoegh LNG or a different vessel. A final decision on the matter is expected by the end of 2022.
KN aims to reach a deal with banks to obtain financing for the purchase by the end of April 2020, and have the state-guaranteed loans cleared under EU state aid rules by the end of May 2021.
By having its own FSRU rather than renting one, Lithuania would presumably save costs in terms of rental fees. It aims to cut costs further by borrowing EUR135.5mn ($150mn) from the Nordic Investment Bank to cover rent payment for the FSRU from 2020, saving EUR27mn per year for consumers.
“Estimates show that the LNG terminal will provide economic benefits for Lithuania and gas consumers of the region after 2024,” KN Klai- pedaLNGdirectorArunasMolissaid.“Asareli- able alternative for gas import, the LNG terminal will ensure competition in the gas market and
contribute to the energy security of the state. In turn, this provides Lithuania with opportunities for regional leadership in the energy sector and for KN to further actively develop the cross-bor- der LNG chain of value.”
Lithuania launched the 4bn cubic metre per year Klaipeda LNG terminal in 2014, but in its early years the project found it difficult to com- pete with cheap and readily available Russian pipeline gas. Thanks to a slump in global LNG prices, however, it managed a 40% growth in imports during the first nine months of 2019, receiving LNG carriers during the period, versus eight a year earlier.
The terminal’s biggest customer is Lithuanian fertiliser producer Achema. It has two more Lith- uanian clients – energy group Lietuvos Energijos Tiekimas (LET) and commodities trader Imlitex – as well as Estonian power group Eesti Energia and Estonian gas distributor Elenger.
Lithuania developed its LNG import capa- bility to help wean itself off heavy reliance on Russian gas. However, while it has success- fully reduced its dependence on Russian piped exports, Achema and the terminal’s other buyers are in fact buying significant quantities of Rus- sian LNG, according to recent shipping data.™
Week 44 07•November•2019 w w w . N E W S B A S E . c o m P7