Page 6 - NorthAmOil Week 19

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Germany may be reeling in excess gas follow- ing a lengthy COVID-19 lockdown. But its grid operators have drawn up a $9.2bn investment plan to prepare the country for rising imports over the next decade. Meanwhile, Bulgaria’s par- liament has backed increased tax controls over the country’s top fuel supplier, owned by Russia’s Lukoil, in the hope of boosting budget revenues. The company has threatened to shut down its depots if the measures are introduced.
If you’d like to read more about the key events shaping Europe’s oil and gas sector then please click here for NewsBase’s EurOil Monitor.
FSU production pressures
In the former Soviet Union, eyes are on Russia and its OPEC+ partners Azerbaijan and Kazakh- stan to see how agreed cuts to production will be implemented.
Russian oil and condensate production surged 5% m/m in April to 11.35mn bpd, according to initial energy ministry data. But under the new OPEC+ deal, oil output needs to fall to 8.5mn bpd this month. The cuts do not apply to condensate and the energy ministry does not provide a breakdown on liquids. News- Base understands that Russia is close to reaching its oil target, however, with flows averaging just 8.75mn bpd in the first five days of May.
Russian oil firms boast considerably low pro- duction costs, albeit not quite as low as those in Saudi Arabia. Even so, like their international peers, they too are seeing their free cash flow plummet as a result of the oil price collapse. Goldman Sachs expects them to cut their dividends by 25% this year. Russian oil firms typically set their dividends as a percentage of IFRS profit. Therefore the decline will be the result of diminished earnings rather than changes in dividend policy.
Russia’s Gazprom marked the 75th anniver- sary of World War 2 with the announcement of a new 200 bcm gas discovery in the Arctic Kara Sea. But the find is of little commercial benefit until prices recover. The company is also con- tending with a serious outbreak of COVID-19 at an Eastern Siberian field that pumps gas to China via the Power of Siberia pipeline. It insists that flows continue as planned, but seeing as its main contractor has halted work, delays in the field’s ramp-up to full capacity look likely.
In Azerbaijan, state-owned SOCAR has reported drilling a new well at the Umid field in the Caspian Sea – a project it once described as the biggest find since the giant BP-operated Shah Deniz field. SOCAR is raising the field’s output level steadily, but an international partner is likely needed to realise its full potential.
If you’d like to read more about the key events shaping the former Soviet Union’s oil and gas sector then please click here for NewsBase’s FSU Monitor.
LNG FID delays
US LNG developer NextDecade has warned that it may delay a final investment decision (FID) on a new liquefaction terminal as a result of the collapse in energy demand glob- ally because of COVID-19. The company said in a US regulatory filing that the FID on Rio Grande LNG in South Texas was scheduled for this year, but that prospects for financing and developing the terminal depended on mar- ket conditions that were likely to worsen as a result of the pandemic. (See: NextDecade aims for FID this year, but issues warning, page 16)
NextDecade’s warning follows Sempra Energy delaying an FID on Port Arthur LNG and Cheniere Energy saying that it may similarly push back a planned FID on the next phase of its Corpus Christi LNG project since late April.
These moves come as news emerges of more cancellations of cargoes that were due to be loaded at US liquefaction terminals in June. By late April up to 25 US LNG cargoes for June loading were reported to have been cancelled, but the latest estimates suggest that it could ultimately be around 33. Buyers typi- cally have to give 45-60 days’ notice to cancel a contracted US cargo.
While LNG producers do not tend to com- ment publicly on decisions taken by their cus- tomers, suppliers are increasingly expected to come under pressure to curtail some of their output. Warnings about these looming curtail- ments have been stepped up – again – over the past week.
Meanwhile, Malaysian shipping firm MISC has said it expects growth of the global LNG fleet to slow as FIDs on new liquefaction capacity are pushed back.
Some projects continue to move forward, however, both on the liquefaction and the
While LNG producers do not tend to comment publicly on decisions taken by their customers, suppliers are increasingly expected to come under pressure to curtail some of their output.
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w w w . N E W S B A S E . c o m Week 19 14•May•2020