Curtis LNG on track but BG wary of labour dispute

31 July 2014 | By: Edward Cox

Portfolio seller BG Group has said the Australian Queensland Curtis LNG (QCLNG) export project is on course to start up in the fourth quarter but the company has admitted that an ongoing labour dispute could impact the timeline.

BG reported a rise in profits from LNG sales in the second quarter but was cautious on the outlook given ongoing concerns over Egyptian supply and lower 2015 availability from the Equatorial Guinea export plant.

“We don’t expect strong LNG performance to continue in the second half of the year, given lower prices and adverse changes in the supply mix,” said BG chief financial officer Simon Lowth at the company’s quarterly results presentation on 31 July

Australia

BG acknowledged there was “clearly a risk” from the ongoing labour dispute involving workers from US-based engineering company Bechtel who are employed at the QCLNG facility. A further vote is planned in August with subsequent strike action possible.

BG plans to fire up gas turbine generators and send power into the QCLNG plant in August, with compressors starting up and gas filling the first train in September. Cool-down operations would then start in October, meaning first LNG could be available before the end of the year.

QCLNG will be the world’s first project to turn gas from coal seams into LNG. BG has sales agreements for almost 10mtpa with buyers who helped underpin the QCLNG development. While production will be integrated into BG’s supply portfolio, after which it can reach a number of end-buyers, the company has previously highlighted China National Offshore Oil Corp, Japan’s Tokyo Gas and Chubu Electric, GNL Chile, as well as Singapore as the end-markets for the QCLNG production.

Egypt

Just one BG cargo was lifted from Idku in the second quarter with total upstream production down by 52% year on year in the second quarter. The company was downbeat on the outlook for future LNG exports and also for domestic gas production.

“We are in contact with every government level to secure our payments owed,” said BG chief operating officer Sami Iskander. The company is now owed $1.5bn with $1.2bn of this overdue.

While recent increases in gas tariffs were welcomed, BG was cautious on the speed of development of the possible pipeline link between its Idku plant and the Israeli Leviathan field. It also said that diversions of gas into the domestic market – caused by widespread gas shortages – were affecting its own production in Egypt from the West Delta Deep Marine project, in addition to the problem of water also coming through during production.

Equatorial Guinea, Trinidad

Fewer cargoes will be available from the export project in Equatorial Guinea in 2015 because of the operator’s planned gas development programme, BG said. This, coupled with the Egyptian shortage, will impact possible spot sales from BG’s portfolio.

In Trinidad, BG said it would implement a further 14-day outage in October on the North Coast Marine Area (NCMA) pipe system that feeds trains 2, 3 and 4. This followed work on the NCMA and East Coast Marine Area systems earlier in the year.

Profits from LNG shipping and marketing were up by 44% year on year in the second quarter to $749m.

Delivered volumes of LNG were up by 29% to 3.1m tonnes. BG delivered a total of 50 cargoes over the quarter, up from 39 the year before. This included 16 cargoes from BG’s interests in Trinidad, 10 from Nigeria, 14 from Equatorial Guinea, one from Egypt and nine sourced from the spot market.

BG said it was still in the process of selecting a new CEO.

LNG prices, indices, news and market analysis

ICIS offers market participants vital LNG information to support their trading decisions with reliable pricing data, keep track of shifts in trade dynamics, as well as analyse the markets with our historical data and long-term trends.

ICIS publishes daily and weekly LNG reports covering:

  • Spot DES price assessments for 22 key cargo destinations
  • FOB price assessments for 8 LNG-producing regions
  • East Asia Index (EAX) – a reliable price point reference for East Asia
  • Indices for other trading regions – South America, Mediterranean, Northwest Europe and Iberia
  • LNG shipping information – charter rates, vessel availability, shipping costs and tanker movements
  • Daily news and information on the latest bids, tenders, negotiations and confirmed deals
  • Weekly round-up of spot market and trading activity focusing on the key factors driving prices
  • Expert analysis on short, mid- and long-term LNG industry trends and contract pricing