QCLNG on track for December, but spot buys hit BG results

BG Group’s Queensland Curtis LNG (QCLNG) is on track to produce first LNG in December with plateau production expected by the second quarter of 2015, the company said on Tuesday.

Plateau production from the first train should be achieved by the second quarter of 2015 with the second train of the 8.5mtpa facility at a similar stage by 2016.

BG Group reported a 4% year-on-year fall in LNG operating profit to $576m in the third quarter and a 29% drop in total earnings, which it attributed to higher costs and lower realised prices.

An increase in the number of spot purchases had hurt performance in its LNG business, as a result of overall tightening in the seller’s portfolio supply.

QCLNG on track

While first LNG from QCLNG should come by the end of the year, BG Group admitted there was little room for additional manoeuvre with the next few weeks representing a crucial period.

“There is limited remaining contingency in the schedule,” the company reported in its results statement.

Gas turbine generators that will provide electricity to the QCLNG facility have ramped up with maintenance testing on the plant’s compressors carried out in October. Plant cooldown is planned for the end of November.

When asked if the company had the capacity to cover its contractual requirements in the case of a start-up delay, a spokesman said it had sufficient portfolio flexibility to cover its 2015 commitments.

BG Group said the economics of the domestic Australian gas market would help to decide if it would purchase more future feedgas from third-party sellers but currently it was taking only a very small volume from other providers.

Timeline on Lake Charles

Approval on the development of an export project at the US Lake Charles liquefaction expansion could come from the Federal Energy Regulatory Commission (FERC) in the second quarter of 2015 with a financial investment decision possible in the second half of next year, said interim executive chairman Andrew Gould.

“When it comes to a partnership or a selldown of assets we are keeping our options open – the economics of the project and future gas price risk sits alongside the need to accommodate our balance sheet,” said Gould.

BG Group would be responsible for offtake from the proposed 15mtpa facility in Louisiana, while US-based energy infrastructure company Energy Transfer will own and finance it. First exports could come in 2019.

Elsewhere in North America, the risk that the global gas market could be oversupplied after 2020 has slowed BG Group’s work on the Canadian Prince Rupert LNG export project in British Columbia. The company continues to work on the project but not at the same pace as previously, it said.

No change on Egypt

No LNG cargoes were loaded from the Idku liquefaction plant in Egypt in the third quarter with little improvement likely in the near future.

BG remained cool over the possible pipe link from the Leviathan field in Israel that could bring gas into Idku for liquefaction. It also said that any additional Egyptian domestic gas production, from the likes of British BP, for example, would not be used for LNG exports and would remain within Egypt.

In Tanzania, the process of land acquisition required to develop a planned LNG export project was slow. This was in part attributed to upcoming domestic elections.

The tone for the rest of the year was generally pessimistic for LNG but in line with company guidance, with some longer-term caution noted over the falling oil price and the impact on future earnings.

Fewer spot LNG cargoes will be available in 2015 as a result of the planned gas development programme in Equatorial Guinea and the situation in Egypt. BG Group has sole offtake from the LNG plant in Equatorial Guinea.

BG Group sourced a total of 44 LNG cargoes in the third quarter; 10 from Trinidad’s Atlantic LNG, 11 from Nigeria LNG, 14 from Equatorial Guinea and nine from the spot market. The increase in spot purchases and associated costs – from just three cargoes over the same period in 2013 – was cited as a key reason behind its fall in LNG margins.

Of the 44 cargoes, 33 were sold into Asia, nine into South America and two into what BG Group classed as Europe and other.

The company recently appointed ex-Statoil boss Helge Lund as its new CEO. Edward Cox