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Mega-ModulesMega-Savings!
July 2018
Extremes of heat or ice? Extremely wet, salty, dusty or cramped con-ditions? Environment turning explosive? STAHL CraneSystems engineers and technicians develop the right solution for tricky situations where unusual requirements emerge. Their long experience and detailed know-how, coupled with a high degree of vertical integration and seamless quality management, enable them to rise to extreme challenges.
The right choice when ambient conditions turn explosive.
ISSN 1747-1826
CONTENTS
Copyright © Palladian Publications Ltd 2018. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. All views expressed in this journal are those of the respective contributors and are not necessarily the opinions of the publisher, neither do the publishers endorse any of the claims made in the articles or the advertisements. Printed in the UK.
ON THIS MONTH’S COVER
10
LNG Industry is audited by the Audit Bureau of Circulations (ABC). An audit certificate is available on request from our sales department.
JULY 2018
Monkey Island LNG (MILNG) is developing a 21.0 million tpy LNG export facility in SW Louisiana, USA, and has reduced its CapEx by over US$1.5 billion by leveraging a Mega-Module construction strategy. MILNG’s unique site allows for the reception of Mega-Modules, and only 8 million tpy needs to be contracted for a positive FID.
03 Comment
05 LNG news
37 An enterprising view of LNG project deliveryMark White, Hexagon PPM, USA, discusses a new approach to project and portfolio management that aims to relieve pressure on investors, project owners, and contractors.
39 A new generation of industrial safetySteve Badger and Brandon Stambaugh, Owens Corning, USA, present the details of the pool fire suppressant system installed at Freeport LNG.
42 The future is flexibleMiriam Wennberg, Connect LNG, Norway, outlines the development, implementation, and benefits of the Universal Transfer System.
45 Enhancing facility functionalityNiki Thomas, Quorum Software, USA, presents a study of LNG companies’ technology infrastructure: Past, present, and future.
48 Making best use of big dataSoma Maroju, BMT, USA, outlines how the cutting-edge data exploration and analytics platform developed by the company is giving offshore marine professionals additional and deeper insights into asset performance.
51 A programme for the futureAlex Keys, Fluenta, UK, explores technology’s role in LNG management.
56 15 facts on... Latin America & the Caribbean
14 Leap of faithGunnar Helmen, Skangas, Norway, discusses how the company’s strategic initiatives to provide ready access to LNG are fuelling a vibrant LNG market, and changing the face of the Nordic marine market.
19 Challenges and opportunitiesDavid Jetter, Baker Botts LLP, outlines the unique challenges and opportunities associated with converted FLNG facilities.
23 Integrating tomorrow’s LNG projects, todayJohnnie Keen and Tim Cuttance, Aker Solutions, UK, discuss how integrating technologies in the full gas value chain can optimise costs and production.
27 Preventing poor performanceJulien Sippel, TechnipFMC, France, outlines the benefits of the thermal and hydraulic performance testing of large plate and frame heat exchangers for FLNG.
31 Pretreatment challengesPhani Patchipulusu and Clark Dickson, Dickson Process Systems LLC, USA, discuss operational challenges with condensable hydrocarbons in LNG pretreatment systems.
10 Gas imports? Yes pleaseCarlos Torres Diaz, Xi Nan, Sindre Knutsson, and Iben Fürst Frimann-Dahl, Rystad Energy, investigate the natural gas situation in Brazil.
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Last month’s World Gas Conference in Washington, D.C. brought together an estimated 12 000 attendees, including 600 speakers from over 40 countries from around the world.
I was one of those 12 000 attendees and really enjoyed my week in the capital. It was great to meet friends from the industry, put faces to names, and make new contacts. I divided my time between trawling the exhibition floor, manning our booth, and attending the various panel discussions, debates, and workshops.
Given that the US was playing host, it was natural that many of the discussions centred on the potential for US LNG exports. What is clear is that the potential is enormous, and the mood is therefore one of optimism and excitement. This was reflected in US Secretary of Energy Rick Perry’s opening remarks. In a speech full of positivity Perry said “we are sharing our energy with the world … and in so doing, we are empowering our friends, allies and trading partners economically and energy-wise.” His speech mirrored the eagerness of those companies involved in exporting LNG from US shores. “As I look to the future, I am truly excited about what it holds”, Perry stated.
This optimism has been clouded somewhat however by the continuing uncertainty over trade disputes between the US and China.
Patrick Pouyanné, CEO of Total, spoke to reporters at the World Gas Conference and warned that a trade war with China would be “very bad news” for exports of LNG.
LNG Ltd has announced that its talks with potential buyers in China have been placed on hold until the issue had been resolved.
The CEO of LNG Ltd, Greg Vesey, said: “We were in a meeting with a potential customer, who said they were not going to make a move until it has been clarified what is
happening with these tariffs.” The trade dispute has tempered enthusiasm and
stalled plans to invest tens of billions and employ tens of thousands of workers in constructing a new wave of LNG export capacity in Texas and Louisiana. China has so far kept LNG off the list of US imports that are threatened with additional tariffs, even though other fuels such as oil and coal are included. Exporters of US LNG are worried that it could soon be targeted.
As many countries increase their imports of LNG, China remains by far the largest growth market, as the government seeks to curb the use of coal and clean its polluted skies. Last year China leapfrogged South Korea to become the world’s second-largest buyer of LNG, after Japan, with a 42% increase in imports. China alone accounted for 44% of the entire worldwide increase in LNG imports last year.
Whether or not this potentially damaging trade war intensifies is another thing. Positions may change, and the situation may de-escalate. Pouyanné is hopeful. “I hope that heads will cool down very quickly around the world among the leaders, so we can come back to a more stable world.”
In this month’s issue of LNG Industry, we are keeping up the intensity with features on FSRUs/FPSOs, terminal design, heat exchangers, transfer systems and more. Rystad Energy kick off this month’s helping with an investigation into the natural gas situation in Brazil, followed by a discussion on how Skangas’ strategic initiatives are providing ready access to LNG. I hope you enjoy this issue and if you have any questions or comment please do not hesitate to get in touch!
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July 2018 5
LNGNEWSTurkeySeawater circulation deal for LNG driven wellboat
PG Flow Solutions has been awarded a contract to deliver a large seawater circulation pump system to the world’s first
LNG driven wellboat.The pump system will ensure continuous seawater
circulation in the boat’s well to enable transport of live fish. The company will also supply engine room pumps that are required for the main engine and support engines, plus generic pump requirements for operating the wellboat.
The contract values are undisclosed.PG Flow Solutions will deliver the equipment as a
subcontractor to Cflow Fish Handling AS, that is responsible for supplying the wellboat’s fish handling and transportation system. The equipment will be delivered during Q1 2019.
“Cflow has a stringent approach towards supplying sustainable solutions that carefully preserve fish resources, to the benefit of the fish farmers and society as a whole. Our seawater circulation pump system ensures excellent animal welfare, which is a good match for Cflow’s equipment. To be involved with the world’s first LNG driven wellboat adds another exciting dimension to this project,” says Øyvind Berg, vice president sales and marketing at PG Flow Solutions.
The wellboat, which is the world’s first that is powered by a combination of LNG propulsion and battery pack, has been ordered by Norwegian salmon producer Nordlaks. The new technology will reduce CO2 emissions by 30% and NOx levels by 90%. The 84 m wellboat will carry up to 600 t of live salmon and trout for Nordlaks. The vessel is designed by NSK Ship Design in Harstad and will be built at Tersan Shipyard in Turkey.
ItalyItaly chooses Argus LNG prices for regasification costs
I talian energy regulator Arera has chosen global energy and commodity price reporting agency Argus to provide the LNG
prices for a new formula to calculate reserve prices in auctions for LNG regasification capacity.
The formula uses Argus Italy delivered prices and Argus US Gulf coast LNG export prices published in the Argus LNG Daily report.
Regasification involves treating LNG so that it reverts to natural gas and can be fed into the transmission grid. Arera has chosen Argus assessments to ensure that regasification costs are linked directly to the country’s import prices, as well as to wider LNG market dynamics in the Atlantic basin.
The new formula used by the regulator is part of extensive reforms to the Italian energy market, which aim to increase the use of LNG terminals, diversify supply sources and improve security of supply.
The formula will initially apply to the Offshore LNG Toscana (OLT) terminal and will be extended later to the GNL Italia terminal in Panigaglia. The two terminals, which are considered part of Italy’s strategic infrastructure, have been operating well below capacity in recent years.
Italy is one of Europe’s largest gas markets and plays an important role for the continent in balancing competing sources of supply. Increased access to and use of LNG import capacity is an important step in providing competition for pipeline gas supplies from north Africa and Russia, which will soon be supplemented by exports from Azerbaijan. Pipeline gas sales are normally linked to crude prices as well as gas hub prices in northwest Europe.
RussiaNovatek secure LNG transport deal with Sovcomflot
Leonid Mikhelson, Chairman of the Management Board of Pao Novatek, and Sergey Frank,
General Director of PAO Sovcomflot, have signed a Strategic Cooperation Agreement on developing a strategic partnership to transport hydrocarbons (LNG and gas condensate) produced at Yamal LNG, Arctic LNG 2, and other Arctic projects of the company.
“Our unique partnership with Sovcomflot will optimise our LNG transport model through the
Arctic zone by efficiently and effectively using ice-class tankers” according to Novatek’s Chairman of Management Board Leonid Mikhelson. “To implement our long-term development strategy to produce more than 55 million t of LNG by 2030, we need to establish an efficient Northern Sea Route shipping model. Combining our efforts with Sovcomflot, one of the global leaders in navigation in harsh ice conditions, will allow us to achieve maximum efficiency in managing our transportation costs.”
6 July 2018
LNGNEWSGlobalABS and probunkers sign JDP for fleet of LNG bunkers
ABS has signed a pioneering Joint Development Program (JDP) with probunkers to provide technical support as they embark
on designing a fleet of specialist LNG bunker vessels for key ports around the world.
“With its low sulfur emissions, LNG is an attractive proposition for shipowners and operators responding to the 2020 Sulfur Cap. However, lack of bunkering infrastructure has been one of the key constraints on its adoption. ABS is proud to play a part in addressing that issue with probunkers,” said ABS Vice President for Global Business Development, Peter Fitzpatrick. “As a global leader in LNG, ABS has a wealth of expertise to help probunkers meet the technical and operational challenges that a project of this scale and ambition will need to overcome.”
Based in Athens, probunkers aims to design, build, own, and operate a fleet of LNG supply vessels in seven ports initially: Houston; Rotterdam (or alternatively Antwerp); Gibraltar; Singapore; Hong Kong; Busan; and Fujairah.
Alexander Prokopakis, probunkers Chief Executive, said: “Our vision is to become the premier global bunker supplier of LNG. Our collaboration with ABS will play a key role in realising our ambition to build a reliable global-scale bunkering network that will support the future of Sustainable Shipping and Green Energy.”
ABS will work with probunkers to provide regulatory compliance guidance for the fleet as well as define applicable rules and standards. ABS will also identify technical and operational challenges and advise on technological solutions in a range of areas including, but not limited to, capacity, dimensions of the vessels in relation to port restrictions, required power and speed, propulsion and maneuvering systems. Suitability analysis of available technologies for cargo containment, LNG Handling & Transfer Systems, and Boil-Off Handling Systems is also a significant aspect of the JDP.
FranceGTT to design tanks for four new LNG carriers
GTT has received two order notifications from the South Korean shipyard Daewoo Shipbuilding and
Marine Engineering (DSME), for the design of the tanks of four new 174 000 m³ LNG carriers.
The orders, involving two units each, will be built on behalf of two European ship-owners, whose names remain confidential at this stage.
The four units will be equipped with the
NO96 GW membrane containment system. The deliveries are expected by the end of 2020 for the first order and early 2021 for the second one.
Philippe Berterottière, Chairman and CEO of GTT declared: “We entertain, with DSME, a privileged and long lasting relationship. We are pleased to bring, once more, our technology and expertise to such a project.”
USAPGNiG and Venture Global LNG sign SPA
Polish Oil & Gas Company (PGNiG) and Venture Global LNG have entered into an agreement relating to the terms of
delivery of LNG from Calcasieu Pass LNG and Plaquemines LNG facilities.
The agreement defines basic terms and conditions of a 20-year contract for the sales and purchase of 2 million tpy of LNG, which equals about 2.7 billion m³ following regasification. Cargoes will be supplied from Calcasieu Pass and Plaquemines LNG export facilities which are expected to be completed in 2022 and 2023 respectively. Both terminals will be located by the Gulf of Mexico in Louisiana. The documents were signed during the World Gas Conference in Washington, DC.
Mike Sabel and Bob Pender, co-CEOs of Venture Global LNG, jointly announced: “We are honoured to be partnering with PGNiG of Poland, one of Central Europe’s leading utilities and suppliers of energy, as it secures the long-term supply of LNG. PGNiG will be joining our existing global partners Shell, Edison SpA, Galp, and BP in our Calcasieu Pass project and become one of our foundation partners for Plaquemines LNG.”
Piotr Wozniak, CEO and President of the Management Board at PGNiG, announced: “With satisfaction we look forward to commencing long-term cooperation with our new partner Venture Global LNG. This is an important step for PGNiG in developing our activities on LNG market. Purchasing of LNG in the USA will not only allow further diversification of our import portfolio following 2022, but will also let us develop our trading competences and will enable PGNiG’s presence as a global LNG market player.”
Deliveries may be subject to further trading on international markets and will be supplied on a free-on-board basis (FOB – the purchaser is responsible for transport of cargo from a loading port).
July 2018 7
LNGNEWS
01 - 03 August 2018Gas Indonesia Summit & Exhibition 2018Jakarta, Indonesiawww.gasindosummit.com
27 - 30 August 2018ONSStavanger, Norwaywww.ons.no
14 - 16 October 2018North American Gas ForumWashington, USAenergy-dialogues.com/nagf
12 - 15 November 2018ADIPECAbu Dhabi, UAEwww.adipec.com
USAEagle LNG and Crowley Fuels to provide LNG to Puerto Rico
Crowley Fuels and Eagle LNG Partners have signed a multi-year agreement to supply a major pharmaceutical
company in Puerto Rico with containerised LNG – an expansion of LNG supply chain services for customers seeking cleaner, cost-effective alternative fuel.
“Crowley is pleased to be partnering with Eagle LNG, a world-class LNG supplier in the Jacksonville area, to serve our customer in Puerto Rico, who will benefit from full supply chain solutions while using a fuel source that offers strong reliability and lower emissions for industrial and commercial uses,” said Crowley’s Greg Buffington, vice president, LNG.
After production at Eagle LNG’s new Maxville Facility in Jacksonville, LNG is loaded into Crowley’s 10 700 gallon international shipping organisation (ISO) tank containers. These ISO containers then are transported via truck and loaded onto Crowley vessels at the Port of Jacksonville (JAXPORT). Crowley provides ocean transportation and truck delivery of the LNG to customers in Puerto Rico.
“We are proud to be providing LNG for Crowley’s Puerto Rico clients from our Maxville production facility in Jacksonville. The Maxville facility is the embodiment of the commitment to North Florida and Puerto Rico that Eagle LNG and Crowley have made,” said Linda Berndt, vice president, Eagle LNG. “Providing LNG from a local supply point offers simplified logistics and assured supplies at competitive prices for Puerto Rico, the Caribbean and the numerous regional customers who are adopting LNG in their businesses.”
FranceEDF making progress in sale of stake in Dunkirk LNG
Following a competitive auction process launched early 2018, the EDF Group has announced it has
entered into exclusive negotiations with two groups of investors for the disposal of its 65.01% interest in the share capital of Dunkerque LNG, owner and operator of the LNG terminal of Dunkirk.
On the one hand, a consortium composed of Fluxys, AXA Investment Managers – Real Assets, on behalf of clients, and Crédit Agricole Assurances has committed to acquire a stake of 31%; on the other hand, a consortium of Korean investors led by IPM Group (comprised of InfraPartners Management Korea Co. Ltd. in Seoul and InfraPartners Management LLP in London) in collaboration with Samsung Asset Management Co., Ltd and composed of Samsung Securities Co. Ltd., IBK Securities Co. Ltd., and Hanwha Investment & Securities Co. Ltd., has committed to acquire a stake of 34.01%.
Across prices paid by the two consortia, the average enterprise value for the entire stake amounts to approximately €2.4 billion.
The transaction will allow current 25% shareholder Fluxys, with the support of Axa Investment Managers – Real Assets and Crédit Agricole Assurances, to take control and consolidate Dunkerque LNG in line with its global growth strategy in gas infrastructures. Fluxys’ expertise in the gas business and in the management of LNG terminals will benefit Dunkerque LNG and ensure industrial continuity and strong reliability of the terminal.
17 - 20 September 2018Gastech Exhibition & ConferenceBarcelona, Spainwww.gastechevent.com
18 - 20 September 2018Turbomachinery and Pump SymposiaHouston, USAtps.tamu.edu
8 July 2018
News Highlights
Visit our website for more news: www.lngindustry.com
X UK to receive Qatari LNG shipment
X JERA acquires EDF’s LNG business X Taiwan agrees preliminary LNG purchase deal with
US producer
LNGNEWSSwedenPort of Gothenberg offers LNG discount
In 2015, the Port of Gothenburg introduced an environmental discount on the port tariff in an effort
to increase the number of calls by ships running on LNG.
Several major LNG investments have been made since then, including initiatives by a number of Swedish shipping companies. This has had a positive impact on the environment, including reduced emissions of sulfur dioxide, particles and nitric oxide into the air in western Sweden. The Gothenburg Port Authority is now set to extend the discount period and is already outlining a renewed environmental discount.
As part of the Gothenburg Port Authority environmental discount scheme, vessels that report good environmental performance receive a 10% discount on the port tariff, assuming they achieve a certain level according to the globally recognised environmental indexes ESI and CSI. Vessels that run on LNG receive an extra discount of 20% each time they call. The LNG discount is subject to a time limit and is due to run to the end of this year, although the Port Authority is considering extending the discount period.
BermudaTeekay LNG Partners announces CFO transition
Teekay LNG Partners L.P. has announced that Brody Speers, the current Chief Financial Officer (CFO)
of Teekay Gas Group Ltd., a management services company that provides services to the partnership and its subsidiaries, has been appointed as Vice President, Corporate Finance, of Teekay Shipping (Canada) Ltd. and Scott Gayton, who currently serves as a Vice President at Teekay, has been appointed to assume the CFO position from Speers.
Gayton brings over 20 years of finance and accounting experience, including most recently serving as CFO of Tanker Investments Ltd. from the time of its initial public offering until its merger with Teekay Tankers Ltd. Gayton will also continue to oversee capital markets transactions across the Teekay Group.
Mark Kremin, President and CEO of Teekay Gas Group Ltd. commented, “I would like to thank Brody for his dedication to Teekay LNG and particularly his instrumental role in the successful financing of the partnership’s market-leading newbuilding program. I wish him continued success in the transition to his new role where he will serve as a key member of Teekay’s finance team. At the same time, I look forward to working with Scott as we continue executing on Teekay LNG’s strategic plan.”
10
Despite the huge potential from pre-salt basins, Brazil still needs gas imports to cover domestic demand in the next decade. Brazil is forecasted to produce
47 billion m3 of gas in 2030 with low production costs from developments in the Santos and Campos basins. However, as the current offtake capacity from the offshore operations to mainland has already proven to be a bottleneck for marketed gas growth, new infrastructure is critical for future growth. Furthermore, gas demand is extremely volatile and could oscillate between 40 billion m³ and 57 billion m³ by 2030 due to the high dependence on hydropower, which in turn is highly dependent upon precipitation patterns. So while continued pipeline imports from Bolivia and LNG imports are seen, the levels are uncertain. Nevertheless, during normal precipitation years, Rystad Energy forecast that lower Bolivian gas imports will make room for greater growth in LNG imports.
ProductionOver recent years, gas production in Brazil has been growing significantly driven by three main basins: Santos, Campos,
and Espirito Santo. In 2017, natural gas production reached 22 billion m³ per year, compared to 8 billion m³ in 2000. The pre-salt fields located in the Santos basin accounted for approximately 8 billion m³ (or 35%) of Brazil’s marketed gas production in 2017, with the majority of the production coming from the Mexilhao, Iracema, Lula, and Sapinhoa fields. Most of the gas produced from the pre-salt fields is associated gas, and this will be the main driver of supply growth in Brazil 2030. The Buzios, Iara, and Libra fields are forecasted to add almost 14 billion m³ to Brazil’s natural gas production by 2030, driving total production to approximately 47 billion m³ per year.
Due to the lack of offtake infrastructure from the offshore fields to mainland, significant volumes are currently re-injected or flared. These volumes amounted to about 10 billion m³ in 2017, roughly the same as the total pipeline imports from Bolivia. Last year, however, Petrobras was able to reduce re-injected volumes by 1 billion m³ year-on-year as a second pipeline, Route 2, began operating; increasing offtake capacity from the Santos basin by 4.7 billion m³ per year. This comes as an addition to the
Gas imports? Yes please
Carlos Torres Diaz, Xi Nan,
Sindre Knutsson, and Iben Fürst Frimann-Dahl,
Rystad Energy, investigate the natural gas situation
in Brazil.
11
12 July 2018
Route 1 pipeline bringing total capacity to 8.4 billion m³ per year. A third pipeline, with another 6.6 billion m³ per year capacity, is under construction and is expected to start up in 2020 – routing pre-salt gas to the state of Rio de Janeiro where there is high demand for gas. In addition, there are plans to build a fourth pipeline with a capacity of 5.5 billion m³ per year connecting the Santos Basin to Cubatão in São Paulo. With these additions, the total pipeline capacity could increase by 16.8 billion m³ per year and would help eliminate the bottleneck that currently constrains production at the Santos Basin.
ConsumptionNatural gas consumption in Brazil has grown steadily since 1999 when the Bolivia-Brazil pipeline (GASBOL) was commissioned. Brazil consumed 31 billion m³ of natural gas in 2017, which is triple the consumption in 2000 of 9 billion m³. The industrial and power sectors account for roughly 90% of gas demand in Brazil with the remainder taken up by transportation, residential, and others. Although
the industrial sector has been the largest gas consumer historically, the share of industries in the gas consumption mix has dropped to approximately 50% due to a prolonged drought, which caused increased demand in the power sector.
Gas consumption in the power sector in Brazil is volatile and highly dependent on the availability of hydropower. In 2011, a comparatively wet year, the power sector consumed 3.8 billion m³ of gas, which was a 34% drop from 2010. One year after, Brazil entered its worst drought in more than 80 years. Gas-fired plants used 8.4 billion m³ to produce power, a 120% increase from 2011. The impact of unpredictable precipitation patterns makes gas demand in the power sector follow no predictable pattern and leaves gas E&P companies with additional uncertainty. This also makes it very difficult for independent power producers to secure long-term gas supplies to win power auctions.
Historically, 80% of Brazilian power has been produced from hydro plants and 5% from gas plants during normal years. When abundant water supplies were not available in a period of rising temperatures and diminishing precipitation during 2012 and 2015, the hydroelectric share in the power generation mix fell to 60% and gas jumped to 14%. Although power plants burning natural gas were operated at capacity during dry years, millions of people were still hit with power outages. Brazil needs greater diversity in their power generation mix in order to form a stable base load. The Brazilian government has therefore announced its intention to restrict the construction of hydroelectric plants with large reservoirs favouring instead run-of-river hydro capacity and wind power. Rystad Energy forecasts installed capacity from wind power in Brazil will grow to 30 GW in 2030, a 150% increase from the 2017 level. The gas-fired power capacity is expected to grow to 25 GW in 2030 (a modest 20% increase from 2017).
Assuming economic growth remains stable, Rystad Energy expects Brazilian gas demand to increase to 39 billion m³ by 2025 and 44 billion m³ by 2030. Industrial demand will grow at a low rate of 2% per year and achieve 19 billion m³ by 2030. Gas use in road transport is forecasted to increase by 3% per year to 3 billion m³ in 2030, given Rystad Energy’s house view of oil prices trending up towards 2030. In that there is no space heating need in Brazil, Rystad Energy predict that gas demand in residential and commercial sectors will more or less stay the current level. The outlook for gas demand in the power sector remains uncertain. As hydro power highly depends on precipitation which is hard to forecast and additional renewables capacity is preferred over gas, gas for power is expected to arrive at just 19 billion m³ by 2030 in normal years and 31 billion m³ in drought years.
BalancesBased on the forecasted demand during normal years, Rystad Energy see consumption outpacing production despite the large potential from major gas fields. As a result, Brazil is expected to be a net importer until the end of the next decade. Historically, Brazil has had net imports every year since the startup of the GASBOL-pipeline from Bolivia in 1999. The gap between domestic gas demand and domestic production increased through the start of this
Figure 1. Brazilian gas production (billion m3) by basins and field life cycle, 2000 – 2030 (source: Rystad Energy UCube).
Figure 2. Brazilian gas consumption (billion m3) by sector, 2000 – 2030. Consumption in the E&P industry, natural gas processing units and transmission is not included (source: Rystad Energy Gas Market Report).
July 2018 13
century and was especially evident during the production drop around 2006 and the drought years of the early 2010s as can be seen in Figure 3. Net imports to Brazil continued throughout the recent economic downturn despite the drop in gas demand. The future net imports entail a continued dependence upon the main supply sources, Bolivia and LNG.
Bolivia is the main supplier of gas to Brazil. The GASBOL-pipeline has a capacity of 11 billion m³ per year, which also reflects the yearly contracted gas volumes between the two countries. The 11 billion m³ take-or-pay gas contract is held by the two major state-oil companies on either side, Petrobras and YPFB, and has covered Bolivian export volumes through GASBOL since it started up. Although lower delivered volumes were observed in the beginning, the flows from Bolivia to Brazil have increased steadily and have remained around capacity over the last 10 years.
LNG imports, on the other hand, were not possible until the first regasification terminals started up in 2009. Now Brazil has three LNG import terminals: The Pecém, the Guanabara, and the Bahia. The total capacity of these terminals is close to 16 billion m³, but they are dependent upon FSRUs to receive the cargoes. LNG import volumes have varied since 2009 as they have only imported LNG when needed. The highest annual import volume of approximately 7.3 billion m³ was imported during 2014 due to the large need for gas in the power sector.
Argentina has also played a minor role as a gas exporter to Brazil, however, the volumes have been small and they are not forecasted to have sufficient domestic production to cover even their own consumption; let alone export to Brazil.
During the next ten years, both Bolivia and the global LNG market will continue to supply Brazil with gas. However, stable, Bolivian exports are expected to fall and make way for a larger share of LNG volumes. As the Bolivian contract expires next year and there has been talk of reducing the dependence on Bolivian gas, Rystad Energy expect to see lower contracted gas volumes from Bolivia going forward. Unless Bolivia is able to turn around its declining gas production with the recently announced Los Monos gas field, exports to Brazil are expected to drop after 2020 as supplies from the Andean country wane.
This leaves LNG imports to cover the remaining gap. Since future net import volumes above 15 billion m³ are not expected, the current regasification capacity should be sufficient to cover future volumes. However, new planned terminals have already been announced, such as the terminal in Segripe. The global supply of LNG has expanded rapidly during the 2010s, predominantly led by Australia and the US, which has resulted in a looser market. However, Asian appetite for gas during the previous winters has revealed that the market is not as oversupplied as what many believed. And despite seeing proposed global liquefaction projects with a combined capacity of more than 1000 billion m³, the slow sanctioning activity could already cause a tight market in the beginning of the 2020s. As a result, Brazilian LNG prices would have to converge towards Asian LNG prices to attract cargoes.
Rystad Energy expects the Asian Spot LNG price to average approximately US$7.8 per million Btu in 2018, before falling in 2019 and 2020 due to excess supply in the market, which will affect spot prices. However, from the early
2020s the tight market will lead prices to increase to nearly US$9.8 per million Btu in 2025. In comparison, the costs of domestic gas will be significantly cheaper than the price of imported LNG. Currently producing fields in Brazil have an average breakeven price in the range of US$3.3 – 5.4 per million Btu (see Figure 4). Pre-salt fields in the Santos basin are Brazil’s biggest and cheapest source of natural gas with an average breakeven price of US$3.3 per million Btu, emphasising the economic opportunity for Brazil of making these volumes available for the domestic market.
Nevertheless, despite the economic advantage of domestic supplies, the gas volumes brought to the market during the next ten years will not cover the forecasted gas hunger and Brazil will look outward for additional supplies. However, the change in the pace of production from 2025 will lead domestic production to catch up with demand and result in declining imports. Therefore, Brazil has the potential to enter the following decade as a net exporter of natural gas.
Figure 3. Brazilian gas supply/demand balance (billion m3), 2000 – 2030 (source: Rystad Energy research and analysis, Rystad Energy UCube, Minas e Energia).
Figure 4. Cost of supply curve (US$/million Btu, billion m3) for Brazilian natural gas basins by life cycle. P/UC: Producing/under construction, D: Discovery (source: Rystad Energy research and analysis, Rystad Energy UCube).
THAT WAS A SAMPLE OF
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