Daily Digest: March 12th, 2020

LOW OIL PRICES MAY BOOST ASIAN GAS DEMAND: WOODMAC

Sustained lower oil prices will substantially lower the price of gas for consumers, which have been at a premium to hub-priced gas in recent times. This could make gas competitive with coal in Japan and South Korea and encourage coal-to-gas switching in the power sector, Wood Mackenzie said in a note published March 11. 

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The Big Picture:

• Oil prices have seen a sharp fall in recent days following Saudi Arabia's decision to slash prices to refiners and go for market share.

• Oil prices lost more than a quarter of their value on March 9, marking the biggest single-day loss since the 1991 Gulf War.

• “In Asia, the fall in oil prices will start to affect the pricing of gas under long-term contracts from late 2020. This could start to have a major impact on the competitiveness of gas in major Asian markets like Japan and South Korea,” it said.

RENEWABLE ENERGY OVERTAKES GAS IN UK POWER

Renewable electricity generation was 28.8 TWh in Q3 2019, up 16% on the 24.7 TWh in Q3 2018, according to the most recent government statistics. The share of total electricity generation from renewables – 38.9% – is the highest recorded and marginally exceeds the share of generation from gas for the first time.

The Big Picture:

• The increase was largely due to increased load factors for wind as well as increased renewable capacity.

• Onshore wind generation rose by 24% with offshore wind increasing by 43%, the highest increase across the technologies.

SANTOS SELLS OZ DARWIN LNG STAKE TO SK E&S

Australian producer Santos said it had agreed on the $390mn sale of 25% stakes in the 3.24mn mt/yr Darwin LNG export plant and the Bayu-Undan gas field that supplies it to South Korea's SK E&S.

The Big Picture:

• The deal is conditional on Santos completing its takeover of ConocoPhillips' northern Australia and Timor-Leste business, which will raise its share of Darwin LNG and Bayu-Undan from 11.5% to 68.4%, and its stake in the Barossa and Caldita fields from 25% to 62.5%.

• It will also depend on third-party consents, regulatory approvals and a final investment decision being taken at Barossa, expected to underpin a potential expansion at Darwin LNG.

TULLOW SLIMS DOWN AFTER 'INTENSE' YEAR OF LOSSES

UK Tullow made a loss after tax of $1.69bn but a gross profit of $759mn on revenues of $1.68bn in 2019, it said.

The Big Picture:

• The group is now being restructured to create an effective and efficient organisation which will see 35% of the employees leave, as it aims for cost reduction of about $200mn.

• It is planning a 45% reduction in the exploration budget and a 30% or so cut in capital expenditure this year, to $350mn. And it is eyeing in excess of $1bn of proceeds from asset sales.

• Tullow said it was working successfully with the government of Ghana to increase gas offtake and improve production at both Jubilee and TEN.

MITSUBISHI TO SWITCH US COAL PLANT TO GAS/HYDROGEN MIX

Japan's Mitsubishi Hitachi Power System (MHPS) has received a contract to supply two M501JAC power trains for the Intermountain Power Plant (IPP) in Delta, Utah, from the Intermountain Power Agency, MHPS' US division said in a statement on March 10.

The Big Picture:

• The power trains will include gas turbines, steam turbines and heat recovery steam generators and auxiliary equipment. The trains will enable the station to switch from coal to gas and eventually renewable hydrogen.

• The goal is to run the 840-MW plant entirely on this hydrogen by 2045.

OMV SHIFTS FOCUS WITH ASSET SALES, PURCHASES

Austria's OMV announced it planned to sell its remaining shares in gas pipeline operator Gas Connect Austria to the country's biggest power company Verbund and divest its filling station business in Germany. It also reported striking a deal to increase its stake in Borealis, one of Europe's biggest petrochemical producers.

The Big Picture:

• Gas Connect operates a 900-km pipeline grid in Austria. It is responsible for the marketing and provision of transport capacity at border points, as well as capacity for meeting domestic demand.

• "With this potential sale, OMV intends to exit the regulated gas transport business in line with its strategy and engage in proactive portfolio management to secure continued profitable growth."