Daily Digest: March 17th, 2020

ASIA PACIFIC MAY SEE $1BN CUT IN EXPLORATION SPEND: WOODMAC

The oil price crash and the Covid-19 outbreak will lead to a cut in exploration spend in the Asia Pacific (Apac) of up to $1bn from an expected level of $4.5bn this year, Wood Mackenzie Asia Pacific vice-chair, Gavin Thompson said in a note.

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The Big Picture:

• Most explorers will delay campaigns where a rig has not yet been committed or if the well economics at $35/b fail company thresholds,” Thompson said. At time of press, Brent crude was trading at $30/b.

• Only around one in seven prospects in Apac breakeven below $35/b, and most of those are smaller near-field prospects. With fewer wells drilled, Asia can expect a rising import requirement in future years, he said.

• The biggest blow will be felt in Australia where companies are aiming to sanction large, strategically important backfill LNG investments in 2020. Significant projects in southeast Asia will also be pushed back, Thompson said.

• Among those projects targeting FID in 2020, Australia's Scarborough, operated by Woodside, and Barossa, operated by Santos, account for 52% of unsanctioned spend and 48% of reserves. 

LNG CANADA SLOWING KITIMAT WORK

Canada’s only active liquefaction project, the Anglo-Dutch Shell-led LNG Canada project at Kitimat, on BC’s northern coast, is slowing work at the site in light of the global Covid-19 pandemic.

The Big Picture:

• The number of staff actually on the ground in Kitimat will gradually be reduced to half of current levels over the coming weeks, LNG Canada said, primarily by reducing the number of workers flying in on rotation.

• Coastal GasLink, which is in the early stages of construction on the 670-km pipeline that will feed the LNG Canada plant, is also restricting on-site staff, in the field and in the office, to those in critical operations, including construction.

KOSMOS EYES 30% CUT IN 2020 CAPEX

Texan oil and gas producer Kosmos Energy aims to slash its capital expenditure for this year by around 30% to $250mn, in response to current market volatility.

The Big Picture:

• In a statement, the company said it had identified more than $100mn of discretionary planned spending, mostly relating to exploration activities in the Gulf of Mexico and its basin-opening exploration portfolio, that could be cut.

• Kosmos is a partner in the Greater Tortue Ahmeyim (GTA) LNG development off the coast of Mauritania and Senegal. The company said it was working with GTA's operator BP on deferring planned capital spending in 2020 relating to the project's first phase, sanctioned in December 2018.

SONATRACH, CHEVRON INK MOU

Algerian state-run Sonatrach and Chevron have signed a memorandum of understanding to initiate joint discussions on the opportunities concerning the exploration, development and exploitation of oil and gas in Algeria in particular following the promulgation of the new Algerian hydrocarbons law, Sonatrach said March 16.

The Big Picture:

• As per the MoU, the two companies will also work on the transfer of technology and know-how in various segments of the oil and gas industry.

• Algeria’s new hydrocarbon law was passed late last year and preserves Sonatrach’s equity position in contracts at 51%, allowing foreign companies to hold 49%.

• Earlier this month, Sonatrach and Italy's Eni signed a deal on the marketing of dry gas from the Zemoul El Kbar licence at block 403.

SIEMENS WINS 3RD TURBINE ORDER FROM BELARUS

Germany's Siemens has secured a third gas turbine order from Belarus in three months, this time for five SGT-800 gas turbines, along with associated auxiliary and electrical systems, it said March 16.

The Big Picture:

• They will be part of a 254-MW peak load and backup power plant in the former Soviet republic.

• Belarus produces almost all its electricity using gas, which it received at a discounted rate from Russia.

• The company also reported that it had won a joint contract worth €130mn ($145mn) to supply equipment for Novatek's Obsk LNG project.

CANADIAN, JAPANESE PORTS TO PROMOTE LNG AS FUEL

The Vancouver Fraser Port Authority and Japan’s Tomakomai Port Authority March 5 signed a memorandum of understanding to promote the use of LNG as a marine fuel and work on LNG bunkering services at the Port of Vancouver and Port of Tomakomai, Port of Vancouver said March 13.

The Big Picture:

• The development of LNG bunkering services in the Port of Vancouver and Port of Tomakomai will enable the adoption of LNG as a marine fuel by ships engaged in trans-Pacific trade, Port of Vancouver said.

• The Port of Vancouver and the Port of Tomakomai will exchange information and expertise on LNG bunkering, including technical procedures and best practices, and where feasible, coordinate port requirements and guidelines for LNG bunkering to facilitate the use of LNG marine fuel in both ports.

GOLAR POWER TO ESTABLISH BRAZILIAN LNG HUB

Golar Power, a joint venture between Norway's Golar LNG and US-based Stonepeak Infrastructure Partners, has signed a protocol of intentions with Brazil's Pernambuco state government on developing an LNG import terminal in the Brazilian port of Suape, it said on March 16.

The Big Picture:

• Golar Power's plan envisages establishing Suape as a hub for LNG distribution in northeast Brazil. Access to gas will benefit the economies of Pernambuco's interior cities that lack pipeline access, it said.

• Work will commence in the second half of 2020 on the project, which will include infrastructure for the supply of gas and LNG for electricity generation and to meet the demands of industries, commerce, LNG stations and households.

• In November Avenir LNG, a partnership between Golar LNG and fellow Norwegian firms Hoegh LNG and Stolt-Nielsen, announced it would collaborate with Golar Power on developing Brazil's small-scale LNG market. Stonepeak is an investor in Venture Global's US liquefaction projects.