It’s possible that I shall make an ass of myself. But in that case one can always get out of it with a little dialectic. I have, of course, so worded my proposition as to be right either way (K.Marx, Letter to F.Engels on the Indian Mutiny)
LNG has its critics in environmental circles, but its fiscal attractiveness is clear, according to industry advocacy group SEA-LNG. Setting aside any debate about LNG's environmental merits, it will be the least-cost option for boxship owners who need to meet EU compliance requirements for GHG reduction, the group argues in a newly-released analysis.
LNG is one of the most affordable marine fuels under normal market conditions, and it has a lower emissions profile than HFO or VLSFO. Using SEA-LNG's estimate for LNG's well-to-wake greenhouse gas reduction benefit - about 20 percent below VLSFO - switching to LNG is itself enough to comply with the FuelEU Maritime GHG reduction requirements out through the year 2039. After that, operators would have to blend in varying proportions of costlier bio-LNG and e-LNG. (E-LNG may be the most expensive alternative fuel, according to the Maersk McKinney-Moller Center for Zero Carbon Zhipping).
As the proportion of "green" fuel in the blend goes up to meet strengthened requirements, so does the cost for compliance - except for ammonia, which declines in price and becomes cheaper than a 50 percent gray / 50 percent renewable LNG mix by 2050. Blue ammonia (produced from natural gas with carbon capture) comes out as the most cost-effective option by midcentury, but not before.
"It is clear from this analysis that the LNG pathway to compliance offers massively lower fuel costs than that for both the methanol and ammonia pathways, particularly in the first 15 years of the vessel’s life – a period critical for vessel financing decisions. The methanol pathway is approximately 2.5 times more expensive and the ammonia pathway, 2.5 to 3.5 times more expensive," concluded SEA-LNG.
Reducing methane slip
Most of the debate around LNG's climate effectiveness centers on methane emissions. Natural gas is mostly methane, a gas with substantially higher warming potential than CO2, and a percentage escapes during upstream extraction, transport and liquefaction. LNG-powered ships also emit varied amounts of methane during operation, with the amount dependent on engine type and operating profile.
This last emissions category - methane slip - has captured the public debate for years, with some environmental groups arguing that it makes LNG an unattractive alternative. Though this debate gets headlines, it may soon be over. The industry's biggest players are quietly working to eliminate engine emissions of LNG by 2030, according to Steve Esau, SEA-LNG's chief operating officer.
"There are a number of companies on the shipping side and the OEM side who are investing a significant amount of money to measure where the operational emissions are coming from on board ship, and then looking at solutions for addressing those," says Esau. "That would be a combination of operational solutions and pre- and post-combustion technologies to deal with methane slip. And I think they're very confident that methane slip will be eradicated by the end of the decade."
Wednesday, August 07, 2024
Big Oil Doubles Down on LNG as Renewables Falter
ANY EXCUSE WILL DO
By Irina Slav - Aug 06, 2024Supermajors are scaling back renewables projects and investments due to poor returns compared to LNG.
Big Oil prioritizes growing its LNG business, seeing strong demand for natural gas in the medium to long term.
Renewables commitments falter as European oil and gas firms focus on energy security amid the energy crisis and skyrocketing prices.
The supermajors continue to bet on LNG while scaling back renewables projects and investments as oil and gas returns continue to trump the poor profits from renewables.
The world’s top international oil and natural gas firms are sanctioning new LNG projects and buying stakes in new developments as they see demand for natural gas growing in the medium to long term.
Bound by the pledges to return more cash to shareholders, Big Oil is betting on growing its much more lucrative LNG business than on wind, solar, or biofuels, where returns have been poor for years and haven’t really taken off despite soaring global capacity additions.
In recent years, LNG trading has reaped a lot of profits for the European majors, while nearly all of them have had to take impairment hits on renewables projects in Europe and the U.S.
The LNG market is set to see a wave of new supply from 2026 and could be oversupplied from 2026-2027 until the end of the decade. Yet, Big Oil is confident that demand will be there and that their trading strategies and the moves to lock in customers from LNG projects will pay off.
Renewables Commitment Falters
At the same time, Europe’s top oil and gas firms haven’t seen improved market and business conditions to warrant the major push into renewables they had pledged before the energy crisis and skyrocketing prices in 2022 upended plans and shifted the focus onto energy security.
BP, for example, booked a pre-tax impairment charge of $540 million in the third quarter last year related to U.S. offshore wind projects. BP and Equinor’s filing to renegotiate the power purchase agreements associated with the Empire Wind 1 and 2 and Beacon Wind 1 wind farms off the coast of New York was rejected.
BP said in June that it was scaling back this year’s plans for the development of new sustainable aviation fuel (SAF) and renewable diesel biofuels projects at its existing sites, pausing planning for two potential projects while continuing to assess three for progression.
“This is aligned with bp’s drive to simplify its portfolio, focusing on value and returns,” the UK-based supermajor said.
Weeks later, the other UK-based giant, Shell, said it was pausing on-site construction work at a biofuels plant in Rotterdam amid weak market conditions, taking a $780-million impairment charge for the second quarter for this.
The pause at the 820,000 tons-a-year biofuels facility at the Shell Energy and Chemicals Park Rotterdam in the Netherlands was needed “to address project delivery and ensure future competitiveness given current market conditions,” the company said.
LNG Bet
At the same time, both Shell and BP, as well as France’s TotalEnergies, are looking to further grow their LNG portfolios by raising their own liquefaction volumes and gaining access to additional third-party volumes.
“In our Integrated Gas business, we said we would continue to grow our LNG portfolio by increasing both our liquefaction and access to third-party volumes,” Shell’s CEO Wael Sawan said last week when the company reported better-than-expected earnings for the second quarter.
Shell has extended existing partnerships in Oman, invested in backfills in Manatee in Trinidad and Tobago, and agreed to acquire Pavilion Energy in Singapore to increase portfolio length, the executive of the world’s top LNG trader added.
Shell also leads the LNG Canada joint venture project in Kitimat, British Columbia, where it is “working hard to achieve first production” by the middle of 2025, Sawan said.
In addition, Shell, BP, TotalEnergies, and Japan’s Mitsui have just signed a deal with Abu Dhabi’s ADNOC to take 10% each in the Ruwais LNG project in the UAE as international partners.
BP works towards building an LNG portfolio of 30 million tons by 2030, up from 23 million tons of long-term LNG portfolio last year. The company is looking at long-term contracts and at short-term market opportunities, Carol Howle, EVP, trading and shipping at BP, said on the earnings call last week.
TotalEnergies has also been busy sanctioning LNG projects in recent months. The French group gave the green light to the Marsa plant in Oman, Marsa LNG, as well as the Ubeta gas project in Nigeria, which will supply Nigeria LNG.
“These projects will not only contribute to the objective to grow our upstream by 2% to 3% per year in the next five years, but they will also boost the underlying free cash flow generation and ultimately shareholder distributions,” CEO Patrick Pouyanné said on TotalEnergies’ earnings call.
“I think there is a fundamental structural demand coming from India, and we are convinced that the Indian market will take the relay I would say, for the traditional, Korea, Japan, and even China,” Pouyanné added.
LNG demand in China is becoming more seasonal as Beijing is “moving very quickly on these renewables, continuing to increase its coal production,” the executive noted.
Big Oil is positioning for a major boost in global LNG demand as a way to earn more money from their core business amid low or negative returns in the renewable energy industry.
By Tsvetana Paraskova for Oilprice.com
Monday, August 22, 2022
Adam Pankratz: Natural gas is the elephant in the room that Trudeau and Scholz are ignoring
Special to National Post -
This week, German Chancellor Olaf Scholz is visiting Canada. Many items will be on his agenda with Prime Minister Justin Trudeau but one critical item is blatantly missing: liquified natural gas. Failure to discuss an LNG deal during this meeting is a further demonstration of a wanton and failing energy policy from both sides. The only question is, who is worse? The one whose country is currently paying €250 per megawatt hour for gas (more than 10 times what it was last year) or the one whose country is sitting on trillions of cubic meters of the stuff, yet can’t get it to market?
Canada’s proven gas reserves as of 2020 amounted to 2.4 trillion (yes, with a “T”) cubic meters of gas. That’s 83 trillion cubic feet if you prefer imperial. We also produce 165 billion cubic meters of gas annually, making us the fifth largest producer of gas in the world. Yet, despite our incredible reserves and large production we fail time and time again to get market value for our product.
Current price differentials in the LNG market boggle the mind. AECO, the Alberta or Canadian reference price, has fluctuated between $4 and $5 per gigajoule in recent months, most recently dropping below $2. They could even turn negative in September. Meanwhile, in the United States, the reference price of Henry Hub currently sits at a touch over $12 or US$9/MMBtu. While this differential may be enough to drive Canadian producers mad, it pales in comparison to what Europe is paying for gas with current prices over the equivalent of $90/MMBtu.
The reason for this differential blowout is simple: Canada lacks the infrastructure to get our gas to the world. With Canada’s LNG unable to be exported due to lack of pipelines and terminals our gas is held captive by our own domestic market. Our LNG should be transported all over the world to get the highest price but right now it remains largely trapped within our borders. Since Russia’s Ukraine invasion oil and gas prices worldwide have risen enormously. But in Europe, gas prices have soared more than anything else because of the lack of supply options other than Russia. Europe deserves heavy blame for their lack of gas substitutes and Europeans will suffer heavily this winter because of bad political judgement, particularly in Germany.
Canada may not have been able to affect European decision making but we do control our own destiny. Regardless, in past years, governments have shirked and ignored the huge LNG opportunity for enviro-political gain.
In British Columbia, there were multiple LNG projects proposed in recent years, but ultimately only one, with much delay and struggle — LNG Canada — has made it through the province’s byzantine regulatory and consultation process. Still not complete, LNG Canada will allow Canadian gas to access the world market for the first time, ever. On the East Coast there is no LNG export terminal, despite multiple attempts to build one. In February, Ottawa nixed Énergie Saguenay’s proposed LNG facility, which had been in the works since 2014. It was crushed just in time to watch Russia invade Ukraine two weeks later and use gas as an economic weapon.
We can bowdlerize with polite insinuations of a missed LNG opportunity, but the reality is that Canada’s performance on LNG has been short-sighted, ideological, unrealistic and foolish. There has been little concrete leadership by politicians who have more broadly preferred a starry-eyed, half baked approach to LNG policy discussions. Oil and gas are not disappearing anytime soon and it’s time Canadian policy started to reflect that reality.
Even those resistant to oil should be able to recognize that LNG is the next enormous economic opportunity for Canada. LNG is the bridge fuel which can replace coal, while producing at least 40 per cent fewer emissions than coal and about 25 per cent less than oil. This gives us a cleaner burning alternative as we transition (over decades) towards fully renewable energy. If there is a more economically and environmentally compelling argument in the world today, I have not seen it.
But there is also a moral and societal argument here in Canada as well. That argument is the huge economic opportunity LNG represents for First Nations communities in Canada, and particularly in British Columbia. LNG Canada and the Coastal Gas Link (CGL) will bring in billions of dollars in royalties and jobs to these communities. Multiple Indigenous leaders have spoken on the importance of this issue for their communities, including Crystal Smith of the Haisla Nation, Karen Ogen-Toews, CEO of the First Nations LNG Alliance, and Ellis Ross, Haisla member and MLA for Skeena.
LNG is here to stay as an important energy source for longer than many unrealistic politicians would like to admit. For over a century we have been using fossil fuels to grow and prosper; that will not change overnight. LNG will have a decades-long run ahead as a reliable, transition fuel. This is an opportunity Canada cannot miss. We must develop, in conjunction with indigenous communities, more pipelines, more gas wells and more LNG export terminals so that our precious resources find equitable prices in the growing world market. Any politician who can’t find space for an LNG discussion in their agenda today is woefully failing their citizens.
Adam Pankratz is a lecturer at the University of British Columbia’s Sauder School of Business and is on the board of directors of Rokmaster Resources.
Saturday, May 13, 2023
ALL CAPITALI$M IS STATE CAPITALI$M
South Korea Expands Support for Shipbuilders as Challenges Grow
Ministers announced additional support during a visit to the HD Hyundai shipyard in Ulsan (file photo)
The South Korean government announced a series of new initiatives planned to further support the domestic shipbuilding industry. Government officials cite the strong orderbook built over the past two years as the industry rebounded and leadership in what they term “high-value” ships while also recognizing the growing competition and need to develop new technologies.
Minister of Trade, Industry, and Energy, Lee Chang-yang outlined the plans to support the industry with further investments during a tour of the HD Hyundai Heavy Industries shipyard in Ulsan on Wednesday, May 10. Supported by the Ministry of Justice and the Financial Services Commission, he said the government would be expanding its investments to support the development of new technologies while also increasing the foreign worker programs and providing new financial support programs all designed to expand South Korea’s position in the industry.
Previously the government had launched programs to support research and development of advanced technologies including ammonia, hydrogen, and electric propulsion. They have also outlined programs to support training and recruitment to meet the long-term employment needs and address the current shortage of skilled workers.
The announcement of the new programs comes as the shipbuilding industry is under pressure as global orders have slowed since late 2022. Clarkson Research in its latest monthly update highlighted that April saw the lowest monthly level in three years, with just 80 ships (1.85 million compensated gross tons) ordered, a 62 percent decline over a year earlier and a 44 percent decline versus the previous month. South Korea’s shipyards received orders for only 13 ships, 20 percent of the market, while China grew its market share to 70 percent.
Minister Lee however highlighted that South Korean shipbuilders currently have orders for nearly 40 million tons or 35 percent of the order backlog. He pointed to the $9.4 billion in orders booked in the first three months of the year and a 12-year high of 38.68 million CGT in March, enough to “generate income for the next three years.” Korea won 70 percent of the high-value and green shipping orders in March, including 17 of the 19 LNG carriers ordered worldwide. The Minister expects the industry will generate $21.5 billion in exports this year alone.
"The world has a close eye on our shipbuilders' technology and manufacturing capability, and the business environment is changing favorable to us, with ship prices rising and more demand for environment-friendly vessels," Lee said during his presentation. "The government will spare no effort to support the industry's rebound and for market leadership in the future.”
To address the labor shortage, the government said that approximately 5,500 foreign workers had entered South Korea so far this year. They have already reached a third of the industry’s goal of 14,000 foreign workers this year with the government promising more efforts to simplify visa and labor regulations.
Other programs include investments of approximately $135 million for R&D of new technologies. The government looks to expand efforts in autonomous shipping and eco-friendly designs to continue the leadership in high-value shipbuilding. The Financial Services Commission is also expanding finance programs designed to extend more support to medium-sized shipbuilders. More state-run and commercial lenders will be involved to ensure more access to financing for the large and medium-sized shipbuilders as well as increase the guarantee rate for shipbuilders to protect from contacts terminated due to a builder’s default.
The ministers said the industry is coming back from years of an industry-wide recession but it will be critical to maintain South Korea’s competitive price, quality, and technological advantages.
Korea Commissions LNG Bunker Vessel with Domestic Containment System
Blue Whale employs a domestically designed containment system and tanks (Ministry photo)
South Korea christened its new domestically designed and built liquified natural gas bunker vessel this week. The ship marks a milestone as it incorporates the country’s newly developed second-generation LNG containment system. The goal was to develop a domestic technology that will be competitive on the international market and provide a marketing advantage for Korean shipbuilders.
Christened the Blue Whale, the vessel has the capacity to provide 7,500 cubic meters of LNG fuel directly to vessels, which represents an advancement as it replaces up to 250 trucks required to deliver the same amount of LNG. The vessel was built in a project led by Korea LNG Bunkering which is a subsidiary of KOGAS, which in turn was selected by the Ministry of Trade, Industry and Energy in 2020. The government provided a subsidy of $11.7 million to support the development and construction of the bunker vessel with the new tank design and technology
The completion of the ship marks a 20-year effort by Korea to develop a domestic LNG containment system. Officials noted that while their shipyards continue to be a leader in the construction of LNG carriers, they and their competitors continue to license containment technology at a cost of up to $7.5 million per vessel. The goal of the project was to end Korean dependence on technologies from French giant GTT, the world’s leading company in the design and construction of LNG tanks and containment systems.
“We will be able to secure advanced, high-value homegrown cargo technology, as the Blue Whale will verify the KC-2 system for commercialization,” said Korea’s Ministry of Trade, Industry and Energy.
The new system is the second attempt by the South Koreans in a project that began in 2004 when Korea Gas Corporation in partnership with Daewoo Shipbuilding and Marine Engineering, Hyundai Heavy Industries, and Samsung Heavy Industries, began to jointly develop LNG tanks with support from the government.
The first product, the KC-1 LNG tank technology, took 10 years to develop and was adapted for use on four domestic ships, but structural defects caused gas leakages, and installation of the tank on carriers was halted. Based on lessons learned with the KC-1 membrane technology, the Korean government launched a second project in 2017 to upgrade the system to come up with the advanced KC-2 tank design.
The Blue Whale will be operated by Hyundai LNG Shipping after winning a bidding contest in January for the right to run the vessel. It will be employed for bunkering and will undergo a rigorous series of tests and demonstrations. Korea expects to commercialize the KC-2 technology to provide a new competitive advantage in the sector.
Korean shipyards continue to be the leader in shipbuilding for gas carriers although China has begun to compete for new orders. The Blue Whale was built by Hyundai Heavy Industries at the Ulsan Shipyard at a cost of $41.7 million. Hyundai Heavy Industries highlights that it has built a total of 100 LNG ships to date and that it currently has orders for 58 of the 155 LNG carriers to be built worldwide.
HMM Enters Bidding to Acquire Hyundai LNG Shipping
Hyundai LNG introduced Korea's first LNG carrier 30 years ago and became independent during Hyundai's liquidity crisis (Hyundai LNG Shipping)
HMM has reportedly decided to enter the bidding to acquire its former LNG shipping operation that was spun off a decade ago during the company’s liquidity crisis. The Korea Herald is reporting on Friday that HMM notified IMM Holdings, owners of the gas carrier, of its intent to enter the bidding and to begin a due diligence process.
South Korea’s largest LNG carrier, Hyundai LNG Shipping was put up for sale by the investment company that has owned it since 2014. IMM reported its plans to sell the company it had acquired for a reported $375 million a decade ago opening the bidding process in March. Since then, an initial list of 20 potential buyers has reportedly been narrowed to four, with all of them being foreign companies. Media report said the potential buyers are located in the United States, the UK, Denmark, and Greece, with bidding expected to be completed later this month.
HMM reportedly had sought to buy the gas carrier at the end of 2022 but could not agree on a price and gain the support of its two large shareholders. IMM then placed the company up for sale, but recently there have been objections because of the critical role the company plays in the import of LNG to Korea. The shipping industry recently objected to the government over the possible foreign sale of Hyundai LNG Shipping. Reports said that the government is also considering the ramifications of a foreign sale and looking to possibly block it on the grounds of national security.
HMM is also currently beginning a process to be privatized by its owners Korea Development Bank and the Korea Ocean Business Corporation, both government institutions that had become the largest shareholders during a financial rescue of the company then known as Hyundai Merchant Marine. The banks recently named a group of advisors to structure the sale process for HMM. It is expected that they might launch bidding later this year for the carrier.
The company which is today primarily a container carrier had previously reported its strategy was to grow its operations including in bulk shipping. In July 2022, HMM detailed a five-year strategy calling for $11.4 billion in investments that would double its container capacity. They also said investments would be made to increase the bulk fleet, which includes 10 VLCC crude oil tankers as well as one Suezmax, two chemical tankers, and one LNG carrier. HMM also has a fleet of dry bulkers for iron ore and coal transport.
Hyundai LNG Shipping reports it launched Korea’s first LNG carrier in 1994. After the IMM acquisition in 2014, they won a transportation contract with KOGAS and more recently began expanding the fleet including with LPG carriers. Earlier this year they took delivery on three VLGCs built by Hyundai Samho Heavy Industries with two more due for delivery later this year. The total fleet will consist of 16 LNG carriers and six LPG carriers. They also recently launched Korea’s first LNG bunker vessel.
The Korea JoongAng Daily is reporting that the bidding process for Hyundai LNG Shipping will now be delayed to permit HMM to enter a proposal. IMM had previously said it had not received a reasonable financial offer from a Korean company but that it is not opposed to selling the company to Korean investors at a fair price.
Friday, August 09, 2024
Gasum and Equinor Collaborate on Bio-LNG Operations for OSV
Island Crusader operating under charter to Equinor is pioneering in the use of Bio-LNG (Gasum)
Gasum, the Nordic energy company owned by the State of Finland, is collaborating with Equinor on a series of liquefied biomethane (bio-LNG) bunkering operations in the Port of Dusavik, in Stavanger, Norway. The latest bunker, which was carried out in mid-July, expands on the earlier tests in 2021 which made the OSV Island Crusader the first offshore supply vessel operating on the Norwegian shelf running on biofuel.
The first bio-LNG delivery was successfully carried out in mid-July. Gasum reports it will continue to supply the Island Crusader with two to three truckloads of bio-LNG approximately every other week. Each truckload contains about 22 tons of bio-LNG.
Built in 2012 by Vard, the Island Crusader (4,750 dwt) is a pioneer using an innovative LNG hybrid battery technology. The vessel is fueled by pure LNG but also features an 896 kWh battery pack, which further improves its environmental performance. Owned by Island Offshore, it is operating under charter to Equinor to support its offshore operations.
Engine manufacturer Bergen Engines initially conducted tests on land to certify the engines for a switch to biofuel. A pilot project in October 2021 then confirmed that biogas can be used on LNG engines without any modifications.
Gasum highlights that biogas can be used in all the same applications as natural gas, including as a road and maritime transport fuel and as energy for industry. The biogas is a fully renewable and environmentally friendly fuel with life-cycle greenhouse gas emissions that are, on average, 90 percent lower when compared with fossil fuel use. It is produced from waste feedstocks such as biowaste, sewage sludge, manure, and other industrial and agricultural side streams and the by-product of biogas production is also high in nutrient content that can be used in industry and agriculture.
The operation is a pioneering step said Gasum as it works to procure more renewable gas to satisfy the increasing demand for sustainable energy. Gasum’s goal is to offer 7 TWh of renewable gas to its customers yearly by 2027, including biomethane and e-methane. A large portion of this volume relies on establishing long-term partnerships with certified biogas producers throughout Europe. Achieving this goal would mean a combined carbon dioxide reduction of 1.8 million tons per year for Gasum’s customers.
GFI LNG and Pilot LNG Form Joint Venture to Develop Salina Cruz LNG
The Salina Cruz LNG JV will develop, construct and operate an LNG bunkering and transshipment terminal in Salinas del Márquez, Salina Cruz, Oaxaca, Mexico. Strategically located on the Pacific side of the Panama Canal, the project is ideally positioned to
GFI LNG LP (GFI), a diversified energy solutions company, and Pilot LNG LLC (Pilot), a Houston-based clean energy infrastructure developer, today announced that they have formed a partnership to develop, construct, and operate a small-scale LNG terminal in Salina Cruz, Mexico.
At full build-out, the facility is anticipated to produce 600,000 gallons of liquified natural gas (LNG) per day, or roughly 0.34 million metric tonnes per annum (MTPA). The partners anticipate operations to commence in mid-to-late 2027.
With speed-to-market in mind, the project is being designed to include modular, land-based liquefaction equipment and an optimized storage solution. The project will deploy a floating storage unit (FSU) with an estimated capacity ranging from 50,000 – 140,000 m3 to be moored inside the newly expanded breakwater in the Port of Salina Cruz.
Salina Cruz will use domestic Mexican gas supply from the Veracruz gulf region to access new high-value markets along the Pacific Coast. These premium markets include: LNG marine fuel deliveries at the Pacific entry of the Panama Canal and into Southern California (the Ports of Long Beach & Los Angeles), sales into Central American power markets, and trucked volumes in the local region of southwestern Mexico. Salina Cruz customers can expect to benefit from competitively priced, Henry Hub-linked LNG sales.
GFI, a Houston-based energy company, has over 20 years of continuous commodity sales of natural gas, refined products, and electricity into Mexico.
“The infrastructure planned in Salina Cruz will not only provide LNG to growing markets seeking cleaner fuel, but will also bring millions in direct community investment to the region” said Gomez. “We are pleased to be adding the LNG and marine expertise of Pilot to the development team. Thanks to our new partnership with Pilot, we look forward to bringing this facility to Salina Cruz.”
Led by LNG veterans with extensive experience in project development, Pilot aims to deliver LNG to new and existing markets across the world and develop a global portfolio of projects. “With long personal ties to the region, the GFI team is dedicated to helping bring infrastructure development to Salina Cruz and brings a critically necessary understanding and appreciation for the local community and government,” said Jonathan Cook, CEO of Pilot. “We are pleased to be working with GFI to help progress this project.”
GFI and Pilot plan to commence front-end engineering and design development for the project this quarter. The partners anticipate a 12-18 month development and permitting timeline and anticipate announcing a Final Investment Decision (FID) in the second half of 2025.
The products and services herein described in this press release are not endorsed by The Maritime Executive.
Maersk Cautiously Optimistic as It Plans Fleet Renewal Including Bio-LNG
Maersk's newest ship passing the older fleet as the company plans to accelerate its fleet renewal (Maersk)
Maersk provided investors with additional details on its outlook while reporting a better-than-expected second quarter and sounding optimistic while emphasizing continued market uncertainty. After starting 2024 with a cautious note, the second largest container shipper reports higher than expected volumes and rates led it to raise its forecast to an operating profit of between $3 and $5 billion for the year. It made $1.1 billion in the first half of 2024.
Making the rounds through the major media outlets, CEO Vincent Clerc said the company had been surprised by the resilience of the container market moving from the pandemic to the decline in rates and volume in 2023, and now the disruptions in the Red Sea. He said the second quarter for Maersk was fueled by strong market demand and volume growth across all its segments and stabilization as the market absorbs the ongoing disruptions in the Red Sea region.
Maersk said profitability was building back in its ocean shipping operations largely driven by higher freight rates which helped them to achieve a 5.6 percent margin despite higher operating costs. The added distances of sailing around Africa drove fuel consumption and costs to an all-time high. Shippers Maersk also believes have accelerated their business fearing a range of issues from further disruptions to port congestion due to the impact on schedules. They also pointed to the potential for a trade war between the U.S. and China as the U.S. moves to raise tariffs and the further impact of the U.S. presidential election.
Moving into the third quarter, Clerc said they would benefit from the full effect of the higher rates. With a significant contract business, he said the full rate impact was yet to come for Maersk.
“Our results this quarter confirm that performance in all our businesses is trending in the right direction. Market demand has been strong, and as we have all seen, the situation in the Red Sea remains entrenched, which leads to continued pressure on global supply chains. These conditions are now expected to continue for the remainder of the year,” said Clerc.
Speak on CNBC he said the company did not see signs of a potential U.S. recession, noting the strong growth in Chinese exports. He predicted that the global container market will grow between 4 and 6 percent up from their earlier force of 2.5 to 4.5 percent growth. However, Maersk is also uncertain if there will be a further rush to move Christmas merchandise or if shippers have already built inventories for the year-end sales. Clerc said he believes freight rates have peaked with the easing of congestion and new capacity into the segment.
Maersk, unlike many other large carriers, has been slow on new orders with Alphaliner highlighting that five of the top 10 carriers now have larger orderbooks. CMA CGM is forecast by many to be set to surpass Maersk moving into the second position behind MSC Mediterranean Shipping. Maersk has also avoided the rush to the 24,000-plus TEU mega-ships.
Clerc said today however the company is set to accelerate a fleet renewal program. Maersk told investors it is increasing its capital forecast by $1 billion annually to $10 to $11 billion due to its continuous fleet renewal program.
While it is not finalized, the company said it is close to orders for 50 to 60 new containerships. Clerc however emphasized it is a fleet renewal saying the target is to execute with the existing fleet size of 4.1 to 4.3 million TEU. The company plans a renewal pace of 160,000 TEU annually and said it would have orders for 800,000 TEU this year for delivery in 2026 to 2030. They expect to build owned vessels with 300,000 TEU capacity and charter the additional 500,000 TEU of capacity.
The company has been adamant that its strategy for new orders was to only order new, owned vessels that come with a green fuel option. Clerc however admitted today that multiple fuel technologies are likely as the sector moves forward with Maersk saying “The exact split of propulsion technologies will be determined considering the future regulatory framework and green fuel supply.”
Maersk would not rule out orders for LNG-fueled ships and told investors it has commenced the work of securing offtake agreements for liquified bio-methane (bio-LNG). The company said its goal with the renewal program is to increase to 25 percent of its fleet equipped with dual-fuel engines.
Maersk has also raised its 2024 estimate saying it should provide at least $2 billion in free cash flow from its operations. While Clerc confirmed they had withdrawn from the bidding for DB Schenker, he said they continue to actively explore acquisitions for the land side of the business. The strategy remains a diversified logistics company balancing the ocean business with growth in the logistics sectors.
Thursday, November 02, 2023
Europe's Liquefied Natural Gas Buildout Collides With Waning Demand
Yale Environment 360 Wed, November 1, 2023 A liquefied natural gas import terminal near Porto Levante, Italy.
MARCO SABADIN / AFP VIA GETTY IMAGES
As part of its efforts to wean itself off Russian energy, Europe has sought to import more natural gas from overseas, erecting new terminals for processing deliveries of liquefied natural gas. But this new capacity is set to far exceed demand, an analysis finds.
With war roiling energy markets, Europe has aimed to swap gas delivered by Russian pipeline for liquefied natural gas (LNG) delivered by ship, largely from the U.S. and Qatar. From the beginning of last year, Europe has added six new LNG terminals, expanded an existing terminal, and restored a dormant terminal.
But much of that new infrastructure may prove unnecessary as European gas consumption declines, according to the Institute for Energy Economics and Financial Analysis. Europe’s recent efforts to build out renewables and curb gas consumption are paying off. After a surge in imported LNG in 2022, it has seen imports flatten out this year.
IEEFA
With new LNG infrastructure still coming online, the analysis found, Europe will be able to import 406 billion cubic meters of natural gas by 2030, slightly more than the 400 billion cubic meters of natural gas it is projected to consume in total.
“The decline in gas demand is challenging the narrative that Europe needs more LNG infrastructure to reach its energy security goals,” said analyst Ana Maria Jaller-Makarewicz. “The data is showing that we don’t.”
Experts have warned that new LNG infrastructure could incentivize future consumption of natural gas even as countries must cut fossil fuel use to avert dangerous climate change. A new report from the International Energy Agency finds that the global buildout of LNG infrastructure threatens to create a supply glut, which could cause prices to crater later this decade. Chevron in talks on 15-year LNG supply contracts into Europe
Thu, November 2, 2023 FILE PHOTO: Illustration shows Chevron logo and natural gas pipeline
By Ron Bousso
LONDON (Reuters) - Chevron is negotiating contracts to supply liquefied natural gas (LNG) into Europe for up to 15 years as buyers expect the region to rely on imports for longer than previously thought, an executive at the U.S. oil and gas company said.
The new willingness by buyers to agree on long-term supply deals comes after several European governments rolled back some green policies citing higher costs and economic concerns.
European imports of the super-chilled fuel surged after Russia halted pipeline gas exports in the wake of Moscow's invasion of Ukraine last year.
Buyers initially sought short-term LNG supply of up to 5 years due to the uncertainty in the market and countries' ambitions to reduce their reliance on fossil fuels.
But that has changed as the focus on securing energy supplies grew, Colin Parfitt, head of Chevron's trading, shipping and pipeline operations, told Reuters on Wednesday.
"There's been an evolution over the past 18 months from short-term and spot supply deals to longer term commitment," Parfitt said.
"After Russia-Ukraine, the initial thoughts we were getting out of Europe were 'we only want LNG for a short period of time because of the energy transition'. What I've seen happening in the last year is that lengths of contracts customers are willing to sign have been extended," Parfitt said.
"European customers want medium-term deals in the up to 15 years space and we're working on some commercial deals."
Last month, Shell and TotalEnergies agreed on two separate 27-year LNG supply deals into Europe with Qatar, one of the world's top producers.
Chevron will supply most of the LNG from the United States, which has become a major LNG exporter following the shale boom in recent years.
U.S. LNG exports hit their second highest level on record in October, with Europe remaining the principal buyer.
In the short term, Parfitt said the European market looked well supplied ahead of winter.
"In the short term European gas looks well supplied, softer than last year but with risk of volatility if you get a cold winter in Europe, cold winter in Asia, risks to supply as well as geopolitics."
(Reporting by Ron Bousso; Editing by Emelia Sithole-Matarise) New Fortress Energy may need to reapply for Mexico LNG permit -US
Wed, November 1, 2023
By Curtis Williams
HOUSTON (Reuters) - The U.S. Department of Energy (DOE) has warned New Fortress Energy if any portion of its Altamira floating liquefied natural gas (LNG) project is located onshore Mexico, the company will have to resubmit its application for an export permit.
New Fortress's $1.3 billion Altamira LNG project was expected to start shipping the superchilled gas this month under an export permit issued in June. If the company must reapply for a U.S. export permit, it could further delay the two-phase project.
New Fortress did not immediately reply to a request for comment submitted through its website.
The company has received a U.S. license to export Altamira's LNG to Free Trade Agreement (FTA) countries, but not the larger set of non-FTA countries. New Fortress has proposed many LNG projects that use converted offshore oil production rigs to support LNG processing.
Altamira was originally designed with two facilities - Fast LNG1 on converted oil platforms and Fast LNG2 on three fixed platforms. The entire project is set to be Mexico's first producing and exporting LNG facility. It would use U.S.-sourced gas, the DOE wrote.
"If the project site and design have been modified such that FLNG2 will be located onshore in Mexico instead of offshore, NFE Altamira is required ...to request an amendment of its FTA order," the department wrote on Oct. 30.
The DOE's letter pointed to a corporate press release and an Oct. 16 securities filing that suggested the project was a hybrid, with FLNG1 located offshore and FLNG2 set onshore.
The configuration requires clarification, the DOE added, since it might not meet the terms of the export license that governs both parts.
In June, Mexico's government granted NFE a permit to export up to 7.8 million metric tons through April 2028.
Its existing U.S. FTA authorization allowed it to supply LNG to Mexico and other countries with free trade pacts. The project awaits a decision on its application for a non-FTA export permit.
(Reporting by Curtis Williams in Houston; Editing by Josie Kao)
Exclusive-Electricity constraints force Canada's first LNG terminal to delay renewable shift
Mon, January 16, 2023 By Rod Nickel and Nia Williams
(Reuters) -Shell PLC's LNG Canada export project in British Columbia plans to start building its proposed second phase with natural gas-powered turbines and switch to electricity as more renewable power becomes available, a top executive said, a decision that means the expansion project will initially generate high greenhouse gas emissions. LNG Canada, in which Japan's Mitsubishi Corp owns a 15% stake, is set to be Canada's first liquefied natural gas (LNG) export terminal. The first phase is expected begin shipments around 2025.
With global demand for natural gas from sources other than Russia accelerating after its invasion of Ukraine last year, LNG Canada is weighing whether to build by 2030 a second phase to double annual capacity to 28 million tonnes.
LNG Canada now plans to initially build Phase 2 with natural gas-powered turbines and switch to electric motors as more power becomes available, pending a final investment decision, CEO Jason Klein told Reuters on Friday.
LNG Canada has previously described this approach as only one of the options it was considering.
The company's move to only gradually switch to renewable electricity risks means the Phase 2 project would produce initially high emissions that would run up against ambitious emissions reduction goals set by the British Columbia and federal governments.
Running the turbines using B.C.'s hydro electricity to cool the gas to liquid for shipping would limit emissions, but requires hundreds of kilometers of new transmission lines to reach the province's remote northwest coast.
"We can't do an immediate and wholesale electrification of the plant and the pipeline. It's not possible today because the transmission infrastructure just isn't there," Klein said, adding that LNG Canada is discussing with both governments and utility BC Hydro when lines may be in place.
"If the power was there today it would be a pretty straightforward decision."
LNG Canada's dilemma illustrates the practical challenges of a global push to electrify buildings and vehicles to curb climate-warming emissions. The move requires the world's grid to generate significantly more power and build infrastructure to deliver it.
Klein said LNG Canada had not directly asked for financial assistance from either government to build transmission lines and electrify Phase 2, and is still assessing the project's economics.
"I wouldn't expect to be able to attract capital to a project that's not competitive," Klein said.
LNG Canada has full environmental permits from both governments to use natural gas turbines for Phase 2, making it unclear what leverage governments have to force electrification.
Government cooperation is critical to constructing transmission lines, however.
"It would be difficult to make an investment on this scale without some level of alignment and the support of host governments," Klein said. CLIMATE GOALS
Russia's invasion of Ukraine upended gas deliveries to Europe, prompting a scramble for alternative supplies. Some of Canada's allies, including Germany and Japan, have asked Prime Minister Justin Trudeau to play a major role in increasing LNG supplies.
Ottawa wants to develop a Canadian LNG industry to boost the economy, but has also pledged to cut emissions by at least 40% by 2030.
The terminal, which LNG Canada says would have the lowest emissions intensity in the world, will emit 4 million tonnes of greenhouse gases annually with both phases based on natural gas power. That's the equivalent of 0.6% of Canada's total 2020 emissions.
Electrifying Phase 2 is expected to be more expensive than using natural gas. But buyers may pay more for LNG produced with lower emissions, Klein said, noting that some buyers already purchase carbon offsets for LNG cargoes.
He said he is satisfied the province of B.C. can generate enough electricity for the terminal - the issue is how quickly it can build new transmission lines and how that would impact Phase 2 costs.
Mora Scott, a BC Hydro spokesperson, said the utility expects to have more than enough power until the end of the decade and is planning for scenarios including rapid growth from mining and LNG development.
Future LNG projects need to fit within B.C.'s climate goals, the province's ministry of energy said in a statement, while federal Environment Minister Steven Guilbeault said it was up to B.C. to decide what to do with its electricity.
LNG production accounts for only 15% of the greenhouse gases associated with it, and the rest enters the atmosphere when consumers burn the gas, suggesting the governments' emphasis on electrification of the terminal is misplaced, said Bruce Robertson, an analyst at the Institute for Energy Economics and Financial Analysis, an independent energy research group.
"This is a classic example of how perverse carbon accounting is," he said. "The LNG industry in Canada is conveniently excluding where most of the emissions occur." (Reporting by Rod Nickel in Winnipeg and Nia Williams in British Columbia, additional reporting by Allison Lampert in Montreal, editing by Denny Thomas and Deepa Babington)
