‘Gas OPEC’ holds glut talks

[ The National ]
by Tamsin Carlisle

Eleven of the world’s leading gas exporters have met in Algeria to discuss how to cope with a supply glut that could last for years.


The Gas Exporting Countries Forum (GECF), which has been dubbed the “gas OPEC”, appears to be growing more organised. But there was little evidence yesterday it would agree on a workable strategy for propping up sagging spot market prices for natural gas.

Algeria, which is hosting the meeting at its port of Oran, near the country’s biggest liquefied natural gas (LNG) export terminal, has for the first time called for supply cuts.


But other big exporters including Russia and Qatar seemed unconvinced this week that such a move would be effective, and wanted to discuss how to prevent the ready availability of spot supplies from undercutting long-term contracts. The UAE is not a member of the forum.

In the run-up to yesterday’s ministerial meeting, Chakib Khelil, the Algerian energy minister, had softened his stance and was no longer talking explicitly about cutting exports.


“A new model of co-operation is to be devised, beneficial to all,” Mr Khelil said before the meeting. “I think we should work towards a stable international gas trade through efficient use of world energy resources.


“The elements we should discuss today could constitute the basis for the definition of all possible options for implementation of all appropriate strategies for their achievement.”

Mr Khelil blamed the significant drop in spot market gas prices, which have fallen 28 per cent in the US since the start of this year to about $4 per million British thermal units, on the global economic crisis and new production technologies that have unlocked large volumes of unconventional “shale gas” in the US, ending the country’s reliance on imports.


A “fair” price for gas, he proposed, would be based on thermal equivalency with oil, giving a gas price of between US$13 and $14 per million British thermal units when crude is priced at $80 a barrel.

Abdullah al Attiya, the Qatari energy minister, said on Sunday he shared Mr Khelil’s position on “the question of fair gas prices”.


“The most important thing for us is to establish an appropriate price for gas indexed to the price of oil,” Mr al Attiya said.


Sergei Shmatko, the Russian energy minister, said gas producers should work together to limit the impact of spot sales on their long-term deals, as consumers sought to reduce what they purchased under long-term contracts, making up the difference with cheaper spot supplies.

“The spot market is also important, but it should not start to compete with long-term contracts in the form that is happening today,” Mr Shmatko said.


“We supply within the framework of long-term contracts, and we believe that other suppliers should or could express their approach to that and join with us.”


The GECF, made up of the holders of 70 per cent of the world’s gas reserves, has never before co-ordinated supply policy. Analysts said the group was now being forced to consider such action because the unexpectedly low prices were squeezing their export revenues.

Russia holds the world’s largest gas reserves and is the leading gas exporter, while Qatar is the biggest LNG exporter. Algeria is also a major gas exporter by pipeline and tanker, and was among the first countries to export LNG.


The GECF was expected to issue a statement after the meeting.


tcarlisle@thenational.ae




The original version of this story stated that the UAE was a member of the Gas Exporting Countries Forum. In fact, it is not a member.

Indonesia Power Report Q3 2008

[ pr-inside ]

The new Indonesia Power Report from BMI forecasts that the country will account for 2.08% of Asia Pacific regional power generation by 2012, with an increasing generation shortfall that provides a growing import requirement. BMI’s Asia Pacific power generation estimate for 2007 is 6,865 terawatt hours (twh), representing an increase of 9.6% over the previous year. We are forecasting an increase in regional generation to 9,370twh by 2012, representing a rise of 36.5%. Asia Pacific thermal power generation in 2007 is estimated by BMI at 5,431twh, accounting for 79.1% of the total electricity supplied in the region.

Our forecast for 2012 is 7,104twh, implying 46.6% growth that reduces the market share of thermal generation to 75.8% – thanks partly to environmental concerns that should be promoting renewables, hydro-electricity and nuclear generation. Indonesia’s thermal generation in 2007 was 135twh, or 2.49% of the regional total. By 2012, the country is expected to account for 2.52% of thermal generation. For Indonesia, oil is the dominant fuel, accounting for 47.5% of 2007 primary energy demand (PED), followed by gas at 26.5%, coal at 24.3% and hydro with a 1.7% share of PED. Regional energy demand is forecast to reach 4,830mn tonnes of oil equivalent (toe) by 2012, representing 37.3% growth over the period.

Indonesia’s 2007 market share of 3.10% is set to fall to 2.98% by 2012. Indonesia is moving ahead slowly with controversial plans to build its first nuclear power plant, which could be operational by 2017. Indonesia is now ranked sixth, just behind Malaysia in BMI’s updated Power Business Environment rating, reflecting to its low level of energy import dependence and healthy power consumption growth prospects. Several country risk factors offset some of the industry strength, and the country may struggle to keep Philippines and Thailand at bay over the longer term. BMI is now forecasting Indonesian real GDP growth averaging 5.83% per annum between 2007 and 2012, with a 2008 forecast of 6.10%. Population is expected to expand from 231.6mn to 245.3mn over the period, with GDP per capita and electricity consumption per capita both forecast to increase significantly.

The country’s power consumption is expected to increase from 173twh in 2007 to 282twh by the end of the forecast period, leaving a shortfall in generation rising from an estimated 26twh in 2007 to 87twh in 2012, assuming 7.1% annual growth in generating capacity. Between 2007 and 2018, we are forecasting an increase in Indonesian electricity generation of 90.7%, which is among the highest for the Asia Pacific region. This equates to 35.1% in the 2013-2018 period, up from 32.6% in 2007-12. PED growth is set to fall from 25.8% in 2007-12 to 24.0%, representing 63.8% for the entire forecast period. An increase of 168% in hydro-power use during 2007-18 is a key element of generation growth. Thermal power generation is forecast to rise by 88% between 2007 and 2018. More details of the long-term BMI power forecasts can be found in the appendix of this report.

Author:
Mike King

RI may earn $6b in revenue from Senoro LNG plant

[ The Jakarta Post ]
Ika Krismantari, Jakarta

The government is projected to earn up to US$6 billion in revenue under a 15-year production split scheme for the LNG plant in Senoro, Central Sulawesi, a source close to the deal says.

The revenue is based on a production split arrangement, under which the government will gain 85 percent, while the Senoro block operators -- state oil and gas firm PT Pertamina and Medco Exploration and Production (E&P) -- will gain 15 percent, Medco E&P president director Lukman Mahfoedz said Tuesday.

The plant uses a complicated downstream business structure, under which the gas producers -- Pertamina and Medco -- will sell the gas to LNG plant owners Pertamina, Medco and Japanese firm Mitsubishi, who will then sell the liquefied gas to third parties.

The LNG plant is 51 percent owned by Mitsubishi, 29 percent by Pertamina and 20 percent by Medco.

Lukman said construction of the LNG plant, designed to produce a total capacity of two million tons per annum, could begin in the first quarter next year.

Construction costs are estimated at around $1 billion, with the plant expected to start production in the second quarter of 2011.

It was earlier reported that gas from the LNG plant would be exported to Japan despite increasing domestic demand, according to Pertamina vice president director Iin Arifin Takhyan.

The fact that a Japanese company, Mitsubishi, is involved in the Senoro LNG project as a majority shareholder supports the idea LNG from the plant would be shipped there, Iin said.

Japan, one of the country's biggest gas buyers, is hoping Indonesia will continue to supply LNG.

Japan reportedly demanded the continuity of Indonesia's gas exports in the economic partnership agreement (EPA) recently signed between the two countries.

However, Indonesia will only be able to commit an export total of three million tons per year after the current contracts end in 2010.

Under existing contracts, Indonesia supplies 12 million tons of LNG a year to Japan.