Ratko Vasiljević

Leading Geologist in ECOINA Ltd
Last Updated: March 12, 2018
1 view
Gas & LNG
image

Pre conference troduction

Mart 7 and Mart 8 CEE (Central and East European) Gas Conference will be held in Zagreb Croatia. The title of conference is 8 predictions on the future of the Central & Eastern European gas market. The conference will The bring together regional and international industry stakeholders, gas suppliers, TSOs, regulators, government members, commercial executives and industry consultants - to share insights, meet new and existing customers and suppliers, and capitalise on the opportunities presented by these dynamic markets.

The conference is organised by Croatian national Oil Company INA, East West Institute, Energy Community, LNG Croatia, LNG Allies, Tellurian, National Croatian Gas Distribution Company – Plinacro and CEGH.

The Conference comes in time when Gas production in Croatia from Pannonian Basin and North Adriatic Offshore has trend of decrease. At the moment, domestic production satisfies approximately 60% of Croatian needs, but without further investment in Exploration and Production, this percentage will decrease, and in the future Croatian dependences on imported gas will grow.

Certain reserves of gas can be storage in Underground Gas Storage Okoli, and in the future is new peak Underground Gas Storage is planned.

Another supply direction is planned from new floating LNG terminal that should be installed at Island Krk (Primorsko – Goranska County).

This conference comes only four days after demonstration against new LNG terminal were held in Rijeka City, the capitol of the Primorsko Goranska County.

Regarding all emerging issues, I expect to see interesting discussion at this conference.

At the end, special thanks to the Company NRG Edge, Singapore ( www.nrgedge.net ), that enables me to be there as their representative. 


CEE Gas Conference Day 1. 

CEE Gas Conference, Hotel Sheraton, Zagreb.  

Gas conference started wary intensively, after Welcome words by Organiser, Minister of Economy And president of the board of the Croatian national oil company INA, sessions started with LNG Croatia Keynote by Goran Frančić, Managing Director LNG Croatia.

The most important information’s were on public discussion on Environmental Impact Assessment on LNG Terminal in Omišalj (Island Krk) held on Monday.

According to dynamics, they expect location permit by the end of April, and expected finalising the project was predicted by the end of 2019.

At the moment conceptual project is finalized, and the main project is ongoing.

Due economical feasibility, according to National energetic institute Hrvoje Požar, it is expected to be feasible in capacities between 700 x 106 Sm3/year to 900 x 106 Sm3/year.

Since the present domestic production of gas at the moment satisfies 40% of needs, 60 % came from the import, mostly from Russian Federation.

LNG in long term will enable diversification of supply and consequently expected decrease of prices.

In spite that LNG ensure more expensive gas than pipeline, for LNG terminal it needs to be liquefied and after gasified, supply by pipeline is often covered by risks of global political situation, unfair prices, etc. The good example was the problem of Russian Gas supply through the Ukraine several years ago.

At the territory of European Union, at the moment 25 LNG terminals are operative, and which can increase the offer of natural gas, respectively, LNG terminals can be a factor of price and supply balance.

The main question on LNG terminal is sustainability, which depends of price, time of installation and total capacity. One negative example is LNG terminal in Tuscany, built in relatively long period of 5 years with total expenses of about   850 x 106 EUR.

With maximum expected expenses for LNG terminal in Omišalj of about 200 x 106 EUR, it should be feasible in capacities of about 109 Sm3/year .

Spreading of market for LNG has a big space in transportation sector, for example, large Italian truck producer IVECO, produce LNG driven vehicles.

LNG terminal at Island Krk will be performed in two phases, in the first phase it is planned to be installed offshore as floating terminal with total capacity of 5 – 6   x 109 Sm3/year , and in second phase it is planned to be installed onshore with total capacity of 6 – 8   x 109 Sm3/year. The main problem of location of the LNG terminal was a land owning. More than year ago, the owners weren’t even known so to avoid problems with interrupting properties, it was planned to install offshore terminal. During the last year, all surfaces was bought, so onshore LNG terminal, as previously was planned, and was chosen to be built.

Since the LNG business is according to opinion of majority of visitors is driven by politics rather than market, it was suggested to rebrand LNG project from Croatian to regional or EU project, which will enable integration of non EU countries into the system (Serbia, Albania, Bosnia and Herzegovina, etc.).  The main problems in that part are bureaucracy and infrastructure. In this part it was pointed as a question what was first chicken or egg, respectively, what should be first infrastructure or the offer?

The other problem is legislative, possible new more restrictive environmental legislative for Mediterranean area,  the similar problem appeared in Poland where new legislative literarily driven majority of energetic investors out of country, from 14 of them, only 2 or 3 left.

The environmental regulative for EU predicts a use of natural gas as a transfer fuel toward renewable in next 20 to 25 years, and use of natural gas was planned to decrease. This represents a problem for investments in new pipelines, roads, etc, since this is a relatively short period. In spite of that it is expected that gas demand will grow, and price will depend primarily on Chinese needs.

USA has the great interests on LNG export, since they expect significant increase of shale gas production in following years.  Their formal attitude is that they don’t force anyone for buying their LNG since them already has a big market in South America and Asia.

At the moment in Croatia, domestic gas production decreases rapidly so it will be necessarily to invest in further exploration and production. The most perspective area is Adriatic offshore, but the further investigation is expensive. So national Croatian Oil company INA, search for partners, but applications are expected after new Law on Hydrocarbons will be ratified in Parliament, which can be done even by the end of March.


CEE Gas Conference Day 2. 

CEE Gas Conference, Hotel Sheraton, Zagreb.  

Second day of the conference was planned to encircle question oh transportation, regulatory framework, forming of prices at the market, hubs and regulations.

Regarding traffic issue, it was pointed that this topic in the past usually wasn’t considered, or if it was it was mostly at the margins. At this conference transportation issue was a part of it, and in the future it is expected that it will be more and more important.

 At European Union CO2 emissions reached a level from 1999, only in traffic sector they have a trend of growth. This is important since 1/3 of all CO2 emissions came from traffic. At the maritime traffic, regulation on protection of Mediterranean Sea (MARPOL Convention) requires continuous decrease of the pollutant.

Maritime traffic was recognised as a great market niche for the LNG, but at the conference was pointed a question on Chicken or Egg, does ships needs to be driven by LNG or to install appropriate terminals first? Of course it would be ideal if it would be simultaneously.

Generally after investment in maritime transport, there is a lot of space for spreading LNG toward a road transportation, which was recognised in Italy, so their truck producer IVECO started to produce trucks driven by the LNG, recently Scania and Volvo joined into race, and Volvo developed a truck driven by new bi fuel engine, diesel and LNG. In Italy it is expected that 1 million tons of LNG per year will be used in traffic by 2030.

The main problem for the LNG market in Europe is a regulation, first of all the regulatory is issued in Bruxelles. At the moment, it is expected that energy efficiency will rise up to 35% by 2030, and new upcoming regulative on Renewable energy and Energy efficiency will influence to the business in the future.

The main spreading of the LNG infrastructure is expected to be between 2025 and 2035, and it is important to include all stakeholders, distributors, final users, traders, etc. That means the LNG represents a big business opportunity in the future.

The issue of LNG prices is a question should it be regulated according to oil prices, should it be separated from oil, should it be regulated by state or by market?

State monopoly doesn’t allow creation of market price, but if gas business turns from national to regional, what is a vision of the EU, it will enable to include more players on the market, attract investors, create more hubs which will enable greater flexibility in gas supply. In this constellation upstream can also jump in directly to distribution on the market.

In spite of importance of market influence, energetic projects can’t be a 100% market driven because they need to ensure security of distribution toward final users.

Some options of financing are private financing, financing by European Bank Of Reconstruction and Development, Structural Funds, Horizon 2020 (Only for research).

European Investment Bank is interested in financing of such projects, and between 2014 and 2016 it financed a gas infrastructure in 1.6 billion euro. For application of financing, EIB in energy projects, take a special care to Carbon Footprint and their threshold for financing is 150 g of CO2 per kWh.


Post conference Conclusion

The main target of the CEE gas conference in Zagreb was development of the LNG – terminals, infrastructure, discussion of potential market chances. LNG represents more expensive option in compare to pipeline gas. On the other hand it enables flexibility of gas supply, and decrease potential risks of global politic situation, which are higher in pipeline transport. On the other hand potential solution for feasibility achievement are market spreading toward border and non EU countries, toward a new sectors such as production of electricity and a new fuel for transportation. These projects in Croatia are unfortunately influenced by politics which can use a demonstration for collecting points. The main issue in Croatia is still a communication between investors and stakeholders. At the moment I prepare this report, demonstrations against new LNG terminal in Omišalj (Island Krk) were held. New LNG terminal brings more expensive gas, but in the other hand enable diversification of supply. This will be important in upcoming years due depletion of domestic gas production. In the introduction I wrote that domestic production covers approx. 60% of gas needs (2 years old data), but at the conference it was pointed that today it covers no more than 40% and still decline.

 New LNG project can set Croatia as a regional leader in energy distribution, but it should be performed fast and efficient.

Prepared by

Dr.Sc. Ratko Vasiljević, Grad.Eng.Geol.

LNG Gas Central East Europe Traffic Hub Gas Market
3
7 3

Something interesting to share?
Join NrgEdge and create your own NrgBuzz today

Latest NrgBuzz

“Lubricants Shelf” to Assess Engine Oil Market

Already, lubricant players have established their footholds here in Bangladesh, with international brands.

However, the situation is being tough as too many brands entered in this market. So, it is clear, the lubricants brands are struggling to sustain their market shares.

For this reason, we recommend an impression of “Lubricants shelf” to evaluate your brand visibility, which can a key indicator of the market shares of the existing brands. 

Every retailer shop has different display shelves and the sellers place different product cans for the end-users. By nature, the sellers have the sole control of those shelves for the preferred product cans.

The idea of “Lubricants shelf” may give the marketer an impression, how to penetrate in this competitive market. 

The well-known lubricants brands automatically seized the product shelves because of the user demand. But for the struggling brands, this idea can be a key identifier of the business strategy to take over other brands.

The key objective of this impression of “Lubricants shelf” is to create an overview of your brand positioning in this competitive market.

A discussion on Lubricants Shelves; from the evaluation perspective, a discussion ground has been created to solely represent this trade, as well as its other stakeholders.

Why “Lubricants shelf” is key to monitor engine oil market?

The lubricants shelves of the overall market have already placed more than 100 brands altogether and the number of brands is increasing day by day.

And the situation is being worsened while so many by name products are taking the different shelves of different clusters. This market has become more overstated in terms of brand names and local products.

You may argue with us; lubricants shelves have no more space to place your new brands. You might get surprised by hearing such a statement. For your information, it’s not a surprising one.

Regularly, lubricants retailers have to welcome the representatives of newly entered brands.

And, business Insiders has depicted this lubricants market as a silent trade with a lot of floating traders.

On an assumption, the annual domestic demand for lubricants oils is around 100 million litres, whereas base oil demand around 140 million litres.

However, the lack of market monitoring and the least reporting makes the lubricants trade unnoticeable to the public.

February, 20 2019
Your Weekly Update: 11 - 15 February 2019

Market Watch

Headline crude prices for the week beginning 11 February 2019 – Brent: US$61/b; WTI: US$52/b

  • Oil prices remains entrenched in their trading ranges, with OPEC’s attempt to control global crude supplies mitigated by increasing concerns over the health of the global economy
  • Warnings, including from The Bank of England, point to a global economic slowdown that could be ‘worse and longer-lasting than first thought’; one of the main variables in this forecast are the trade tensions between the US and China, which show no sign of being solved with President Trump saying he is open to delaying the current deadline of March 1 for trade talks
  • This poorer forecast for global oil demand has offset supply issues flaring up within OPEC, with Libya reporting ongoing fighting at the country’s largest oilfield while the current political crisis in Venezuela could see its crude output drop to 700,000 b/d by 2020
  • The looming new American sanctions on Venezuelan crude has already had concrete results, with US refiner Marathon Petroleum moving to replace Venezuelan crude with similar grades from the Middle East and Latin America
  • While Nicolas Maduro holds on to power, Venezuela’s opposition leader Juan Guaido has promised to scrap requirements that PDVSA keep a controlling stake in domestic oil joint ventures and boost oil production through an open economy when his government-in-power takes over
  • Despite OPEC’s attempts to stabilise crude prices, the US House has advanced the so-called NOPEC bill – which could subject the cartel to antitrust action – to a vote, with a similar bill currently being debated in the US Senate
  • The see-saw pattern in the US active rig count continues; after a net loss of 14 rigs last week, the Baker Hughes rig survey reported a gain of 7 new oil rigs and a loss of 3 gas rigs for a net gain of 4 rigs
  • While demand is a concern, global crude supply remains delicate enough to edge prices up, especially with Saudi Arabia going for deeper-than-expected cuts; this should push Brent up towards US$64/b and WTI towards US$55/b in trading this week


Headlines of the week

Upstream

  • Egypt is looking to introduce a new type of oil and gas contract to attract greater upstream investment into the country, aiming to be ‘less bureaucratic and more efficient’ with faster cost-recovery, ahead of a planned Red Sea bid round encompassing over a dozen concession sites
  • Lukoil has commenced on a new phase at the West Qurna-2 field in Iraq, with 57 production wells planned at the Mishrif and Yamama formation that could boost output by 80,000 boe/d to 480,000 boe/d in 2020
  • Aker BP has hit oil and natural gas flows at well 24/9-14 in the Froskelår Main prospect in the Alvheim area of the Norwergian Continental Shelf
  • Things continue to be rocky for crude producers in Canada’s Alberta province; production limits were increased last week after being previously slashed to curb a growing glut on news that crude storage levels dropped, but now face trouble being transported south as pipelines remain at capacity and crude-by-rail shipments face challenging economics

Midstream & Downstream

  • The Caribbean island of Curacao is now speaking with two new candidates to operate the 335 kb/d Isla refinery after its preferred bidder – said to be Saudi Aramco’s American arm Motiva Enterprises – withdrew from consideration to replace the current operatorship under PDVSA
  • America’s Delta Air Lines is now reportedly looking to sell its oil refinery in Pennsylvania outright, after attempts to sell a partial stake in the 185 kb/d plant failed to attract interest, largely due to its limited geographical position

Natural Gas/LNG

  • Total reports that it has made a new ‘significant’ gas condensate discovery offshore South Africa at the Brulpadda prospect in Block 11B/12B in the Outeniqua Basin, with the Brulpadda-deep well also reporting ‘successful’ flows of natural gas condensate
  • Italy’s Eni and Saudi Arabia’s SABIC have signed a new Joint Development Agreement to collaborate on developing technologies for gas-to-liquids and gas-to-chemicals applications
  • The Rovuma LNG project in Mozambique is charging ahead with development, with Eni looking to contract out subsea operations for the Mamba gas project by mid-March and ExxonMobil choosing its contractor for building the complex’s LNG trains by April
February, 15 2019
SHORT-TERM ENERGY OUTLOOK

Forecast Highlights

Global liquid fuels

  • Brent crude oil spot prices averaged $59 per barrel (b) in January, up $2/b from December 2018 but $10/b lower than the average in January of last year. EIA forecasts Brent spot prices will average $61/b in 2019 and $62/b in 2020, compared with an average of $71/b in 2018. EIA expects that West Texas Intermediate (WTI) crude oil prices will average $8/b lower than Brent prices in the first quarter of 2019 before the discount gradually falls to $4/b in the fourth quarter of 2019 and through 2020.
  • EIA estimates that U.S. crude oil production averaged 12.0 million barrels per day (b/d) in January, up 90,000 b/d from December. EIA forecasts U.S. crude oil production to average 12.4 million b/d in 2019 and 13.2 million b/d in 2020, with most of the growth coming from the Permian region of Texas and New Mexico.
  • Global liquid fuels inventories grew by an estimated 0.5 million b/d in 2018, and EIA expects they will grow by 0.4 million b/d in 2019 and by 0.6 million b/d in 2020.
  • U.S. crude oil and petroleum product net imports are estimated to have fallen from an average of 3.8 million b/d in 2017 to an average of 2.4 million b/d in 2018. EIA forecasts that net imports will continue to fall to an average of 0.9 million b/d in 2019 and to an average net export level of 0.3 million b/d in 2020. In the fourth quarter of 2020, EIA forecasts the United States will be a net exporter of crude oil and petroleum products by about 1.1 million b/d.

Natural gas

  • The Henry Hub natural gas spot price averaged $3.13/million British thermal units (MMBtu) in January, down 91 cents/MMBtu from December. Despite a cold snap in late January, average temperatures for the month were milder than normal in much of the country, which contributed to lower prices. EIA expects strong growth in U.S. natural gas production to put downward pressure on prices in 2019. EIA expects Henry Hub natural gas spot prices to average $2.83/MMBtu in 2019, down 32 cents/MMBtu from the 2018 average. NYMEX futures and options contract values for May 2019 delivery traded during the five-day period ending February 7, 2019, suggest a range of $2.15/MMBtu to $3.30/MMBtu encompasses the market expectation for May 2019 Henry Hub natural gas prices at the 95% confidence level.
  • EIA forecasts that dry natural gas production will average 90.2 billion cubic feet per day (Bcf/d) in 2019, up 6.9 Bcf/d from 2018. EIA expects natural gas production will continue to rise in 2020 to an average of 92.1 Bcf/d.

Electricity, coal, renewables, and emissions

  • EIA expects the share of U.S. total utility-scale electricity generation from natural gas-fired power plants to rise from 35% in 2018 to 36% in 2019 and to 37% in 2020. EIA forecasts that the electricity generation share from coal will average 26% in 2019 and 24% in 2020, down from 28% in 2018. The nuclear share of generation was 19% in 2018 and EIA forecasts that it will stay near that level in 2019 and in 2020. The generation share of hydropower is forecast to average slightly less than 7% of total generation in 2019 and 2020, similar to last year. Wind, solar, and other nonhydropower renewables together provided about 10% of electricity generation in 2018. EIA expects them to provide 11% in 2019 and 13% in 2020.
  • EIA expects average U.S. solar generation will rise from 265,000 megawatthours per day (MWh/d) in 2018 to 301,000 MWh/d in 2019 (an increase of 14%) and to 358,000 MWh/d in 2020 (an increase of 19%). These forecasts of solar generation include large-scale facilities as well as small-scale distributed solar generators, primarily on residential and commercial buildings.
  • In 2019, EIA expects wind’s annual share of generation will exceed hydropower’s share for the first time. EIA forecasts that wind generation will rise from 756 MWh/d in 2018 to 859 MWh/d in 2019 (a share of 8%). Wind generation is further projected to rise to 964 MWh/d (a share of 9%) by 2020.
  • EIA estimates that U.S. coal production declined by 21 million short tons (MMst) (3%) in 2018, totaling 754 MMst. EIA expects further declines in coal production of 4% in 2019 and 6% in 2020 because of falling power sector consumption and declines in coal exports. Coal consumed for electricity generation declined by an estimated 4% (27 MMst) in 2018. EIA expects that lower electricity demand, lower natural gas prices, and further retirements of coal-fired capacity will reduce coal consumed for electricity generation by 8% in 2019 and by a further 6% in 2020. Coal exports, which increased by 20% (19 MMst) in 2018, decline by 13% and 8% in 2019 and 2020, respectively, in the forecast.
  • After rising by 2.8% in 2018, EIA forecasts that U.S. energy-related carbon dioxide (CO2) emissions will decline by 1.3% in 2019 and by 0.5% in 2020. The 2018 increase largely reflects increased weather-related natural gas consumption because of additional heating needs during a colder winter and for additional electric generation to support more cooling during a warmer summer than in 2017. EIA expects emissions to decline in 2019 and 2020 because of forecasted temperatures that will return to near normal. Energy-related CO2 emissions are sensitive to changes in weather, economic growth, energy prices, and fuel mix.

U.S. residential electricity price

  • West Texas Intermediate (WTI) crude oil price
  • World liquid fuels production and consumption balance
  • U.S. natural gas prices
  • U.S. residential electricity price
  • West Texas Intermediate (WTI) crude oil price
February, 13 2019