The head of BG’s Canadian unit tells WSJ the delay is the result of shifting market conditions such as a flood of LNG expected to hit global markets from places such as the U.S., where BG has agreements to market gas from two LNG facilities.
BG had expected to begin construction in 2016 on the $11B first phase of a LNG plant in British Columbia and start commercial production by 2020.
Liquefied natural gas projects in Africa, Canada and Australia face delays or even cancellation as global demand growth slows and U.S. output increases, Goldman Sachs says in a new report.
Worldwide demand for LNG will grow 5%/year compounded by 2020 and 4% by 2025, the firm says after previously forecasting growth of 6% and 5%, respectively.
Even the U.S. will not be spared from the pullback given the substantial contracts signed in recent years with U.S. LNG projects, Goldman says, adding that "investors should seek exposure to low-cost LNG export capacity, and be realistic about expectations for further contracts.”
Several projects in Canada and Australia likely will face deferrals due to uncertain production costs and price-sensitive buyers, with Papua New Guinea having perhaps the lowest risks as it expands LNG production, Goldman says.
"Given the industry’s renewed focus on capital discipline in recent times, we are observing a number of high-cost LNG projects deprioritized in the investment queue by major companies" such as Chevron (NYSE:CVX), Royal Dutch Shell (RDS.A, RDS.B), BG Group (OTCPK:BRGXF, OTCQX:BRGYY) and Exxon (NYSE:XOM).
This discovery, plus recent volume updates on the earlier discoveries, increases Ophir's estimate of the total Block 1, 3 and 4 mean recoverable resource to 17.1T cf and provides critical mass for an LNG train to be supplied from the fields.
Meanwhile, BG says it has withdrawn from the development of Block 3 off the African country's coast, believing it was not worth further exploration.
"Russia was going to be Exxon’s next mega-area, and the list of mega-areas in the world is very short," says Wolfe Research's Paul Sankey.
FT reports many Russian oil executives believe western sanctions will prove relatively short-lived, but some analysts think the Russians may overestimate U.S. willingness to sacrifice foreign policy goals to help American businesses.
If the road in Russia remains blocked, analysts say XOM could use its financial strength to invest more in the U.S. oil and gas boom; rumors have swirled about an XOM bid for Anadarko Petroleum (NYSE:APC), BG Group (OTCPK:BRGXF, OTCQX:BRGYY) or even BP, an option that could be particularly attractive if weak oil prices put pressure on company valuations.
Petronas CEO Shamsul Abbas warns that the Malaysian energy company could pull out of its liquefied natural gas project in Canada due to what he considers the country's slow progress on a new taxation scheme.
Petronas is holding back for now on making a final investment decision on Pacific Northwest LNG because of the "lack of appropriate incentives," the CEO says, adding that "Canada has to buck up real fast to be a credible global LNG player if it wants to be taken seriously by potential investors."
The $36B Petronas-led project has won an export permit from Canadian regulators and is considered a front-runner from among a dozen gas export terminals proposed for Canada's Pacific coast, which includes Shell (RDS.A, RDS.B), Exxon (NYSE:XOM) and BG Group (OTCQX:BRGYY, OTCPK:BRGXF).
Six global energy companies - including Southwestern Energy (NYSE:SWN), Statoil (NYSE:STO), Eni (NYSE:E) and BG Group (OTCPK:BRGXF, OTCQX:BRGYY) - reportedly have agreed to work to reduce emissions of methane in partnership with more than a dozen national governments through a new United Nations framework.
Officials from the UN and governments that back curbing emissions are increasingly looking to push companies and emerging economies to take voluntary steps to reduce emissions, since the international community has failed to adopt strict binding regulations.
The move likely will test relations between the government and multinational corporations such as Exxon Mobil (NYSE:XOM), Statoil (NYSE:STO), Eni (NYSE:E) and BG Group (OTCPK:BRGXF, OTCQX:BRGYY), which are implementing multi-billion dollar projects to exploit gas fields in the region.
E&P companies have discovered nearly 50T cf of natural gas in Tanzania and more than 180T cf in neighboring Mozambique.
Petrobras' (NYSE:PBR) oil production rose again in August, marking the seventh month in a row the Brazilian company has seen an increase in the amount of oil it is pulling out of the Atlantic.
PBR produced ~540K bbl/day of oil with its partners Galp Energia (OTC:GLPEF) and BG Group (OTCPK:BRGXF, OTCQX:BRGYY) ; PBR President Maria das Gracas Foster says the company remains on target to achieve a 7.5% Y/Y rise in domestic oil production this year, and is on the verge of producing 2.1M bbl/day from pre-salt oil fields.
Shares reached another 52-week high earlier in the day but then fell nearly 2% in afternoon trading.
Test flows at BG's Mzia-3 well off the southern part of Tanzania's coast reached a maximum rate of 101M cf/day, nearly double the flow rate measured at Mzia-2 last year.
BG and partners Statoil (NYSE:STO), Exxon Mobil (NYSE:XOM) and Ophir Energy plan to build a two-train LNG export terminal, with operations expected to start in the early 2020s and a final investment decision set for 2016.
Gorgon and other gas projects worth nearly $200B are nearing completion in Australia, with seven LNG projects due to start exporting gas between late 2014 and 2017, but with LNG exports from the U.S. due to begin next year, wary Asian buyers are holding off on long-term contracts.
The $54B Gorgon project is expected to start up in mid-2015 but so far has locked in sales for just 65% of its share of capacity, which leaves it highly exposed to the risk of falls in the spot price.
Norway's oil fund reports a 3.3% profit on its investments in Q2, and its investments in Russian government bonds, banks and energy companies were broadly unchanged, but the fund's chief executive warns the effect on European equities from tensions between Russia and the West could hurt future earnings.
Oil and gas sector stocks were the fund's best Q2 performers; among individual stocks, Apple, Royal Dutch Shell (RDS.A, RDS.B) and BG Group (OTCPK:BRGXF, OTCQX:BRGYY) contributed the most to earnings.
The Norwegian Oil and Gas Association weighs in with a report says the country risks discouraging investment in its oil industry if it repeats surprise tax increases and political meddling in projects.
Former BG Group (OTCQX:BRGYY, OTCPK:BRGXF) CEO Chris Finlayson has been named Interoil's (NYSE:IOC) chairman as the company develops one of the largest natural gas fields to be discovered in Asia in recent years.
InterOil is planning on building an LNG plant in the Gulf of Papua, which will use supply from the Elk and Antelope gas fields as feedstock. Elk and Antelope were discovered in 2006 and 2009, and are estimated to contain as much as 7T cf of gas.
Finlayson says he's excited at the prospect of working on one of the largest gas finds in recent years. "It’s a world-class field with extremely competitive development costs that is ... very close to the main Asian markets. The proposed project will target customers in China and Japan as the U.S. adds to supply competition in the global LNG market."
InterOil’s project gained important backing this past March when Total (NYSE:TOT), agreed to acquire a 40.1% holding in the Elk-Antelope gas field. It is expected that Total will operate the LNG plant.
The Tanzanian government says it will invest at least $1.2B to revamp its ailing state power utility, as the country tries to guarantee reliable power to domestic and industrial consumers.
It expects the reforms to help the country attract enough investments to diversify power sources and boost generation capacity to at least 10K MW over the next 10 years, from the current 1,600 MW.
Around half of the projected new power capacity will be generated from natural-gas fired plants, as a flurry of natural gas discoveries off the southern coast has made the country a hotspot for natural gas exploration, attracting Exxon (NYSE:XOM), Cnooc (NYSE:CEO), Rosneft (OTC:RNFTF) and BG Group (OTCPK:BRGXF, OTCQX:BRGYY).
Gold mining companies such as Africa Barrick Gold (OTC:ABGLF) and AngloGold Ashanti (NYSE:AU) remain some of Tanzania's largest power consumers.
Although gas resources haven’t yet been declared commercially viable, estimates of discoveries indicate recoverable offshore gas resources of at least 24T-26T cf, potentially sufficient for a four-train liquid natural gas plant, the IMF says.
Exxon Mobil (NYSE:XOM), Statoil (NYSE:STO) and BG Group (OTCPK:BRGXF, OTCQX:BRGYY) are planning to build the country's first LNG export plant.
But with BP, Shell and other oil majors also shedding assets, the market is tough for sellers; also, with Chinese buyers stepping back as they digest recent acquisitions, BG could find speedy asset sales challenging, analysts say.
Shares have fallen ~25% from their April 2011 peak, although the company is still worth nearly $70B - perhaps a problem in itself, since BG could still be too large to purchase outright even the likes of Exxon.
Some analysts think a good start would be for BG to reduce its unusually high 74% stake in the Queensland Curtis gas project, which is due to start up in Q4; BG has said it was considering selling pipeline and water treatment plants connected with the project that could be worth $3.5B-$4.5B.
Alex B. Gray+ FollowFollowing- Unfollow|Send Message3 Dec 2010
BG Group BRGYY.PK announced that its second Tanzanian exploratory well discovers natural gas.
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Alex B. Gray+ FollowFollowing- Unfollow|Send Message28 Oct 2010
BG Group BRGYY.PK announces its first permanent production from its Tupi field in block BM-S-11 in the Santos Basin of offshore Brazil.
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BRGYY vs. ETF Alternatives
BG Group plc (LSE: BG.L) is a world leader in natural gas, with a broad portfolio of business interests focused on exploration and production and liquefied natural gas. Active in more than 20 countries on five continents, BG Group combines a deep understanding of gas markets with a proven track...More