Major $35.8 Bln Growth Predicted for LNG Market

A Visiongain report indicates $35.8bn will be spent on liquefied natural gas infrastructure in 2012. This news comes at a time when a separate report indicates Australia could become biggest LNG exporter by the end of the decade.

The Volvo group will launch a 13L liquefied natural gas engine within the Volvo brand for the North American market by 2014. The engine's high pressure diesel ignition technology will provide significant fuel efficiency gains compared with current natural gas products.

Combined with the group's previously announced offering of compressed natural gas (CNG) powered Volvo VNM and Volvo VNL model daycabs, the new engine will provide customers with a complete range of natural gas powered transportation solutions. Within the Volvo brand another fuel is being tested that can be produced from natural gas, DME (dimethyl ether), which has the potential to become an attractive alternative for the North American market.

"Despite the near-term infrastructure questions regarding widespread adoption of natural gas as a heavy duty truck fuel, it is clear this segment will grow over the next several years," said Ron Huibers, president of Volvo Trucks North American Sales & Marketing.

Through advanced high pressure diesel ignition technology - using trace amounts of diesel to ignite the natural gas - Volvo's LNG engine will deliver a 30% fuel efficiency improvement compared with spark-ignition (SI) engines, making it a viable alternative for demanding long haul applications. The Volvo 13L LNG engine will also reduce greenhouse gas emissions by about 20% compared with current diesel products.

The company's proprietary Volvo I-Shift automated mechanical transmission also will be available for customers to specify.

The Volvo Group has also conducted field tests of trucks equipped with DME. The strong results - from ten vehicles operating in a variety of applications in Europe - indicate DME holds much promise as a heavy truck fuel, and could become a viable alternative in North America to CNG or LNG when it comes to performance, environmental impact, safety and distribution.

Dominion Resources Inc. has signed preliminary agreements with shippers and is proceeding with its plans to develop a natural gas liquefaction and export terminal at its Cove Point facility in Maryland, executives announced on the company's 2012 first-quarter earnings conference call April 26.

"At the end of March, we signed binding precedent agreements with two companies, one of which is [Sumitomo Corp.], a major Japanese company with significant global energy operations. Between the two shippers, the planned project capacity of about 750 million cubic feet per day on the inlet, and about 4.5 (million) to 5 million metric tons per annum on the outlet is fully subscribed," Dominion President and CEO Thomas Farrell II said on the call. "Dominion will provide liquefaction, storage and loading services, but would not own or directly export the LNG. We are continuing to negotiate binding terminal service agreements with the parties and expect to complete them later this summer."

Assuming the project received the necessary approvals and construction can get under way in 2014, Farrell said, the project could have an in-service date in 2017.

Dominion has been suggesting for months its plans to develop an LNG export facility at Dominion Cove Point LNG LP, but its announcement of signed agreements with shipping companies represents a new level of commitment on the part of the company. The move by Dominion mirrors that of other energy companies moving into the LNG export space, such as Sempra Energy, which announced in March plans to develop its Cameron facility in Louisiana. And like Sempra, Dominion is entering the LNG business in such a way that it will be shielded from exposure to commodity volatility.

In September 2011, Dominion filed with the U.S. Department of Energy to export up to the equivalent of 365 Bcf of LNG annually for a 25-year term to non-free-trade-agreement countries. Farrell said Dominion plans to submit a request to FERC "early this summer" initiating the pre-filing process for the project, final approval of which may take as long as two years.

"As with any project of this magnitude; we would expect some opposition from various environmental and special interest groups. For example, the Sierra Club, which is a party to an agreement restricting activities on a portion of the Cove Point property, has expressed its opposition to LNG export facilities and to the fracking process in general," Farrell said. "Dominion plans to design the facility to minimize environmental impact."

Dominion executives declined, however, to offer further details on the estimated cost of the export project, or how its construction will be financed.

"We're looking at all options on Cove Point, and as we get closer to what a final construction price might be, it will help guide us," Dominion CFO Mark McGettrick said. "We might do it all ourselves, we may take on a partner. We're certainly looking at various financing options, all of them that you can think of. But until we get a little more clarity on exactly what this facility is going to cost, we're keeping everything open."

While Sempra is moving to form a midstream master limited partnership, Dominion executives would not say whether the formation of an MLP is in the works.

"MLP will be one of the options we evaluate, with a lot of other options in terms of how that project might be financed long-term," Farrell said. "We looked at the MLP option before a number of times, and it didn't fit us. We'll continue to look at it as Cove Point matures in terms of a project life to see if that is the best option for our shareholders. We have no view on that currently except it is one of many that we will look at."

Farrell also declined to provide any hints as to who the other export counterparty might be but said Dominion would announce it "in the not too distant future." And though the project still faces years of regulatory scrutiny, he expressed confidence that the economic case for an LNG export terminal at Cove Point is compelling.

"This project by itself will help our balance of trade by a couple of percentage points on an annual basis. The economic arguments are pretty straightforward and they are almost overwhelming that it is beneficial to the United States, the region, Maryland, Calvert County, to allow this facility to be built," Farrell said. "So that is why we are confident that it will be approved. It doesn't hurt of course, to have at least one counter-party from Japan."

FERC will tackle new issues in the natural gas space this year as surging natural gas production rearranges the pipeline network and pushes forth a field of LNG export proposals, Commissioner Cheryl LaFleur said April 23.

"The issue we considered in the [Cheniere Energy Inc.] case of how the DOE approval and the FERC approval fit together was the first time we looked at that," LaFleur said at the Natural Gas Roundtable in Washington, D.C. "So whether it's precedential or not ... it won't be the last time. But the facts of other cases may be different, and we'll try to keep an open mind and look at each case on its own merits."

In the Cheniere order, which approved an application to build liquefaction facilities at the Sabine Pass LNG Terminal in Louisiana, FERC reinforced the position that it will keep its review focused on the facilities themselves, and it will rely on the U.S. Department of Energy's determinations on broad market issues involving the export of the commodity.

During her presentation, LaFleur observed that there are four similar applications in the prefiling process before the commission, and FERC is aware of three others that are before the DOE and headed to the commission.

"One issue that I've been thinking a lot about, as all the people rush to put their money into export facilities, is how long the technological advantage that the U.S. appears to hold in unconventional gas extraction will last," LaFleur said. "There are shale plays in other parts of the world, but the supporting infrastructure is not there yet to take advantage of them. Estimates vary as to how long our advantage of being the only one doing this will last. It's certainly not indefinite, and my experience is that these technological cycles seem to be shorter and shorter as we move forward all the time."

LaFleur also touched on FERC's April 16 decision to vacate the authorization for Jordan Cove Energy Project LP to build an LNG import terminal in Coos Bay, Ore., even as the developer proceeds with its plans to build liquefaction facilities. "That decision really prevented what would have been a unique circumstance of a company pre-building an export facility without an export certificate," the commissioner said.

In addition to reviewing LNG export facilities in the coming year, the FERC docket will be full of other project applications and rules influenced by the rising supply of shale gas. FERC will see applications for shorter laterals connecting shale gas reserves to markets, LaFleur said, mostly in the Northeast but also in the Southeast. Capacity values have dropped on long-haul pipelines, she said, and FERC has seen proposals to restructure pipeline rates closer to the market area. Downstream customers have objected to paying rates for transportation along the whole length of a pipeline, and pipeline operators are concerned they might not collect enough revenue to cover their operation and maintenance costs.

"So far we are addressing these on a case-by-case basis, but we're looking at the trend and looking, as we always try to do, [to see] if there is something we need to do more generically," LaFleur said.

Excelerate Energy L.P. is moving forward with the development of the first floating liquefaction facility in the United States utilizing its Floating Liquefaction Storage Offloading vessel (FLSO) technology.

The Lavaca Bay LNG project will be located in Port Lavaca, situated between Galveston and Corpus Christi on the Texas Gulf Coast, and will be designed to export liquefied natural gas (LNG) to markets worldwide by 2017.

Excelerate Energy's FLSO comprises 3 million tonnes per annum (MTPA) of production capacity, 250,000 cubic meters (m3) of LNG storage, and a fully integrated gas processing plant. With this gas processing capability, the FLSO can accommodate a wide range of gas compositions at its inlet making it well suited for virtually any application near shore or offshore. For those situations where gas processing is not required due to presence of existing processing facilities or where pipeline quality gas is used as the feedstock, the processing equipment can be removed and liquefaction capacity increased to 4 MTPA.

The FLSO will measure 338 meters in length, with a breadth of 62 meters. Front End Engineering and Design (FEED) is in an advanced phase and Excelerate is now entering into discussions with potential off takers and natural gas suppliers as well as investors and potential sources of finance to take the project forward. Excelerate Energy expects FEED to last until the end of 2012, and following its completion and successful permitting project delivery will take approximately 44 months from final investment decision (FID).

In its initial phase, the Lavaca Bay LNG project will consist of one permanently moored FLSO with multiple connections to the onshore natural gas grid in South Texas. The project will be designed with the potential for expansion and the addition of a second FLSO over time for a total production capacity of up to 8 MTPA. Excelerate Energy expects to begin the export authorization and Federal Energy Regulatory Commission (FERC) permitting immediately, and is in the process of completing its site-specific final front-end engineering design (FEED) effort.

"Excelerate Energy applies the same philosophy to its liquefaction vessel design as it does to its regasification vessel fleet -- essentially using proven technology in an innovative way to provide more efficient and timely solutions to the LNG industry," stated Rob Bryngelson, Excelerate Energy President and CEO. "Port Lavaca provides us with the unique opportunity to further capitalize on our position as a market leader in floating LNG solutions."

Excelerate Energy selected Port Lavaca for the site of the facility because of its direct access to the highly liquid south Texas natural gas market, access to the Atlantic Basin through the Gulf of Mexico, and potential access to the Pacific basin with the widening of the Panama Canal. The facility will interconnect to the region's existing pipeline system in order to obtain natural gas and liquefy it onboard the vessel. The Port Lavaca location being developed by Excelerate Energy has previously received FERC approval as an LNG import facility, which should facilitate the permitting process.

OriginOil, Inc. developer of a breakthrough technology to convert algae into renewable crude oil, announced May 23 it has filed two patents with the United States Patent & Trademark Office describing its unique technology for processing solids in solution. The technology is expected to find immediate application in oil and gas field wastewater cleanup and going forward, markets in industrial wastewater and remediation of toxic chemicals.

According to the U.S. Department of Energy, as many as 50 barrels of water are contaminated for each barrel of oil extracted domestically. OriginOil’s patent-pending process could offer clear and immediate benefits to oil producers, including more cost efficient environmental compliance, and increased oil production yields.

Recent third party testing has shown that the Company’s patent-pending process, originally developed for algae harvesting, can separate 98% of hydrocarbons from a sample of oil well ‘frac flowback’ water. The process is designed to be the first stage in multi-step processes for cleaning and treating contaminated water from oil and gas wells.

The filed patent applications protect two of the Company’s new inventions related to this process. The first is "Solute Extraction from an Aqueous Medium Using a Modular Device." The second is "Modular Systems and Methods for Extracting a Contaminant from a Solution." The inventor on both applications is OriginOil’s co-founder and chief inventor, Nicholas Eckelberry.

"We believe our proprietary process may be the most efficient method available today for initially separating oil from produced water," said Riggs Eckelberry, OriginOil’s CEO. "With these new patent filings, we not only protect our intellectual property rights, but we also extend them into conventional energy and industrial waste cleanup markets, which could be quite lucrative for the Company. We intend to compete in these immediate markets while we continue to build on our early lead in the promising algae industry."

The company recently announced that it signed a memorandum of understanding with California-based engineering firm PACE to collaborate with oil field operators in Texas and elsewhere to improve petroleum recovery and water cleaning for re-use at well sites. PACE plans to replace the early stages of chemical flocculation and dissolved air flotation with OriginOil’s process, potentially improving the performance and scalability of on-site water recycling and reducing both capital and operating expenses.

In addition to these filings, the company also recently registered a utility patent and international application for "Monitoring Systems for Biomass Processing Systems." The inventors are Paul Reep and Gavin Grey.

Chile energy supplier GasAtacama SA plans to invest between $300 million and $400 million in an offshore liquefied natural gas regasification terminal off the coastline of northern Chile, Valor Futuro newswire reported May 17 citing the company's general manager Rudolf Araneda.

Over the next decade, Chile needs to nearly double its 2011 installed energy capacity of 16,000 megawatts to keep up with projected demand.

GasAtacama supplies energy to the copper mining industry through the northern SING power grid and seeks to lower generation costs through the LNG imports.

Given delays in the start-up date of two major Chilean energy projects, power plant HidroAysen and the coal-fired Hacienda Castilla project, some of the mining industry's expected investment of $100 billion from 2012 to 2020 might not come through if energy becomes scarce or too expensive in the long term.

The power company submitted an environmental impact study on May 17 for its proposed LNG floating storage and regasification unit, which would have capacity of 170,000 cubic meters. The company aims to import LNG from the U.S., it said in a separate statement on the 17th.

GasAtacama is controlled by Chilean generator Empresa Nacional de Electricidad SA, or Endesa and private-equity fund Southern Cross.

2. ASIA

Shell's development of a world-first floating LNG project off the Kimberley coast is likely to be a game changer for the industry, allowing extensive 'stranded' gas assets to be developed.

Shell formally approved the $12 billion Prelude floating LNG project in May last year, after years of development work.

It is aiming for production start-up in 2017, about 10 years after the gas field was discovered.

At least three more FLNG projects off Western Australia's northern coast are being evaluated, based on relatively small gas fields in remote locations, and many more are likely to proceed in other parts of the world.

The key to all of these projects is the ability to build a large and complex gas liquefaction plant, along with storage and offtake facilities, onboard a tanker.

The scale of Prelude's FLNG facility illustrates the magnitude of the task. It will be about 488 meters long, 75m wide and will measure 17 stories high. The complex technology to be deployed on Prelude includes a ballast system that will allow the vessel to stay at sea, even during cyclones, and will stabilise the vessel during offloading to tankers.

Since making the final investment decision last year, Shell has been working on detailed design.

It started construction last September on the well heads and this year will start construction on the world's largest turret.

The keen interest in the project was highlighted by recent agreements to sell a combined 32.5 per cent interest in the project to Japanese company Inpex (17.5 per cent), Korea's KOGAS (10 per cent) and Taiwan's CPC (5 per cent).

Each of these groups is likely to become a customer of Prelude, which will have annual output of 3.6 million tonnes per year.

For Inpex, the investment has added strategic value, because it is looking to use FLNG technology for its Abadi LNG project in Indonesia.

In addition, Shell has been negotiating with Melbourne company Nexus Energy, to finalise a deal that will see the Crux liquids project integrated with Prelude.

Nexus has spent the past few years pursuing the stand-alone development of Crux.

That changed in January, when it announced a heads of agreement that would result in Shell acquiring an 80 per cent interest in Crux and processing the gas through the Prelude FLNG plant.

Separately, a floating production, storage and offloading (FPSO) vessel would be used to produce and offload the Crux condensate.

Nexus announced in early May that the terms of the agreement have been extended by a month to the end of May, to allow documentation to be finalized.

Other FLNG projects that are being evaluated include the Bonaparte, Sunrise and Cash-Maple developments.

French company GDF Suez and its Australian partner Santos are expected to make a final investment decision on their Bonaparte project, in the Timor Sea, in 2014.

It is most likely to proceed as a relatively small FLNG development with output of 2mtpa, starting in 2018. Also in the Timor Sea, Thai company PTTEP Australia is evaluating its Cash-Maple gas and condensate field.

PTTEP is undergoing a concept selection study for Cash-Maple this year. The company has stated that its development options include a FLNG plant.

It expects the study to be completed by the third quarter of this year and be integrated with the results of the Maple-2 appraisal well.

The Sunrise development has been delayed by disputes between project operator Woodside and the government of Timor-Leste.

Timor-Leste wants to see the LNG plant built on its territory to maximize economic and financial spin-offs but Woodside says that would add enormously to the technical complexity and cost of the project.

That's why it has selected a FLNG plant, producing 4mtpa, as its preferred option.

Woodside chief executive Peter Coleman met with Timor-Leste prime minister Xanana Gusmao in February, as part of a year-long effort to rebuild the relationship.

The company said further engagement with the Timor-Leste government is scheduled in the coming months "to work towards a mutually beneficial development outcome".

The nature of FLNG projects means there is limited scope for Australian industry participation, though Shell is working with the Industry Capability Network to find local opportunities on Prelude.

Most of the engineering is being done by Technip, which is based in Paris, and Korea's Samsung Heavy Industries is handling most of the construction, in part because Korea is one of the few places with sufficiently large shipyards.

One of the opportunities Shell is targeting in Australia is the training of FLNG plant operators.

One local business that will benefit is Mermaid Marine, which has been contracted (through its Toll Mermaid venture) to provide supply base and logistic support services.

Mermaid operates a large supply base at Dampier, which services many offshore oil and gas projects, and has a second facility at Broome to service the Browse Basin projects, such as Prelude. The oil and gas sector's strong growth helped Mermaid deliver a record profit of $27.6 million in the half year to December 2012.

UGL Limited announced that in a 50/50 joint venture with EPC firm CH2M HILL it has been awarded a $550 million contract by JKC Australia LNG Pty for the construction of a combined cycle power plant for the Ichthys liquefied natural gas (LNG) project in the Northern Territory.

According to a release, as part of the agreement, GE will engineer and supply gas turbines, steam turbines and heat recovery steam generators for the $34 billion Ichthys project. The CH2M HILL-UGL Joint Venture will design and supply the balance of plant based around the GE technology as well as undertake the complete construction of the project.

GE said its gas and steam turbine technology will generate electricity for the onshore facility based at Blaydin Point, Darwin, enabling it to produce more than 8 million tons of LNG each year. The onshore facility will be linked to the offshore drilling and processing facilities in the Browse Basin off Western Australia by an 885-kilometer undersea pipeline.

UGL's Managing Director and CEO Richard Leupen said: "This is a significant win for UGL and demonstrates our consistent ability to leverage our engineering capabilities, in this instance our power generation expertise, to deliver work on significant resources projects. We look forward to partnering with CH2M HILL and combining our skills to execute this important LNG project.

"Securing this cornerstone project is also a reflection of the strength of CH2M HILL and UGL's longstanding relationship with GE across our engineering businesses. Strong growth momentum in gas turbine generation facilities continues to be supported, underpinned primarily through private investment from the mining sector. Both CH2M HILL and UGL remains well positioned to capture future growth in this industry across Australia and New Zealand."

The companies added that this milestone project follows on from the successful installation of the Tamar Valley Combined Cycle Power Plant by UGL in 2009 and the Darling Downs Combined Cycle Power Plant completed by GE and CH2M HILL in 2010.

GE will supply five GE Frame 6B gas turbines and three SC4 single-flow steam turbines that will provide 500 megawatts of installed power capacity for the facility. Design, procurement and fabrication for the combined cycle power plant works are expected to commence immediately, with an on-site commencement in mid-2013 and completion expected by the end of 2016.

John Anderson, senior region executive, Australia and New Zealand, GE Energy, said the new deal demonstrates GE's long-term commitment to the growth of the LNG sector in Australia. "GE has a long history in the oil and gas sector, and we have been able to capitalize on our expertise in gas turbines and subsea production for many of the world's leading LNG projects."

"We have an extensive track record in providing reliable and efficient gas turbine power plants, as well as the ability to offer a complete customized solution for power generation on the Ichthys project," Anderson said. "Our gas and steam turbines are able to cope with the wide range of fuel gases encountered on a LNG processing train while meeting and exceeding emissions standards."

In January 2012, GE Oil & Gas announced it had received contracts totaling nearly $1 billion to supply a wide range of rotating equipment and subsea production systems for the Ichthys LNG project.

Many in the floating liquefied natural gas (FLNG) community will be closely watching Shell's Prelude project in Australia's deepwater Browse Basin in the coming years. The pioneering project stands to become the world's first floating liquefaction facility, serving as a template for exploiting remote offshore gas reserves in the Americas.

"The use of FLNG units is usually proposed to commercialize stranded gas where pipeline access is not economical to build," said Tom Phalen, Vice President for Upstream Project Operations with Fluor.

Phalen noted any FLNG terminal features three key elements: the mooring or berthing facilities; the ship or hull, including the LNG tanks; and the topsides equipment to either re-gasify the LNG or to liquefy the natural gas. Topsides facilities include loading arms to load or unload LNG plus a gas connection to receive or discharge gas.

Scott Shields, Founder and Principal of Houston-based Morgan Shields Consulting, observed that enhanced mobility, streamlined permitting and reduced regulatory risk are often advantages of FLNG developments over land-based terminals.

"Outside North America, sovereign and regulatory risks can be substantial and difficult to assess and control," Shields said. When these risks render a project unsustainable, the FLNG developer can simply pull anchor and re-deploy its assets to a more inviting location or profitable project.

FLNG may offer enticing economic and regulatory benefits, but Shields cautions that other factors -- increased production cost, significant technological and cost risk, and commodity storage impairment -- often offset those advantages.

Phalen pointed out that a floating storage and regasification unit (FSRU) often makes economic sense as a temporary gasification solution when natural gas is needed quickly with minimum infrastructure for a relatively short period of time. Also, an FSRU offers a practical option where land access is limited.

"Cost estimates have improved very recently on regasification terminals, with companies like Excelerate Energy paving the way to new FLNG techniques and operations," Shields added.

In the Americas, Excelerate has been engaged in five FLNG regas projects extending from Massachusetts to Argentina. Other locations in the Western Hemisphere with FLNG import potential include the Dominican Republic, Jamaica and Panama.

Liquefaction, meanwhile, is another story.

"The costs of liquefaction have historically been five times the costs of regasification," Shields observed. "Therefore, what might be a small production cost speed bump on the regas side becomes a mammoth handicap on the liquefaction side."

"Recent cost estimates on FLNG liquefaction projects in Australia have improved," acknowledged Shields. "But since there has been no actual FLNG liquefaction project to date, cost and technology risks remain high. I don't think I have ever seen a project with this magnitude of risk actually come in close to initial cost estimates."

One up-and-coming FLNG export base in the Americas may be Brazil. Major discoveries in Brazil's ultra-deepwater pre-salt fields have prompted Petrobras, BG Group, Galp Energia and Repsol to contemplate what would be the first FLNG project offshore the South American country.

Near the growing Caribbean and Central American markets, Colombia is another prospective FLNG exporter. Pacific Rubiales and partner EXMAR are building and developing a liquefaction and regasification barge to export production from the La Creciente gas field.

In the U.S., prospects for FLNG liquefaction projects are less promising given the abundance of onshore natural gas.

"It doesn't make a whole lot of sense," noted Chris Faulkner, CEO of Dallas-based Breitling Oil and Gas.

Faulkner, whose company operates in the Haynesville, Eagle Ford, Marcellus and Granite Wash plays, expresses more optimism about onshore LNG exports from projects such as Cheniere's Sabine Liquefaction endeavor.

"It would affect us and the industry as a whole in a very positive manner," Faulkner said. He noted markets such as Europe and Asia would be highly attractive destinations for U.S.-sourced LNG.

"[Exporting LNG] could help to spur activity in dry gas windows like the Haynesville, Faulkner added.

Michael Stosser, New York-based attorney with the law firm Day Pitney LLP, contends challenges to U.S. floating liquefaction projects exist beyond economics.

"There are significant issues that relate to import/export authorizations that would be required by the Department of Energy," Stosser explained. "Further, there are issues that relate to workmen safety and other safety issues, as well as environmental issues, all of which are regulated by the federal government."

"Each project faces unique challenges depending on factors such as jurisdiction, location, project design and political support -- or the lack thereof," concluded Steven C. Sparling, who chairs the Global LNG Team with the law firm Sutherland Asbill & Brennan LLP.

Trying to estimate how many jobs could be created in the Americas as a result of floating liquefaction would be highly speculative at this point. Nevertheless, one could reasonably assume that any such projects would spur demand for engineering, construction and maritime professionals.

Siemens Energy has been awarded a contract to provide long-term maintenance services for the pioneering Santos GLNG Project in Queensland, Australia. The multi-million dollar service order is Siemens’ largest ever for its gas turbines.

The customer is Santos GLNG, which is a joint venture between Santos, PETRONAS, Total and KOGAS.

The six-year contract includes preventative maintenance, remote monitoring, parts supply, and field service for 16 SGT-400 industrial gas turbines (nine generator sets and seven compressor sets) spread across three Santos GLNG sites – Roma and Fairview 1 & 2.

The agreement will help to ensure predictable reliability and maintenance costs for the SGT-400 gas turbines at the Santos GLNG Project.

"The Santos GLNG Project underscores the commitment of Santos GLNG and the Queensland government to advance the progression of this clean energy technology on a global scale and we are pleased to have been selected to provide long-term maintenance at the project," said Dr. Beatrix Natter, CEO, Service Oil & Gas, Siemens Energy.

"This service order, in particular, is very significant for us as it represents the largest single order ever for our small gas turbine product line. It is testament to our commitment to offering truly competitive and cost-effective service solutions and to our dedicated service team."

The Santos GLNG Project is designed to convert coal seam gas (CSG) to liquefied natural gas (LNG) for export to global markets.

The Santos GLNG Project includes the development of CSG resources in the Bowen and Surat Basins in south east Queensland, construction of a 420 kilometer underground gas transmission pipeline from the gas fields to Gladstone, and two LNG trains with a combined nameplate capacity of 7.8m tons per annum on Curtis Island.

The first LNG exports are expected to commence in 2015.

The WorleyParsons and Foster Wheeler joint venture (FWW) has congratulated Woodside on achieving LNG production and first cargo at its Pluto LNG Project.

The FWW JV was responsible for the engineering, procurement and construction management (EPCM) of the onshore element of the project, which comprises a single LNG processing train with a forecast production capacity of 4.3 million tonnes of LNG per year.

The Chief Executive Officer of WorleyParsons, Mr John Grill, said: "WorleyParsons is proud to be associated with the Pluto LNG Project, which is a significant milestone for our client Woodside and also for the WorleyParsons and Foster Wheeler team.

"It is a considerable achievement to have brought this project online in less than seven years from discovery, particularly given the project’s enormous scope and scale. "Our relationship with Foster Wheeler typifies our approach to pursuing joint ventures with partners who bring complementary skills and a shared commitment to delivering outcomes. We look forward to continuing to seek future opportunities to work together with Foster Wheeler," he said. WorleyParsons, through its subsidiary companies, has been involved in the development of resources for both Onshore and Offshore delivery of gas to the Pluto facility.

FMC Technologies, Inc. announced May 14 that it has signed an agreement with Technip France, on behalf of the Technip Samsung Consortium (TSC), to supply offshore loading arm systems as part of the Shell Prelude Floating Liquefied Natural Gas (FLNG) Project.

FMC's scope of supply includes seven offshore footless marine loading arms, four for liquefied natural gas and three for liquefied petroleum gas. FMC's Loading Systems business in Sens, France will design and manufacture the equipment.

"Today's announcement expands our existing support of the Prelude development, having received the subsea equipment contract in June of 2011," said Robert Potter, FMC's Executive Vice President, Energy Systems. "The Prelude FLNG facility will be the largest floating offshore facility in the world, and we are pleased the Technip Samsung Consortium has selected our loading systems."

FLNG opens up new business opportunities for countries looking to develop their gas resources, bringing more natural gas to market. Shell is the first to go ahead with such a project, Prelude FLNG.

The Prelude facility will be built by TSC at the Samsung Heavy Industries shipyard in Geoje, Korea. It will measure 1,600 feet (488 meters) from bow to stern and weigh around 600,000 tonnes when fully loaded. It will be moored over 120 miles (200 kilometers) from land and will produce gas from offshore subsea fields. The facility will treat and liquefy the gas onboard via a cooling process before storing and exporting the LNG via conventional LNG carriers.

ExxonMobil has contracted the Transocean Deepwater Frontier for work offshore Australia on the Jansz-Io drilling project at the Gorgon LNG project. The first phase of drilling consists of 10 wells.

The rig underwent upgrades and inspection that included complete refurbishment and full recertification of the BOP and BOP controls. Other operational integrity and regulatory compliance work was done in areas including fire protection and power supply.

Drilling at Jansz-Io is expected to take around two years and will use ExxonMobil technology related to well design and the application of specialized techniques to allow enhanced production. The 10 Jansz-Io wells will be drilled to a total measured depth of between 3,500 and 4,500 m (11,483 and 14,764 ft) in water depths of 1,350 m (4,429 ft).

Gorgon is operated by Chevron and is a joint venture of the Australian subsidiaries of Chevron (about 47%), ExxonMobil (25%), Shell (25%), Osaka Gas (1.25%), Tokyo Gas (1%), and Chubu Electric Power (0.417%).

A group of Japanese firms is in talks to pay $4.4 billion for a stake in Australia's Wheatstone gas field that had been set aside for bailed-out nuclear operator Tepco, as the country looks to shore up long-term energy supplies.

Tokyo Electric Power Co (Tepco), which is now under state control following last year's earthquake and tsunami that devastated its Fukushima nuclear plant, had planned to buy the stake to secure additional supplies of liquefied natural gas.

Amid concern that Chinese and other foreign companies could snatch the deal from cash-strapped Tepco, the utility asked trading house Mitsubishi Corp and shipping company Nippon Yusen KK to step in, the Nikkei business daily reported on May 16.

Nippon Yusen confirmed it was in talks with Mitsubishi and Tepco to purchase a stake in the project, but said no decision had been made. A Tepco spokesman said talks on Wheatstone stake were ongoing.

"Energy resources are a lifeline for Japan and important, so it is very meaningful for us to be involved in the talks," the Nippon Yusen spokesman said.

The companies were looking at paying $4.4 billion for the stake, a person with direct knowledge of the matter told Reuters. He declined to be named because the negotiations were not public.

Japan's government would take part in the deal through state-owned Japan Oil, Gas and Metals National Corp (JOGMEC), the Nikkei said, while the Japan Bank for International Cooperation (JBIC) and private banks would contribute about $3.3 billion in financing.

State-owned JBIC was also lined up to invest $1.1 billion and receive non-voting preference shares in a special purpose company being set up by the investors, the newspaper said.

Japanese utilities are driving natural gas prices higher as they scour the world for fuel to power thermal plants, with all of the nation's 50 nuclear reactors shut down amid safety fears following the radiation crisis at Fukushima.

Tepco and Japan's other utilities burned 4.56 million tonnes of LNG gas in April, up thirty-three percent from a year ago and a record for the month, an industry association said on May 16.

Although the long-term future of the reactors has not been decided, Japanese leaders have said the country should scale back its reliance on nuclear power, meaning it will need to secure extra supplies of energy from other sources.

"Tepco didn't want to change or cut the volume from about 4 million tonnes, which it originally wanted, so it sought financial assistance to maintain the amount," said Shigeki Sakamoto, a senior researcher at JOGMEC, which has a research division that analyses industry trends.

State-owned Chinese energy companies are expected to increase LNG imports, he said. China's LNG imports are about one-eighth of Japan's, Sakamoto said.

The Wheatstone LNG project off the coast of western Australia, operated by Chevron Australia, is expected to produce 8.9 million tonnes of gas a year from late 2016. Chevron plans eventually to expand production at the $29 billion project to 25 million tonnes per annum.

Tepco has secured rights to purchase 3.1 million tonnes of LNG, and said in 2009 that it planned to take an 11.25 percent equity stake in Wheatstone, which would give it access to about a further 1 million tonnes a year.

"It is true that we are in talks with JOGMEC, Mitsubishi Corp and Nippon Yusen on the joint acquisition of a stake in Wheatstone, but we like to refrain from commenting on the details of the negotiations," a Tepco spokesman said.

A JBIC spokesman said the company had been approached about a possible investment and loan for Wheatstone, while Chevron said talks with Wheatstone customers were ongoing. Mitsubishi confirmed it was in talks but declined further comment.

Japan's Tohoku Electric and Chubu Electric Power Co have signed preliminary agreements with Chevron to each take 1 million tonnes of LNG a year from Wheatstone for 20 years.

Chubu also agreed on May 23 to buy a 0.735 percent stake in Australia's Ichthys LNG project from majority stakeholder Inpex Corp.

Japan's government agreed to a 1 trillion yen bailout of Tepco in early May. Tepco, which posted an annual loss of almost $10 billion, said in a business reorganization plan submitted to the government that it would invest more in upstream energy projects.

Black & Veatch, in partnership with Chemtex, has been selected by Jilin Qianyuan Energy Development to deliver a major liquefied natural gas facility. Once completed in late 2013, the 500,000 NM3/D plant will be the largest of its kind in northeast China and will feature Black & Veatch’s patented PRICO® LNG technology.

The new facility will liquefy inlet pipeline natural gas. The LNG will be used primarily by trucks and other vehicles as an alternative fuel to diesel and petrol.

"LNG delivers significant cost and environmental benefits over other fuels," said Brian Zhang, Business Development Manager for Black & Veatch’s Oil & Gas business in China. "Applied and delivered with the right technology, the value that LNG brings can supersede that of alternative fuel options."

In addition to utilizing PRICO® technology, the plant integrates a nitrogen stripping process. This will contend with high nitrogen levels in the pipeline feed gas. A special boil-off gas re-liquefaction system will also be installed to prevent unnecessary fuel loss and increase the efficiency of the plant.

"The demand for LNG as a clean, portable alternative fuel source is gaining momentum in China," said Kerry Erington, Services Projects Director for Black & Veatch’s Oil & Gas business. "Our successful partnership with Chemtex has allowed us to establish a trusted reputation and leading market position in China."

The Black & Veatch-Chemtex team has won 14 projects in China since the start of the partnership in 2005. Chemtex will provide engineering, procurement and construction services for the project.

INDIA

On May 23 India signed a natural gas purchase deal with Turkmenistan and said the country was keen to further diversify the sources of its gas imports and to acquire stakes in the liquefied natural gas export terminals coming up worldwide. Many new LNG liquefaction terminals are coming up in the North American continent to connect shale gas producers there to customers in Asia.

Turkmenistan agreed to pump natural gas to Pakistan and India through a 1,700-km pipeline across Afghanistan in a deal signed among Turkmenistan's state gas company Turkmengaz, Pakistan's Inter State Gas Systems and India's state-run utility GAIL. India would get about 38 million standard cubic meters a day (mscmd) of gas once the pipeline is complete in 2016.

"We are keen to diversify our source of LNG supplies and are looking to LNG exporters across the globe for tying up our growing requirement of LNG imports," said a communication from the Indian government, quoting Petroleum Minister S Jaipal Reddy's speech made before signing the contract at a Caspian Sea resort.

India is interested in not only buying additional quantities of LNG, but also in having equity participation in existing and upcoming LNG liquefaction projects globally, the communication said.

"We are also keen to explore farm-in opportunities in producing oil and gas blocks whenever they may be available," it added, quoting Reddy.

India has estimated that its natural gas sector will grow at 19.5% in the net five years. Its consumption of gas is expected to grow from the current 166.2 mscmd to 473 mscmd in 2017 and it is focusing on building LNG infrastructure as well as gas pipelines across the country. India's LNG regasification capacity is expected to go up from 13.5 million tonne (mt) to 48 mt by 2017.

India also hopes to auction shale gas blocks next year. "We have undertaken the mapping of India's shale gas resources and are working to put in place a regulatory regime for license rounds in shale gas, by December 2013," Reddy was quoted as saying.

Japan's need for LNG imports to fuel gas-fired power plants is set to ease off gradually as a regional government approves the restart of nuclear reactors. Global LNG markets, however, are forecast to stay tight, investment bank JP Morgan forecasts.

"We continue to believe that nuclear restarts will take time, and meanwhile elevated LNG demand is likely to keep a tightening bias on the global market," the bank said in a research note on May 15.

The municipal government of Oi, a town in the west of Japan, has pioneered to approve the restart of a nuclear reactor, paving the way for reactors Nos 3 and 4 at Kansai Electric Power Co's Oi plant start producing baseload electricity.

The central government support a revival of nuclear plants as parts of Japan have been crippled by a severe electricity shortage, including rolling blackouts, at times of peak demand.

A restart of nuclear plants would broaden Japan's energy mix and ease the pressure on operators of gas-fired plants to cover the bulk of the country's electricity demand.

In the wake of the Fukushima crisis, Japan shut down all of its nuclear plants and rushed to boost LNG imports to increase supply from gas-fired power plants as a replacement.

The surge in electricity produced by gas-fired plants saw Japanese LNG consumption surge 32%, or by 54 mcm/day year on year in March.

Woodside Petroleum Ltd. has joined a consortium to bid for natural gas exploration blocks offshore the Mediterranean island nation of Cyprus, Chief Executive Peter Coleman said May 14, in the latest sign of international interest in an emerging energy province following a series of big discoveries.

Mr. Coleman told a conference that the bid plans reflected a desire to expand Woodside's global footprint to balance better its scale in Australia, where it operates two multi-billion dollar gas-export projects--the North West Shelf and Pluto--with ambitions to lead the development of two more.

Woodside will join Israel's Delek Group Ltd., Italy's Enel Trade SPA and France's Edison International SPA in the bid consortium, of which the Australian company holds a 30% stake.

Interest in the eastern Mediterranean's potential has grown following the discovery of the Tamar and Leviathan fields, estimated to contain up to 9 trillion cubic feet of natural gas and 16 trillion cubic feet, respectively, offshore Israel in recent years by Woodside's competitors.

Coleman said it was too early to tell if Cyprus will house Woodside's next big energy development outside Australia.

"It's simply bidding on some exploration acreage," he told reporters. "It's an emerging basin that's very close to market, and it's very close to those premium European markets."

Coleman said that the most likely development path for the gas would be to chill it for export by constructing a new liquefied natural gas plant. Cyprus has already identified a site where it would like an LNG plant to be situated. Woodside's capabilities may "play well" to the development of large discoveries offshore Israel too but no commercial discussions have taken place in that regard, Coleman said.

Separately, the executive said Woodside still hasn't discovered enough gas to underpin a desired expansion of its A$14.9 billion Pluto project in Western Australia state. "The drilling program hasn't delivered on what we hoped a couple of years ago. We've got a few more wells to drill, and in about the third quarter we'll decide whether we need to take a break or not," Coleman said.

Woodside is also talking to potential third party suppliers to the project. Analysts have speculated that Hess Corp. or the Scarborough joint venture between BHP Billiton Ltd. and ExxonMobil Corp. are considering processing their gas through LNG projects on the coast operated by Woodside and Chevron Corp.

Companies took another step towards building an LNG terminal to supply all three Baltic countries and Finland in early May.

Estonia's electricity transmission system operator (TSO) Elering named Dutch company Vopak LNG as its strategic partner for the planned LNG terminal in the Baltic country On May 2.

Vopak LNG will steer a feasibility study on the construction of a regional LNG terminal at Muuga Harbour near Tallinn, according to Elering.

To this end, the two companies, along with terminal operator Tallinna Sadam, signed a letter of intent. It states that they will cooperate on a study of the technical and economic aspects of the terminal's construction and the need for EU funding.

The results of the feasibility study will be made public in August, when they are presented to Tallinn's economy ministry.

"In developing the LNG terminal, Estonia complies with the EU directives on gas, which state that the ownership and administration of energy infrastructures must be kept separate from producing and selling energy," said chairman of the Elering board, Taavi Veskimägi.

The study may convince the European Commission that Estonia's LNG terminal project would be suitable for supplying all three Baltic countries and Finland, Elering said.

Last November, the countries asked the Commission to rule on the best location for a regional LNG terminal, after failing to reach consensus themselves. At the time, an independent report by consulting company Pöyry said that Estonia would be the best location.

The Commission has previously said that it will support the development of an LNG terminal in the Baltics on the condition that it is able to cover at least 25% of the consumption needs of the entire region.

However, Lithuania's intention to build a rival LNG terminal at Klaipeda port may scupper plans to fund a regional terminal. The Lithuanian terminal, which will cater solely for the Lithuanian market, would damage the Estonian terminal's viability (see ESGM 28 March 2012).

The Baltic countries are keen to build independent LNG terminals to diversify supply sources and reduce dependence on Russia'a Gazprom.

Gazprom is the sole natural gas supplier to all three states and owns a 37% stake in Estonian natural gas incumbent Eesti Gaas.

Vopak LNG is a subsidiary of the Netherlands' terminal specialist Royal Vopak. The company owns and operates the Gate LNG terminal in Rotterdam.

The European Commission has cleared under the EU Merger Regulation the proposed acquisition of joint control over the Angolan company Angola LNG (the joint venture) by BP of the UK, Chevron Global Energy of the U.S., Eni of Italy, Sociedade Nacional de Combustíveis de Angola (Sonangol) of Angola and Total of France.

The joint venture will be active in the production and the worldwide supply of liquefied natural gas in Angola LNG. The Commission found that the transaction would not raise competition concerns because of the joint venture's moderate anticipated market share, the presence of a number of credible competitors in the market concerned and competitors' unchanged ability to access re-gasification terminals.

The joint venture would transform natural gas, obtained as a by-product from oil production and transported along pipelines to its liquefaction plant in Angola, into LNG. The LNG would then be sold to customers around the world for re-gasification.

The parties' activities overlap in the market for the wholesale supply of LNG in the European Economic Area (EEA). Given the joint venture's moderate anticipated market share and the presence of a number of credible competitors, the Commission found that the joint venture and its parent companies will continue to face sufficient competitive constraints on the market for the wholesale supply of LNG.

Although three of the parent companies (Total, Eni and BP) hold capacity rights in re-gasification terminals in EEA, they will not be able to shut out third parties from accessing them because EU law ensures third party access to gas import infrastructures, including re-gasification terminals. Thus, the creation of the joint venture does not lead to any change as regards competitors' ability to access gas import infrastructures.

The Commission therefore concluded that the transaction would not impede effective competition in the EEA or any substantial part of it.

BP, Chevron, Eni and Total operate worldwide in the exploration, production refining and marketing of oil and gas products, while Sonangol is the sole concessionaire for the exploration of oil and gas on the subsoil and continental shelf of Angola.

The Portuguese construction company Zagope - Construcoes e Engenharia S.A., part of Brazil's Groupe Andare Gutierrez, has been showing interest in the implementation of a project for the building in Ukraine of a liquefied natural gas terminal.

"The company Zagope is interested in being part of the LNG terminal," head of the state's agency for investment and managing national projects Gosinvestagentstvo Vladislav Kaskiv told the press on May 27.

He did not provide additional details, as the Portuguese company has only just offered to take part. Investment is at issue here, he said.

Interfax has been unable to obtain comments from Groupe Andare Gutierrez manager Joao Pimentel, who presented in investment proposal to Kaskiv.

Ukraine plans to announce before October a tender for the selection of partners for the creation of a consortium for the LNG terminal project. Plans call for setting up a management company before then that will draw up project documentation and prepare the investor tender. The state's stake in the management company will be 25%-50%. According to the feasibility study, the cost of the terminal - with 10 billion cubic meters (bcm) annual handling capacity - is an estimated EUR 735 million. It is slated to be built near the oil terminal PAO Ukrtransnafta and the commercial seaport Yuzhny.

Zagope - Construcoes e Engenharia S.A. (Empresa Geral de Obras Publicas Terrestres e Maritimas until 2000) which was set up in 1967, specializes in the building of social facilities, and has been involved in the development and modernization of grid infrastructure in Europe, Africa, the Middle East, and Asia.

The Andare Gutierrez group acquired the Portuguese company in 1998. The group's interests are focused on construction, telecommunications, infrastructural facilities (concession), and electric power

Nakilat-Keppel Offshore & Marine (N-KOM), the newest addition to Qatar's giant LNG production and shipping infrastructure, currently has seven giant LNG carriers undergoing drydock repairs.

The drydocking, maintenance and repair facilities have been built near the gas processing hub of Ras Laffan to carry out more of the value-add works associated with Qatar's gas export industry within the country.

As part of the Erhama Bin Jaber Al Jalahma Shipyard, N-KOM has been undertaking marine, offshore and onshore projects for local and international clients since its inauguration in November 2010, with LNG repairs making up almost half of these projects.

The seven LNG carriers (Al Jasra, Al Bidda, Al Wajbah, Dukhan, Al Gharrafa , Al Rayyan and Al Thumama) are undergoing drydocking repairs, including the overhauling of the main engine, valves, pumps and other general repairs and maintenance. Most of these vessels are jointly owned by a consortium of Japanese shipping companies: Mitsui O.S.K. Lines Ltd (MOL), Nippon Yusen Kaisha Line (NYK), Kawasaki Kisen Kaisha Ltd ("K" Line), with Al Gharrafa being technically managed by OSG Shipmanagement (UK).

Shinji Ono, Fleet Manager from MOL LNG Shipmanagement ivision said, "MOL has previously repaired three LNG carriers in N-KOM. The shipyard's commitment to delivering quality and timely services made it an obvious choice for us when it came to drydocking another three LNG carriers with them this time round."

Djamel Mokhtefi, Head of Operation (Fleet 1) of Qatargas, who is overseeing the drydocking and repairs of the five QG1 and one Q-flex vessel added that: "Qatargas has had a longstanding partnership with N-KOM, with a significant portion of our fleet being serviced by the yard. We continue to be impressed with the high level of quality and professionalism demonstrated."

"N-KOM is honored to have the support and trust of our valued customers and we look forward to many more of such collaborations in the future," said Abu Bakar, CEO of N-KOM.

Suspected al-Qaida militants blew up a gas exporting pipeline in Yemen's southeast province of Shabwa on Thursday night, a provincial security official told Xinhua.

"The pipeline transferring liquefied natural gas from Yemeni Marib province to the Belhaf terminal on the Gulf of Aden was bombed in al-Akla area of Jardan district north of Shabwa's provincial capital city of Ataq," the official told Xinhua on condition of anonymity.

Huge fire and heave smoke could be seen from inside Ataq, he said.

An official with the Yemeni Liquefied Natural Gas Company in Belhaf confirmed the attack. "The company has immediately halted all gas flow from Marib following the attack," the LNG official told Xinhua by phone.

It was the third attack on oil and gas pipelines in Yemen in less than a month. The al-Qaida in the Arabian Peninsula (AQAP) have claimed responsibility for previous attacks, saying the bombings were in revenge for air strikes on their hideouts in Yemeni southern cities.

The attack on April 26 came after reports that Washington approved to increase air strikes in Yemen to target the AQAP.

Recently the LNG company, which is led by France's Total, said it resumed output operations after repairing a damaged pipeline which was bombed on March 30, forcing the company to cancel six LNG cargos for export.

The Yemeni interior ministry said it had tightened security around the LNG Company and its establishments in Belhaf district after receiving intelligence information that the al- Qaida network has prepared to launch suicide bombing attacks against the oil and LNG facilities in Shabwa.

The AQAP has seized several cities in southern and eastern regions of the impoverished Arab country since earlier last year, despite intensified air strikes by Yemeni army and U.S. drones.

Yemen's economy is dependent on petroleum production, with oil and gas export accounting for about 63 percent of the impoverished country's budget.

Abu Dhabi is in talks with banks and advisers about an import terminal for liquefied natural gas the Gulf emirate plans in the neighbouring sheikhdom of Fujairah, two people with knowledge of the project said.

Mubadala Development Co. and International Petroleum Investment Co., two Abu Dhabi state-owned investment funds which share ownership of the project, are seeking international banks to advise them on financing, said the two people, who declined to be identified because the talks are confidential.

The partners are also looking for industrial advisers to make construction plans and set technical parameters for the facility, the people said. A spokesman for Korea Gas Corp. said recently that South Korea's biggest gas importer has been hired by the two funds to help develop the LNG facility.

The Fujairah terminal on the eastern coast of the United Arab Emirates would allow imported gas to be transmitted through overland pipelines to UAE and Oman without having to send LNG tankers through the Strait of Hormuz. Iran earlier this year threatened to blockade the strait, a shipping chokepoint at the entrance to the Persian Gulf, in response to international sanctions.

Emirates LNG, as the project is known, is "in a range of discussions with various people who might be involved in the project," Andrew Mitchell, a spokesman for Mubadala Oil and Gas, said by telephone from Abu Dhabi on May 9. He declined to say which companies were involved in talks.