Latam Energy Advisors LNG Update @latamenergyllc

·          LNG market and pricing – NE Asian spot LNG pricing has crashed to just $7.5/mmbtu and SW European prices are at $6.75/mmbtu on an increasingly oversupplied market.  Sellers are apparently offering cargos for ~$8/mmbtu and still struggling to find buyers.  This is despite the force majeure at Yemen LNG (TOTAL impacted), where Kogas takes 2mmtpa.  Canaport recently took a cargo from Trinidad - which should be positive for Repsol who it seems has locked in high gas prices in the NE USA over the winter.  On the regasification side, ~28mmtpa of capacity is due online in Asia this year, mainly China where demand is suffering from a switch to cheaper liquid fuels and the potential for lower domestic gas prices.

·          KBR Magnolia LNG contract – Positive but not yet the big kahuna LNG EPC contract KBR needs to get backlog growing.  KBR picks up Technical Services Agreement and associated FEED work on the 8mmtpa (>1bcf/d), 4-train Magnolia LNG project.  EPC award contingent on final costs estimates, which are included in KBR’s contract scope.  No timing suggested on when the multi-$B EPC award could hit (TPHe cost $6-10B), but wouldn’t expect it until 2H’15 at earliest.  Current macro environment is pressuring LNG prices so positive FIDs likely fewer and further between until oil price rebounds.

Source: Tudor, Pickering & Holt

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