Blogging will remain short and/or intermittent this week due to travel
Over the course of last year we fairly frequently commented upon the potential for East Coast Australia to follow the global trend of importing LNG through a Floating Storage and Re-gasification Unit (FSRU). AGL liked our commentary so much that its Board approved the expenditure of A$17M on a FSRU feasibilty/FEED program – in the view of many primarily to cap the price that the Gippsland JV might otherwise seek to charge it on new long term gas supplies – but also because it might just be profitable.
Yesterday we were however surprised to see that Australia’s first listed company with its very own FSRU is not AGL, but the lesser known Energy World Corporation – EWC – one of the more unusual stocks on the ASX.
Fans of EWC such as this blog always welcome its occasional ASX announcements – which usually contain very few facts but screeds of photos of its operations in Indonesia and the Philippines. And usually there are also other matters of note such as fascinating conflicts of interest, etc.
Other afficiandos of EWC scan the photos and trade stories with the blog of: “there are weeds growing in that storage tank”, “those pipes were there 2 years and are still lying on the ground”, “I swear I saw a monkey swinging from a vine in the half-built power station”, etc.
EWC’s CEO and largest shareholder has now apparently bought a FSRU which has been photographed close to the company’s Philippines half-built re-gas unit (why two re-gas units?) – which is not connected to pipelines or a working CCGT. Still, judging by the latest photos the FSRU has a good canteen, bar, cinema and kitchen.
For all its faults, EWC contains a suite of potentially strategically very interesting assets. It operates in difficult jurisdictions. It could pull it all off – maybe.
Crude trading has been fairly flat over the last few days – particularly with a public holiday in the US on Monday (jeez, do these guys ever work?). Overnight London closed at US$55.50 and New York at US$52.53.
The US dollar and news from the Saudis about cuts were the prime tradeable variables over the week to date.
Affecting the long term, further news has emerged about what seems to be an inexorable decline in Chinese crude production – from the PRC itself and Wood Mackenzie. One can guess that this decline is not for a lack of trying, money, cheap costs, political will, etc – but geology maybe beats all in the end of the day. However the PRC remains more bullish on its shale gas plans – although to date it has always undershot its targets (geology wins again?).
Trading in Henry Hub has also been tepid – it closed flat at US$3.40.
LNG and international gas
Recent news from Platts reported that South Korea is keen to rapidly boost its imports from the US in advance of any possible Washington imposed trade restrictions. This seems strange – Trump presumably has no problem with exports from the US. The rationale behind the story might have got a bit lost in translation – we can see excellent reasons for Kogas, etc, to increase US imports – like the Henry Hub price.
The KSA’s Energy Minister recently announced major plans to increase the Kingdom’s renewable energy sector – which makes eminent sense in a country that burns crude oil for electricity generation, is rather sunny (and Sunni – ouch!) and whose neighbours have attracted bids to supply solar power at less than US$30/Mwh.
Around 10 GW of new capacity is planned to be installed in the next 7 years.
Company news – Cooper Energy (COE)
COE continues to make strong progress on its offshore Sole gas project – announcing today that AGL has agreed to increase its offtake under a conditional GSA to 12 PJ p.a. COE says it now has the volumes it needs to FID this project this quarter.
We expected Origin Energy (ORG) to at least take some gas from this project, for strategic reasons if not portfolio ones. However, perhaps the current plans at ORG to IPO (or sell?) its upstream “Crapco” might be putting on hold decisions about gas supplies – as internal wranglings are no doubt taking place about future supplies from said upstream company to the re-badged downstream focused ORG.
In a different world AGL could presumably sought a ground-floor equity position in Sole as part of its GSA dealings – but we assume that previous disastrous upstream forays by the company have put its Board off from doing so (until the cycle turns again…..).
Quote of the day
It seems that the short and sharp announcements from the Donald might be encouraging other politicians to hone their wit and brevity – as demonstrated by the following comment from Germany’s Economy Minister Sigmar Gabriel to Trump’s lament that there were more BMWs and Mercedes, etc, than Chevrolets in rich parts of the US:
“Make better cars”.