RIM INTELLIGENCE LNG Daily 1-17-18,Shinkawa, Chuo … · 3 RIM INTELLIGENCE LNG Daily 1-17-18,Shinkawa, Chuo-ku,Tokyo,Japan Tel (81)-3-3552-2411, Fax (81) -3-3552-2415 Singapore Tel

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RIM INTELLIGENCE LNG Daily 1-17-18,Shinkawa, Chuo-ku,Tokyo,Japan Tel (81)-3-3552-2411, Fax (81)-3-3552-2415 Singapore Tel (65)-6345-9894, Fax (65)-6345-9894 RIM LNG Report Daily

NO.157 Jan 07 2011

Copyright (c) 2011 RIM Intelligence Co. All rights reserved.

"LNG Annual 2010" publication

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Spot LNG Price Assessment ($/mmBtu)

Feb 1H Feb 2H Mar 1H Average

--Northeast Asia (DES) 9.80-10.10 9.70-10.00 9.70-10.00 9.88

Changes from previous day 0.00 0.00 0.00 0.00

RIM North Asia Index 9.92

--Middle East (FOB) 8.60-8.90 8.60-8.90 8.60-8.90

Changes from previous day 0.00 0.00 0.00

--Atlantic basin (FOB) 8.12-8.42 8.12-8.42 8.05-8.35

Premium/Discount to NBP -0.80/-0.50 -0.80/-0.50 -0.80/-0.50

Changes from previous day 0.18 0.18 0.22

* RIM North Asia Index is the cumulative average of the average price of North Asia price

assessment.

* DES means Delivery Ex Ship.

* F.F. price of Atlantic basin is based on the previous business day’s NBP settlement.

* ALL assessments are based on conventional cargo size

Freight Market ($/mmBtu)

Prompt

--Middle East/Northeast Asia 1.21- 1.26

--Atlantic/Northeast Asia 1.93- 1.98

--Middle East/Europe 1.19- 1.24

*All chartering rate are based on the loading for the prompt cargoes

*Rates are on conventional size for single voyage including all costs

JCC Price ($/mmBtu)

-------------- Expected --------- ----- Result ------

Apr Mar Feb Jan Dec Nov Oct Sep

Expected JCC price 16.01 16.02 16.06 15.61 14.72 13.94 13.10 12.88

Daily change -0.06 -0.07 -0.01 0.00 0.00 --- --- ---

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RIM INTELLIGENCE LNG Daily 1-17-18,Shinkawa, Chuo-ku,Tokyo,Japan Tel (81)-3-3552-2411, Fax (81)-3-3552-2415 Singapore Tel (65)-6345-9894, Fax (65)-6345-9894

Natural Gas Future Prices

NYMEX Henry Hub ($/mmBtu)(Jan 06) ICE NBP ($/mmBtu)(Jan 06)

Feb Mar Apr May Feb Mar Apr May

Settle 4.434 4.404 4.375 4.410 Settle 8.916 8.855 8.607 8.418

Change -0.039 -0.037 -0.031 -0.030 Change +0.181 +0.219 +0.165 +0.153

High 4.623 4.582 4.539 4.565 High 9.017 8.924 8.591 0.000

Low 4.380 4.351 4.322 4.359 Low 8.824 8.800 8.568 0.000

Estimated Volume: 279,746 Estimated Volume: 5,685

Petroleum Future/Physical

NYMEX Petroleum Future (Jan 06) Petroleum Phyisical (Jan 06)

-WTI Futures ($/mmBtu) 15.238 -Dubai crude ($/mmBtu) 15.835

($/bbl) 88.38 ($/bbl) 91.85

-Heating oil ($/mmBtu) 18.107 -Minas crude ($/mmBtu) 16.386

(cts/gal) 251.12 ($/bbl) 96.35

-LSWR Indonesia ($/mmBtu) 14.097

ICE Petroleum Future (Jan 06) ($/bbl) 87.40

-Brent Futures ($/mmBtu) 16.410 -HSFO Singapore ($/mmBtu) 13.266

($/bbl) 94.52 ($/bbl) 530.50

-Gasoil Futures($/mmBtu) 18.232

($/mt) 775.25

Coal price and Electricity Prices

Coal price(Jan 06) Electricity Prices(Yen/kWh)(Jan 07)

-FOB New castle-Global coal ($/mmBtu) 5.819 -Jpex 24h baseload 8.50

($/mt) 133.15 -Jpex daytime 9.22

-ICE futures FOB Richards Bay($/mmBtu) 5.531 -Jpex peakload 9.81

($/mt) 126.55

LNG Benchmark

Nov-11 Oct-10 Sep-10 Aug-10 Jul-10 Jun-10

-JLC Japan LNG Cocktail($/mmBtu) 9.861 10.013 10.244 10.629 10.947 10.517

($/MT) 572.72 567.09 550.13 580.62 544.33 584.76

-Asia CIF Cocktail price($/mmBtu) --- 9.869 9.940 10.199 10.373 9.954

($/MT) --- 537.55 538.94 546.87 545.28 515.32

-U.S landed price ave ($/mmBtu) 4.691 4.201 4.320 4.670 4.520 3.920

Market Commentary

＜Northeast Asia＞ DES Northeast Asia spot prices were left unrevised on Friday at $9.80-10.10 per million

British thermal units for first-half February and at $9.70-10.00 for second-half February

and first-half March delivery. The majority of market players stepped on the sideline, owing

to recent roller coaster-like moves in the British NBP futures and unclear supply/demand

condition in DES Northeast Asia cargoes.

According to Japan’s national forecaster Meteorological Agency, temperatures at nine major

cities in late December (December 21-31) were 7.4 degrees Celsius, 0.1 degrees above year-ago

levels and 0.4 degrees above normal, showing that the cold wave since late December did not

result in a significant increase in demand for heating as it hit areas along Japan Sea coast

and northern Japan, where there are few densely populated cities. Except Sapporo and Fukuoka,

3

RIM INTELLIGENCE LNG Daily 1-17-18,Shinkawa, Chuo-ku,Tokyo,Japan Tel (81)-3-3552-2411, Fax (81)-3-3552-2415 Singapore Tel (65)-6345-9894, Fax (65)-6345-9894 the rest of the cities are all located on the Pacific Ocean side, which normally receives

little snowfall. In fact, some Japanese traders claim that they have yet to receive interest

in buying spot cargoes from Japanese gas utilities.

As previously reported, Japan’s biggest utility Tokyo Electric Power (TEPCO) had bought

at least two January spot cargoes. General consensus is that TEPCO would target to buy

February delivery in the next round. A TEPCO’S official revealed a plan to run maintenance

work for one to two weeks some time in second-half February at several berths in Tokyo Bay,

which makes it difficult for the company to accommodate spot cargoes for the timing.

Massive rainfall in Queensland, Australia, since late December damaged local mines, which

caused shutdown. However, most of coal produced in the region is for end-users such as

steelmakers, not for electricity firms to use as fuel for running coal-fired thermal units.

In fact, the Newcastle Port in New South Wales state, a major coal export terminal, loaded

relatively high 2 million tons or more during the week ended December 31. On the aspect of

prices, spot physical prices of coal to be loaded in Newcastle rose to $128.50 per ton on

New Year’s Eve, up $3.75 per ton from a week before and up $22.73 per ton from a month ago.

The price is translated as $5.62/mmBtu, still far below prevailing LNG market prices.

PetroChina, the listed arm of China National Petroleum Company, restarted talks over a

commissioning cargo for a new 3.5 million tons-a-year storage at the Jiangsu terminal

although some believe that PetroChina would receive such a cargo on April 22. The company

also revealed a plan to begin taking commercial cargoes in the third or fourth quarter this

year. PetroChina is also under a process of building one more storage with capacity of 3.0

million tons per year at the terminal.

South Korean refiner GS Caltex is said to have taken a Sakhalin-sourced early February cargo

at either side of $9.90 from a European major in the tender that was closed last Wednesday.

＜India/Middle East＞ Prices for FOB Middle East for February loading showed no change at 8.60-8.90 on Friday.

There seem some Qatari cargoes in the market. In addition, Japan’s Marubeni continues working

on resale of a February 6-7 loading cargo that the Japanese trader had taken in the tender

issued by Abu Dhabi’s ADGAS. With spot Northeast Asia market prices remaining below $10.00,

sources estimate current FOB Arabian Gulf prices to be discussed in the mid-$8’s.

In India, some end-users such as Gujarat State Petroleum Company (GSPC) and Reliance

Industries are seeking for spot cargoes although their LNG demand is not necessarily strong

since electricity is generated more cheaply at hydro and coal-fired thermal than LNG-fired

thermal power units in India. GSPC admitted having bought one February cargo sourced from

either Trinidad or Nigeria for the 10.0 million tons-a-year Dahej terminal. The price was

said to be a roughly $1.00 premium over around 10% of Brent crude. If this were true, the

price is equivalent to $10.00 or more based on the current Brent crude price. Meanwhile,

GSPC decided to skip a purchase of January delivery, owing largely to the fact that Spain’s

Repsol, a short-term supplier to GSPC, brought a term cargo in early January, one to two

weeks later than originally scheduled. With this cargo delivery, a term contract between

GSPC and Repsol came to an end.

＜Other Region＞ Spot prices for February Atlantic loading cargoes were unchanged at 50-80cts discount to

quotations of British National Balancing Point (NBP) futures on Friday, supported by ongoing

thin spot supply in the region and the sharp comeback in NPB futures. However, reports say

that natural gas production at Nigeria LNG is on recovery and operations at Norway’s Snohvit

LNG project will come online soon. The NBP February front-month contract gained nearly 20cts

from a day before to close at $8.916 on Thursday.

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RIM INTELLIGENCE LNG Daily 1-17-18,Shinkawa, Chuo-ku,Tokyo,Japan Tel (81)-3-3552-2411, Fax (81)-3-3552-2415 Singapore Tel (65)-6345-9894, Fax (65)-6345-9894 Some shipping information says that the 145,000-cubic meters LNG tanker “LNG Ebisu”, which

is believed to have departed U.S. Sabine Pass, is scheduled to arrive at the Isle of Grain

in Britain on January 16. Sources speculate that France’s EDF Trading had earlier bought

the cargo on an FOB basis as the trader time-charters the vessel.

Sources indicate that European energy trader Vitol is working on delivering a Sabine Pass

re-export cargo, which is likely to be loaded into its time-chartered 177,000-cubic meters

vessel “Ben Badis”, to Greece’s Public Power Company (PPC). In fact, Vitol won the tender,

which was earlier issued by PPC, to deliver two cargoes during January and March.

Norwegian state-owned oil and natural gas developer Statoil unveiled a schedule to restart

operations on January 18 at its operated 4.1 million tons-a-year Snohvit project. A gas

leakage on pipelines at a cooling system shut operations at the project down since late

December. As a result, the shortage of gas output led Statoil to have secured three cargoes

to be loaded in second-half December elsewhere. A Statoil official declined to comment on

the origin of the cargoes. Statoil also admitted having bought some more cargoes, including

one from U.S. Sabine Pass to be loaded into the 138,104-cubic meters tanker “Gemmata”.

＜Freight Market＞ Some sources see slightly more spot vessels available to be chartered in March or April,

owing to the surged NPB prices having resulted in a decline in relatively long

Atlantic-Northeast Asia voyages. Estimated daily chartering rates are around $55,000 for

135,000-cubic meters conventional size ships. There appear few players showing interest in

taking spot ships at above $60,000 per day, a similar level of the offer earlier shown by

U.S. Morgan Stanley on the 138,106-cubic meters tanker “Excel”. In order to resell an Atlantic

cargo, one trader is willing to pay for just above $50,000 per day for a spot ship but no

such offers were heard.

＜Long Term Contract＞ India’s state-run GAIL begins talks over short-term contracts running for four years from

this year as well as long-term contracts to confirm supply to the 5 million tons-a-year Dabhol

terminal, which is scheduled to open in the fourth quarter this year. In case of the delay

in start-up, GAIL is expected to inject some term cargoes into another state-run

Petronet-operated 10.0 million tons-a-year Dahej terminal. GAIL seeks for a 20 year-long

contract to annually receive two million tons. As previously reported, the firm plans on

securing 500,000 tons per year through short-term contracts. It had earlier agreed to take

500,000 tons per year from Japan’s Marubeni. Therefore, it takes a wait-and-see stance for

fresh new talks. The quiet move is also explained by the fact that other local end-users

such as Petronet LNG and Reliance Industries signed similar contracts starting this year.

Transactions

Recent Spot Transactions Date Origin Seller Buyer Price FOB/DES Timing Destination Jan 7 Sanibe Pass T.B.R. Vitol T.B.R. FOB mid Jan Greece

Jan 7 T.B.R. T.B.R. Statoil T.B.R. T.B.R. End Dec to Jan T.B.R.

Jan 7 Altantic Basin T.B.R. GSPC Floating basis DES Feb India

Jan 7 Sakhaline a European major GS Caltex $9.90 DES early Feb Korea

Jan 7 Sabine pass T.B.R. Statoil T.B.R. FOB Jan T.B.R.

Jan 5 Peru Repsol CNOOC $9.80 DES end Jan China

Jan 5 Sakhalin Shell/Russian producer CNOOC $9.80 DES mid-Jan China

Jan 5 Oman T.B.R. TEPCO $9.60-9.80 DES Jan Japan

Jan 5 Abu Dhabi Marubeni TEPCO $9.60-9.80 DES end Jan Japan

Jan 5 Abu Dhabi ADGAS Marubeni $8.70 FOB Feb 6-7 T.B.R.

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Recent Term Transactions Date Origin Seller Buyer Price FOB/DES Volume Start Duration

Jan 05 Peru Repsol KOGAS T.B.R. DES 1.5 mil/yr 2011 T.B.R

Dec 24 T.B.R. T.B.R. India GSPC T.B.R. DES 2-3 cargoes/m 2011 2 year

Dec 16 T.B.R. GDF Suez Petronet LNG Brent Crude link DES 1 cargo /month 2011 1 year Dec 15 T.B.R. ENI PPC T.B.R. DES 2 cargoes 2011 Jan 2011 Mar

Dec 15 T.B.R. Vitol PPC T.B.R. DES 2 cargoes 2011 Jan 2011 Mar

NYMEX/ICE Natural Gas Future Market Commentary (Jan 6) NYMEX February natural gas contracts added a 3.9cts loss to settle at $4.434 million British

thermal units on Thursday, pressured by strong selloff due to a supply glut. According to

the U.S. Energy Information Administration, U.S. natural gas stocks stood at 3.097 trillion

cubic feet (tcf) as of Dec 31, down 135 billion cubic feet from a week earlier, almost in

line with market expectations. Current stocks, however, are 5.6% above the week’s past

five-year average. Physical gas prices at Henry Hub, the NYMEX delivery point, slid 3.50cts

to finish at $4.4850.

ICE February gas contracts rose 18.1cts to settle at $8.916, buoyed by bargain hunting after

the contracts slid 82.5cts or nearly 9% until a day before from December 31 when front month

contracts changed to February. The spread between NYMEX and ICE February gas futures widened

22.0cts from a day before to result in $4.482 (ICE is higher). According to National Grid,

physical average gas prices in the U.S. dollar term ended at $8.841, down 17.2cts from a

day before.

In the Access electronics trade, NYMEX front-month February natural gas is traded at

$4.400/mmBtu at am Friday Tokyo hours, down 3.4cts from Thursday's close.

Market news -TABLE 1/6 Spot/Short-Term LNG Cargo Arrivals at Asian Terminals

Spot/Short-Term LNG Cargo Arrivals at Asian Terminals Survey by RIM Intelligence Arrival Carrier Capacity(cum) Capacity(mt) Origin Terminal Note 05-Feb-11 Excellence 138,000 63,480 Freeport, US Indian Ocean 04-Feb-11 British Emerald 155,000 71,300 Trinidad Incheon, Korea 30-Jan-11 Neva River 145,000 66,700 Nigeria Asia 25-Jan-11 Castillo de Santisteban 165,000 75,900 Peru China 14-Jan-11 Methane Rita Andrea 145,000 66,700 Trinidad Asia 14-Jan-11 Sevilla Knutsen 173,400 79,764 Peru Incheon, Korea 08-Jan-11 Clean Force 150,000 69,000 Egypt Incheon, Korea 06-Jan-11 British Innovator 138,200 63,572 Trinidad Pyeongtaek.

Korea

05-Jan-11 Excel 138,106 63,529 Nigeria Shanghai, China departed Bonny Nov-27

05-Jan-11 Seri Angkasa 145,000 66,700 Nigeria Pyeongtaek. Korea

04-Jan-11 LNG Pioneer 138,000 63,480 Australia Yung An, Taiwan 04-Jan-11 Maersk Arwa 165,500 76,130 Australia Pyeongtaek.

Korea 02-Jan-11 Clean Power 150,000 69,000 Sakhalin Incheon, Korea 02-Jan-11 Seri Begawan 152,300 70,058 Malaysia Pyeongtaek.

Korea

ENI seeks DOE OK to re-export LNG from Cameron terminal Italy’s public energy major ENI S.p.A has filed an application with the the U.S. Department

of Energy (DOE) for authorization to re-export LNG from the Cameron terminal in Louisiana,

6

RIM INTELLIGENCE LNG Daily 1-17-18,Shinkawa, Chuo-ku,Tokyo,Japan Tel (81)-3-3552-2411, Fax (81)-3-3552-2415 Singapore Tel (65)-6345-9894, Fax (65)-6345-9894 the DOE’s Office of Fossil Energy recently made public on its website.

The Cameron LNG terminal in Hackberry, Louisiana, is owned and operated by Sempra LNG, a

wholly owned subsidiary of U.S. energy major Sempra Energy. It has three 160,000 m3 LNG

storage tanks and a jetty capable of accommodating Q-Flex tankers of 210,000 m3. The volume

of natural gas regasified at and sent out from the terminal is 1.8 billion cubic feet per

day (the LNG equivalent of 11.4 million mt per year). It came online in July 2009. ENI owns

the right to use 40% or 4.4 million mt of the terminal’s capacity.

The DOE has approved of an application filed by Sempra Energy for re-exporting LNG from

the Cameron terminal, making it possible to re-export LNG starting from Feb. 1. ENI’s

application comes after one by Sempra Energy. Currently, two U.S. terminals are re-exporting

LNG. The two are the Sabine Pass terminal in Cameron Parish, Louisiana, and the Freeport

terminal on Quintana Island, Texas.

The U.S, started re-exporting LNG in December 2009. Up until December 2010, 13 cargoes have

been re-exported from U.S. terminals, five from Freeport and eight from Sabine Pass.

LLeeaaddiinngg gglloobbaall eenneerrggyy ccoommppaanniieess aanndd LLNNGG bbuussiinneessss

((NNiiggeerriiaa NNaattiioonnaall PPeettrroolleeuumm CCoorrppoorraattiioonn))

NNPC=Nigeria National Petroleum Corporation 1. Company outline

Nigeria National Petroleum Corporation (NNPC) is run by the federal government of Nigeria,

which regulates the country's oil industry and its business. The NNPC alone is responsible

for the entire stream of oil production and controlling and reining in the oil industry on

the government's behalf. In 1988, the company went commercial after having been divided into

a dozen organizations. On running oil and natural gas, it engages in development, production,

distribution, oil chemistry, engineering, and commercial investment. Under the company are

the following eleven subsidiaries;

1. National Petroleum Investment Management Services (NAPIMS) 2. Nigerian Petroleum Development Company (NPDC) 3. The Nigerian Gas Company Limited (NGC) 4. Pipeline and Production Marketing Company (PPMC) 5. ISDN Digital Subscriber Line (IDSL) 6. Nigeria LNG (NLNG) – joint venture 7. National Engineering and Technical Company Limited (NITCO)

8. Hydro-Carbon Services of Nigeria Limited (HYSON).

9. Warri Refinery and Petrochemical Co. Limited (WRFC)

10. Kaduna Refinery and Petrochemical Company Ltd. (KRPC)

11. Port Harcourt Refining Co. Limited (PDRS)

(from company website)

The Nigerian law stipulates resources in the country, including minerals, oil and gas,

all belong to the federal government. Therefore, oil companies in the country are supposed

to pay to the government part of their profits from dealing in them. Around 60% of government

revenues comes from the oil industry. In fact, the revenue from the NNPC accounts for about

one fourth of the total government revenue, or 40% of the country's gross domestic product

(GDP). As such, the government relies on crude oil production for around more than 70% of

7

RIM INTELLIGENCE LNG Daily 1-17-18,Shinkawa, Chuo-ku,Tokyo,Japan Tel (81)-3-3552-2411, Fax (81)-3-3552-2415 Singapore Tel (65)-6345-9894, Fax (65)-6345-9894 its revenue and around 90% of the total exports. With the end of the oil boom, Nigeria had

had several financial issues to address, including a continuing fiscal deficit resulting

from a lax financial management, accumulated huge debts and obligations. In October of 2005,

Nigeria received a massive debt relief under the Paris Club Agreement.

Though Nigeria being the seventh largest oil producer in the OPEC in 2009, a continuing

military dictatorship has gotten in the way of appropriating oil revenues to the public in

any responsible way. No progress has thus been made on poverty reduction and infrastructure

development. In the Niger Delta, there seems to be no end to sabotages on oil and gas

facilities and kidnapping of foreign workers by armed forces. So, the new administration

led by President Yar' Adua is urged to take action to turn around the situation. Meantime,

the NNPC has maintained favorable relations with foreign oil capital such as Mobil and Chevron,

as it has established a JV for development, production and sale of oil and natural gas. Table

1 outlines the NNPC.

Item Description RemarkHead Office Abuja, NigeriaFounded 1977Category ofBusiness

Development and Productionof Oil and Natural Gas

RepresetativeEdmunt DaukoruA.O.Oniwon

ChairmanGroup Managing Director

Crude OilReserves

5 billion ｔons BP Statistical Review 2010

Crude OilProduction

99 million tons/year BP Statistical Review 2010

Natural GasReserves 5.25 trillion m3 BP Statistical Review 2010

Natural GasProduction 24.9 billion m3/year BP Statistical Review 2010

LNG exportvolume 15.99billion m3/year BP Statistical Review 2010

Number ofEmployees

unknown

(Source：NNPC website (2009)､BP Statistical review 2010 ）

Table 1　About Nigerian National Petroleum Corporation (NNPC)

2. History of the NNPC 1977: The NNPC was established by merging the NNOC and the Ministry of Mines and Steel in

the federal government. Under the federal law, the NNPC ran a joint venture established

with foreign oil companies such as Shell, Agip and ExxonMobil, besides the federal

government. The Nigerian government became involved in the oil development in

cooperation with such international partners.

1988: The company consisted of 12 strategic business units.

2007: President Umaru Yar' Adua proposed a separation of the NNPC.

2009: NNPC announced they saw no damage on oil production from an unrest between the Nigerian

government and Niger Delta residents.

3. Crude oil and LNG exports by the NNPC Confirmed oil reserves in Nigeria were 5-bil mt as of 2009, or 2.8% of the world's total.

8

RIM INTELLIGENCE LNG Daily 1-17-18,Shinkawa, Chuo-ku,Tokyo,Japan Tel (81)-3-3552-2411, Fax (81)-3-3552-2415 Singapore Tel (65)-6345-9894, Fax (65)-6345-9894 The R/P ratio was said at the time to be able to span over the next 50 years. In Africa,

Nigeria has the second largest oil reserves only after Libya. In 2009, the country's oil

production was at 99-mil mt, down 3.6% on year. Still, the figure meant a 2.6% to the world's

total. In Africa, it boasts of the largest oil production. Chart 1 shows importers of Nigerian

crude oil. The country exports around 50% of its oil to the US, with 24% to Europe and 11%

to Asia. By country, the US is the largest importer of Nigerian oil with India the second

in line.

47.3

8.50.3

23.8

10.6

9.5

Chart 1 Nigeria's Crude Oil Export by region

North AmaricaSouth AmericaCentral AmericaEurope

Asia

Africa

Meantime, confirmed natural gas reserves in Nigeria were 5.25-tril cubic meters in 2009,

or 2.8% of the world's total. The R/P ratio was more than 100 years. Likewise, natural gas

production in 2009 stood at 24.9-bil cubic meters, down 28.7% on year. The figure accounted

for 0.8% of the world's total (BP Statistics 2010). Natural gas and LNG exports by Nigeria,

after having peaked in 2007 and 2008, declined in 2009. The reason is presumably a suspended

production after sabotages by locals in the Niger Delta of oil facilities. Chart 2 shows

the trend in natural gas production and LNG exports in the country.

9


4. Participation of the NNPC in the LNG business LNG production in Nigeria in 2009 declined by 4.5-mil mt a year, or around 30%, from 2008.

Material gas supplied through condensate pipelines is often subject to thieving. The Soku

gas refinement facility, which supplies around 40% of material gas under normal situations,

was forced to be suspended again just three months after having started in the latter part

of 2009. The facility has reportedly yet to run stably. Therefore, a material gas shortage

has continued. Those in regulatory and security agencies said, "Leaks on pipelines were a

result from thefts by the third parties." The NLNG reportedly ran at around 80% of capacity

as of December of 2010. Table 2 outlines LNG projects relating to the NNPC.

Table 2 NNPC's Participation in LNG Business

Country LNG Liqeufaction Plant Country ＬＮＧ Receiving Terminal

Nigeria (1)Nigeria LNG(NLNG)

- - Nigeria (2)Ｂｒａｓ s LNG

Nigeria (3)Olokora LNG

(Source： Prepared by RIM Intelligence Co. based on various data）

(1) Nigeria LNG Project (in operation) The Nigeria LNG (NLNG) Project has six trains in operation. The No7 train (NLNG Seven

Plus) is under construction. A final investment decision had been pushed back to 2008 from

its initial schedule. When to wrap up an FID still remains to be seen. A long time has passed

since construction on the No7 train had been put on the agenda. Those involved in the project

hoped to the FID by 2010, which is likely to be further pushed back, though.

The project eyes constructing a super huge train, capable of producing 8-mil mt a year,

larger than one in Qatar. Among the outlets for LNG from the NLNG, so far settled, are BG,

Shell, Total and Eni. The NLNG is funded by the NNPC (49%), Shell (25.6%), Total (15%) and

Eni (10.4%), as Table 3 shows. A sticking issue is how to secure enough material gas. Supplying

material gas to existent LNG trains has been halted on several occasions. In February of

2010, the NLNG asked the government to confer the same degree of preference to LNG bound

overseas and LNG bound to the domestic market. For further promoting infrastructure, they

need a fair amount of money. So, the NLNG thinks that only exporting gas in parallel with

fielding domestic demand would earn their much-needed money. Table 3 outlines projects

promoted by the NLNG.

10


Project Investor

InvestmentRatio(%)

ProductionCapacity(MT/year）

Numberof

TrainsStart-Up

ImportingCountry

ImporterImportVolume(MT/yea

Import Period

France Gdf 0.40 1999-2021 Italy ENEL 2.82 1999-2021

1.29 1999-2021 2.18 2002-2025

Turkey Botas 0.97 1999-2021 0.34 1999-2021 0.80 2002-2025

NNPC 49.0% 0.70 2003-2021Shell 25.6% 0.25 2005-2025Total 15.0% BG 2.50 2005-2024ENI 10.4% Shell 1.10 2005-2024

Iberdrola 0.40 2005-2024Endesa 0.81 2007-2017

Portugal Transgas 1.61 2005-2024WesternCountries

ENI 1.21 2005-2024

Total 0.97 2007-2025Shell 3.00 2007-2025

India NTPC 3.00 2009-BG 2.25 2012-2031Shell 2.00 2012-2031ENI 1.38 2012-2031OXY 1.38 2012-2031

NorthAmerica

Total 1.00 2012-2031

(Source：Prepared by RIM Intelligence CO.)

Table 3　Outline of Nigeria LNG Project

NLNG(Train No.6)(Bonny Island）

U.S.201218.40

NLNG(Train No.7）(Bonny Island）

WesternCountrie4.00 1 April 2008

NLNG(Train No.1-3）(Bonny Island）

Spain

U.S.

200528.10NLNG(Train No.4-5）(Bonny Island）

199926.60

Spain Gas Natura

Portugal Transgas2.90 1 2002

U.S. BG

(2) Brass LNG Project (under consideration) The Brass LNG Project in Baylesa State in the Niger Delta is also participated by Eni,

Total and ConocoPhillips. Almost five years had already passed since a conclusion among the

companies of a sale agreement. The companies therefore hoped to start the project as soon

as possible. In 2006, Total joined instead of Chevron. The project will be able to produce

at 10-mil mt a year with two trains. The project is funded by the NNPC (49%) and Eni, Total

and ConocoPhillips (17% each). It was decided that contracts, both FEED and construction

went to Bechtel in 2004 and 2007, respectively.

As an index, to which the LNG price for the project would refer to, either the NBP price

or the price charged on the border with Germany might be adopted in Europe to set in motion

the stagnant gas market in North America to diversify outlets and price indexes to refer

to. The German bordering price is a price charged on gas from Russia transferred by the

pipeline at the border with Germany. In terms of exporting to Asia, Japanese companies such

as LNG Japan and Itochu Corp. are considered as possible capital participants in the project,

which would sell LNG in tandem with crude oil prices. Both companies were selected in return

for procuring funds to the project on behalf of the NNPC, along with Sempra and the local

company Sahara Group, at the request of the NNPC.

There is no projection of any changes to LNG supply from the project allocated to Eni,

Total and ConocoPhillips. It is likely for them to receive 1.6-mil to 1.7-mil mt a year,

given their capital participation of 17% in the project. The remaining participants, BG,

GDF-Suez, and BP, are vying for the remaining 4.9-mil to 5.1-mil mt. The NNPC insisted on

retaining the schedule for a final investment decision to be wrapped up at the end of 2010

in time for campaigns by President Goodluck Jonathan in the next presidential election on

January of 2011 to show it off as his own achievement.

11

RIM INTELLIGENCE LNG Daily 1-17-18,Shinkawa, Chuo-ku,Tokyo,Japan Tel (81)-3-3552-2411, Fax (81)-3-3552-2415 Singapore Tel (65)-6345-9894, Fax (65)-6345-9894 In the meantime, the foreigners think that the first quarter of 2012 or the end of 2011

would be a more realistic timeline for the FID to be concluded. The president from the state

of Baylesa had had a strong interest in the Brass project, which had only boosted during

his presidency. Both LNG Japan and Itochu are likely to have overestimated appropriations

from the project to Asia. Both companies needed to procure most funds for the NNPC, while

having to maintain rational and consistent profits. It is to be almost for sure for part

of the funds would come from the Japan Bank for International Cooperation (JBIC). Both

companies are responsible for concluding the funding anyway.

LNG Japan is expected to gain 4% in special interests in the project as of now with Itochu

and Sempra-Sahara 3% and 2%, respectively. This means the interests of the NNPC would decline

to 40% from 49%. Whether Chevron and Shell do capital participation in the first two trains

remains to be seen, though. Meantime, ConocoPhillips said in 2009 that it was possible to

sell its 17% stake little by little to secure material gas supply. Once outlets, including

Asia, are newly decided, distances to cover by transportation will be longer than projected.

Shipping companies are reportedly asked to launch tenders for LNG ships of 155,000, 180,000

and 216,000 cubic meters, respectively.

As the Brass LNG set the deadline of delivery for the first quarter of 2015, it is presumed

that the project aims to start around the mid-2015. The process of a tender issuance by

selected ship owners was expected to start at the end of 2010. In November of 2010, the Brass

LNG project almost completed an analysis of four leading packages for a construction tender.

They were ① to set up onshore facilities, exclude liquefaction plants, ② offshore work at a loading platform, ③ set up breakwater and export facilities, ④ put down undersea lines. The project adopted the so-called cascade method of ConocoPhillips as a method for

liquefaction. Bechtel would be in charge of an engineering, procurement and construction

(EPC). The FID will be settled in the first quarter of 2011. Table 4 outlines the Brass LNG

Project.

Project InvestorInvestment

Ratio(%)

ProductionCapacity（MT/year）

Number ofTrains

Start-UpImportingCounry

Importer Volume ofPurchase（MT/year）

ImportPeriod

NNPC 49.0% BP ?

Eni 17.0% BG 1.60～1.70？

Total 17.0% GDF-Suez 1.60～1.70？

ConocoPhilli 17.0% Eni 1.60～1.70？

（Source：Prepared by RIM Intelligence Co. based on various data）

Tabla 4　Outline of Brass LNG Project

Brass LNG ?5.00×2 2 2015 ?

(3) Olokola LNG Project (under consideration) The Olokola LNG, also known as OK LNG, is determined to secure enough gas reserves

to start by 2014. It is totally unthinkable for the project to move on as scheduled, though.

In February of 2010, BG, one of the participating companies predicts, the project to start

from 2015 on issues with administrative procedures and a delay from attending to high costs.

In March of 2008, Nigeria's Energy Minister Emmanuel Odusina said, "We will not suspend either

the Brass or Olokola projects. The federal government is still moving ahead with the projects,

as it has never announced they do not exist or that they will be put to a halt." In such

a way, he insisted on the government's determination to complete both projects.

Behind the announcement was an intention to deny speculation about the government's

withdrawal from the OK LNG for a continued dispute over participation rights. This reflected

government officials said back in February that the government had come to eye on withdrawing

from the project with a 6.75% stake of the NNPC to transfer to investors relating to the

12

RIM INTELLIGENCE LNG Daily 1-17-18,Shinkawa, Chuo-ku,Tokyo,Japan Tel (81)-3-3552-2411, Fax (81)-3-3552-2415 Singapore Tel (65)-6345-9894, Fax (65)-6345-9894 former president Obasanjo. Meantime, President Yar'Adua was reported to be thinking of

suspending the transfer as part of government efforts to avoid corruptions. The NNPC holds

a 46.75% stake in the project. The other participants are Shell and Shevron (19.5%) and BG

(14.25%). The Olokola project will start in 2014. In February of 2008, skepticism emerged

about any viability to put in effect the Olokola project, located remote from gas sources

in the Niger Delta.

The project is to be near the borders of Ogun and Ondo states. The former is the home

state of President Obasanjo with the latter the former NNPC president Funsho Kupolokun's.

Meantime, project costs reportedly boosted to 20-bil to 22-bil dollars from an initially

projected 6-bil dollars. The developers show willingness to cut them by 30%. The Olokola

project is expected to produce 11-mil mt with two trains in an initial period. With more

two trains added, it will expand the capacity to 22-mil mt at the maximum. The energy minister

has no issue with supplying gas to both projects. "There is enough gas to feed the projects.

They are still viable and I am sure to expand the gas department to let sources meet domestic

and export needs in five to six years," said the minister. In February of 2008, President

Yar'Adua approved of a new gas policy to secure a rise in gas supply for domestic power

generation and fertilizer production facilities.

With the policy, prices for domestic gas users will vary, as those for industrial users,

including power companies and fertilizer plants, will be cheaper than those for local

industries. The energy minister noted that the government had talks with Gazprom over

developing and making use of huge gas resources in Nigeria. In February of 2008, Gazprom

said it wished to conclude a sweeping oil and gas contract with Nigeria, which centered around

the development of the projects by the end of May. Apart from the announcement, a reported

energy cooperation between Russia and Iran and continued talks between Russia and Algeria

have increased fears that countries with gas reserves might go towards creating a gas cartel.

Still, most experts have reservations about it and said such a move would not be realized

at least in 10 years, given the regionalism of the gas market.

In December of 2009, the NNPC, not giving up on the development of the OK LNG, came

out with the view that it would take some more time for the project's timeline to be settled.

The NNPC said securing material gas for the Olokola project would come last after completing

the Brass project and the No7 train of the NLNG. An FID is likely to be concluded between

2013 and 2014. In February of 2010, those involved in the project said the project held enough

gas reserves to start in 2014. "In accordance with a government policy on the use of gas,

the OK LNG holds enough reserves to supply gas to domestic markets."

The possibility is almost zero for the Olokola LNG to start by 2014, though. BG, one

of the participants in the project as of February of 2010, said administrative affairs and

delays from cost issues would push back facility construction to 2015 or later. The facilities

of the Olokola LNG will be built on the border of Ogun and Ondo states through a joint venture,

funded 46.75% by the NNPC, 19.5% by Chevron and Shell and 14.25% by BG. The Olokola LNG is

scheduled to start with two trains, capable of producing 5.5-mil mt a year, which will be

four in the future. In addition, 30,000b/d of LPG and 15,000b/d of condensate will be produced.

Table 5 outlines the Olokola Project and Chart 3 shows the location of LNG projects in Nigeria.

13


InvestorInvestmentRatio(%)

ProductionCapacity(MT/year）

Numberof

TrainsStar-Up

ImportingCountery

ImporterImportVolume

(MT/year）

NNPC 46.75

Shell 19.50

Chevron 19.50

BG 14.25

(Source： Prepared by RIM Intelligence Co. based on various data)

Table 5　Outline of Olokola LNG Projecet

2014 ？？？

Project

Olokola 5.50×2 2

(Chart3 Map of Nigeria LNG Project)

(Source: JOGMEC)

14


◎Forward Curve-natural Gas Futures vs WTI Futures

88.00 88.50 89.00 89.50 90.00 90.50 91.00 91.50 92.00 92.50 93.00 93.50 94.00 94.50 95.00

4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 9.0 9.5

10.0 10.5

Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12

in $/bblAs of Jan 6 2011in $/mmBtu

RIM Intelligence

Forward Curve-Natural Gas Futures vs WTI FuturesNYMEX NG NBP NYMEX WTI

◎RIM Asia Spot LNG vs NYMEX/ICE Natural Gas futures

3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 9.0 9.5

10.0

Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11

$/mmBtu

RIM Intelligence

RIM Asia Spot LNG vs NYMEX/ICE Natural Gas FuturesRIM ASIA LNG ICE NBP NYMEX HH

15


◎Japan Power Demand

◎Spark Spread

Spark Spread JEPX（Dec 26-Jan 1 Average Delivery）Unit Price

JEPX Average Price Delivery DA-24

Change from

previous week

DA-DT

Change from

previous week

DA-PT

Change from

previous week

Fuel Market Price Dec 26-Jan 1 Average Yen/ｋ

Wh 7.37 -0.83 7.84 -1.08 7.76 -1.42

Cost Difference Cost Difference Cost Difference

Kerosene Yen/Kl 30,000 -30,943 32,000 -28,943 31,600 -29,343 60,943 AFO 32,000 -23,501 34,100 -21,401 33,700 -21,801 55,501 LSAFO 32,000 -23,688 34,100 -21,588 33,700 -21,988 55,688 LSCFO 34,100 -14,650 36,300 -12,450 36,000 -12,750 48,750 HSCFO 34,100 -10,069 36,300 -7,869 36,000 -8,169 44,169

JEPX Average Price Delivery DA-24

Change from

previous week

DA-DT

Change from

previous week

DA-PT

Change from

previous week

Fuel Market Price Dec 26-Jan 1 Average Yen/ｋ

Wh 7.37 -0.83 7.84 -1.08 7.76 -1.42

Cost Difference Cost Difference Cost Difference

Thermal Coal(25%) Yen/t 13,600 +4,424 14,500 +5,324 14,300 +5,124 9,176

16


Example））In case that kerosene is used to generate electricity, generating cost will be JPY 31,600/kl calculating back average price of DA-PT, JPY 7.76. As the market price is JPY 60,943, spread will be minus JPY 29,343. In case of A-fuel oil, generating cost will be JPY 33,700/kl. As the market price of AFO fuel oil is JPY 55,501, spread will be minus JPY 21,801.

Thermal(35%) 19,000 +9,824 20,300 +11,124 20,100 +10,924 9,176

Petroleum Coke 29,100 +14,553 20,300 +5,753 20,100 +5,553 14,547

LNG(40%) 44,600 -1,996 47,500 +904 47,000 +404 46,596

LNG(50%) 55,800 +9,204 59,400 +12,804 58,700 +12,104 46,596

＊Market Price： Kerosene, AFO, LSAFO, LSCFO, HSCFO＝RIM Monthly Average Estimate Thermal Coal, Petroleum Coke, ＬＮＧ＝Feb Customs Clearance Record

＊Spread： Value calculated by subtracting market price from generating fuel cost ＊Generating Efficiency is set to 40%. 25, 35％ is added for Thermal Coal and 50% for LNG DA-24 24-hour simple mean value of system price DA-DT Simple mean value of system price from 8:00～22:00 DA-PT Simple mean value of system price from 13:00～16:00

Spark Spread：The spark spread represents the gross income for a power plant, which calculated by subtracting fuel cost from power price. In the U.S. and Europe, spark spread is used for financial transaction as to fix the generating cost and to hedge against risk. Table above shows the difference (Spark Spread) between the market price of electricity and its cost of production per kilowatt-hour. Generating cost of each fuel is calculated by calculating back weekly average spot price quoted at Japan Electric Power Exchange (JEPX).

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RIM INTELLIGENCE LNG Daily 1-17-18,Shinkawa, Chuo … · 3 RIM INTELLIGENCE LNG Daily 1-17-18,Shinkawa, Chuo-ku,Tokyo,Japan Tel (81)-3-3552-2411, Fax (81) -3-3552-2415 Singapore Tel