Wildcat’s Pick of the Week.

Every Monday, Wildcat will give you a headstart on the coming week, as well as a round-up of what mattered in the previous week.

Week Ahead

Monday 15 October: Australian Pipeline Industry Association annual convention and exhibition, Brisbane (until Tuesday); GDF Suez roadshow (Singapore and Hong Kong); New Zealand’s tender for 23 oil and gas exploration blocks closes; Kunlun Energy and PetroChina at Macquarie China Corporate Day, Hong Kong; China Petroleum & Chemical extraordinary shareholder meeting.

Thursday 18 October: Santos quarterly report, Woodside Petroleum quarterly report.

Winners & Losers

Winner: Total has beaten a host of high-profile rivals to acquire stakes in Australian Oil Search’s gas exploration licences in Papua New Guinea, in a move which could lead to the development of another LNG export facility in the remote country. Under five sale and purchase agreements, Total will take a 40% interest in offshore petroleum prospecting licences (PPLs) 234 and 244, a 50% stake in offshore petroleum retention licence 10, and the option to acquire a 35% interest in onshore PPLs 338 and 339. The deal marks Total E&P’s first step into Papua New Guinea, which holds significant untapped gas export potential.

Winner: Argentina will have 420 MW of extra gas-fired power capacity in 2014, after the conversion of two gas-fired power plants into combined units. Siemens said on Tuesday that it had been awarded the contracts for the conversion by Unión Temporal de Empresas, a temporary joint venture between Isolux Ingeniería and Inversora Andina Ibérica. Argentina’s total installed power capacity is around 28 GW, with thermal generation accounting for between 50% and 60% of production.

Loser: Gas from Azerbaijan’s giant Shah Deniz 2 development could mostly end up in Turkey – not in the rest of Europe as originally thought – according to delegates at the Gastech conference. “Shah Deniz 2 gas will mostly be consumed in Turkey,” said Ali Arif Akturk, managing director and member of the board of Naturgaz, said, delivering a blow to EU gas consumers who were relying on Azerbaijan to help diversify gas supplies away from Russia. Under the second phase of the development of the BP-led Shah Deniz project, the capacity of the South Caucasus Pipeline (SCP) – which delivers gas from the Shah Deniz field through the Caspian Sea to Turkey – is expected to rise from around 9 bcm to 16 bcm.

Loser: Gazprom will be hit by a further wave of legal proceedings aimed at forcing the Russian exporter to lower the cost of its gas exports. The Lithuanian government has joined Polish gas monopoly PGNiG and Germany’s RWE in launching formal legal proceedings against Gazprom to reclaim up to $1.87 billion for gas supplied through its existing, long-term contracts. Documents were formally submitted to the court on Wednesday, with the Lithuanian case arguing that Gazprom has contravened the terms of its purchase of a 37.1% stake in national gas utility Lietuvo Dujos during a privatisation drive in 2004 by not agreeing to “fair prices” for its exports.

Loser: The United States Energy Information Administration’s has flipped its forecast for the country’s gas consumption in 2013, from growth of 5.66 MMcm/d to a decline of the same amount, as higher price expectations have cut projected gas demand from the power sector. The EIA has lifted its gas price expectations for 2012 to $2.71/MMBtu from $2.65/MMBtu, and for 2013 to $3.35/MMBtu from $3.34/MMBtu. Power sector gas demand is forecast to decline by 10.4% in 2013 from 2012 levels, compared with 8.4% in the September outlook.

Quotes of the Week

“As an industry, we frequently tend to over-estimate our future supply prospects. And I wonder whether we are not in danger of heading the same way with regard to the current optimism about supply,” Frank Chapman, chief executive of BG Group, said in a keynote address at the Gastech conference in London on Monday. A truly integrated global gas market is still decades away, even if the industry delivers on LNG projects in Australia, North America and East Africa, he said.

“Given that the global growth of gas markets will persist and the gas share in the energy mix will increase, I believe there will be a place for both Gazprom and independent producers,” Russian Energy Minister Alexander Novak told Interfax on Tuesday, pointing to the large number of gas projects under development. He also noted that the production growth from Russia’s independent producers outstripped that of state-controlled Gazprom.

“Shell is a good company. We work with them, and certainly they could give a positive contribution to the project. I’m very positive talking about Shell,” Claudio Descalzi, chief operating officer for Eni’s upstream division, told journalists on Thursday. He did not, however, confirm rumours that the Italian major was talking to Royal Dutch Shell about joining Eni’s vast offshore Mozambique project.

Week in Numbers

Flip-flop

5.66 MMcm/d: Previous EIA forecast for US consumption growth in 2013.
-5.66 MMcm/d: New forecast for US consumption ‘growth’ in 2013.
$3.35/MMBtu: EIA forecast for US gas prices in 2012.

Source: EIA

Pipe dream

2: Nord Stream lines in operation.
16.6%: Total capacity usage of Nord Stream 1.
4: Nord Stream’s rumoured target for lines.

Source: Nord Stream, Interfax

Some distress

3%: Fall in Japanese LNG demand in August.
$13/MMBtu: Perceived spot market value for Asian LNG imports.
$12/MMBtu: Value of ‘distressed’ cargoes amid Asian demand slump.

Source: Interfax