Houston, Texas-based ConocoPhillips (NYSE: COP), the world’s largest independent E&P company, is said to have put up for sale its Nikiski liquefied natural gas (LNG) terminal on the Kenai Peninsula in Alaska, which has been exporting NLG mostly to Japan for several decades.
A global oversupply, low prices and market uncertainty have combined to make life difficult for gas producers and liquefied natural gas project developers. Demand for LNG will grow in time but “it is a very competitive market out there right now,” said Deepa Poduval, senior managing director at global engineering and consulting firm Black & Veatch.
“Development of new greenfield LNG mega-projects will be challenging worldwide in the near-term as pricing and supply overhang gets played out,” Poduval said at the 19th annual BC Natural Gas Symposium in Vancouver, according to the Kenai Peninsula Borough Mayor’s Office.
“There are a large number of sources of potential LNG supply,” added B&V’s Poduval. “It is currently a golden age for LNG buyers.”
As U.S. natural gas prices have risen and oil prices have stayed low, it could cost at times more to buy Gulf Coast LNG linked to U.S. natural gas prices (closer to $9 per million Btu when the cost of the feed gas is around $3) than LNG priced at a percentage of a barrel of oil (around $7 to $8 per million Btu with oil at $50 per barrel). Japanese utilities are re-examining the move to U.S. gas-linked LNG pricing and looking for a mix of pricing variables, according to Poduval.
Earlier this month, ConocoPhillips outlined the company’s strategy including several actions “for accelerating the company’s value proposition of a strong balance sheet, growing dividend and disciplined growth.” These actions include an initial $3 billion share repurchase program and “the initiation of a $5 to $8 billion divestiture program, which will focus primarily on North American natural gas.”
“During the past two years, we have significantly transformed ConocoPhillips to succeed in a lower, more volatile price environment. We’ve lowered the capital intensity and breakeven price of the company, lowered the cost of supply of our investment portfolio, and created strategic flexibility for future price cycles,” said Ryan Lance, chairman and chief executive officer.
Earlier this year, ConocoPhillips reportedly sold its stake in the Beluga River Gas field in Alaska’s Cook Inlet to the municipality of Anchorage and Chugach Electric Association, in a $152 million deal.
In 2015, Japan, South Korea and Taiwan imported 54 percent of the world’s LNG. By 2020, Black & Veatch estimates that will fall to 40 percent as total demand in the three countries holds flat. China and India are projected to double their LNG imports between 2015 and 2020, with emerging Asian nations to triple their imports. Total demand from China, India and emerging Asian nations could reach almost 80 percent of the annual consumption in Japan, Korea and Taiwan, according to the Kenai Peninsula Borough Mayor’s Office.
ConocoPhillips had operations and activities in 20 countries, $94 billion of total assets, and approximately 14,900 employees as of Sept. 30, 2016. Production averaged 1,560 MBOED for the nine months ended Sept. 30, 2016, and proved reserves were 8.2 billion BOE as of Dec. 31, 2015.
ConocoPhillips was created through the merger of American oil companies Conoco Inc. and Phillips Petroleum Co. in 2002. In 2012, ConocoPhillips’ spun off its downstream assets as a new, and separate company, Phillips 66.