May 10, 2018 / 4:14 PM / 13 days ago

As Trinidad LNG output grows, cargoes flow far afield

LONDON (Reuters) - Liquefied natural gas (LNG) production in Trinidad, a top 10 global exporter, is recovering thanks to a new field start up, but competition from U.S. shale is forcing sellers of its output to go much further afield.

Trinidad built LNG facilities during a second wave of the industry’s expansion in the 1990s with the goal of supplying North and Latin America. But supplies from the U.S. shale gas revolution have since dented that strategy.

Trinidad’s 15 million tonne-a-year (mmta) Atlantic facility, which liquefies natural gas for export and in which BP (BP.L) and Royal Dutch Shell (RDSa.L) are major shareholders, ran at 75 percent of capacity last year as gas deposits become depleted.

Its production fell almost 30 percent from a peak of 34.32 million cubic metres of LNG (mcm LNG) in 2010 to 25.07 mcm LNG last year. The latest data from the energy ministry, issued this week, showed total March output rose to 2.6 mcm LNG, up 0.4 mcm from February and 0.7 mcm higher than a year ago.

Graphic: Trinidad monthly LNG output - reut.rs/2ryGbVf

Output has been broadly rising since November after the $2 billion (1.5 billion pounds) BP-operated Juniper project came onstream in August. BP said at the time that the project would add 590 million cubic feet of natural gas a day (mcf/d) to its capacity in the country.

The completion of an onshore compressor by Atlantic’s Point Forint terminal, which improves gas recovery from BP’s low-pressure wells, has further raised its gas capacity by 200 mcf/d.

The additional gas from the two projects translate to 5.9 mmta of potential LNG production compared to Atlantic’s 15 mmta capacity, according to Reuters calculations, although actual gas output plus domestic consumption needs to be taken into account before calculating any consequent increase in LNG output.

“Take a little for domestic and you’d certainly see something like 3 to 4 mmta (added to LNG production),” said Trevor Sikorski, head of natural gas and carbon research at London-based consultancy Energy Aspects. “It’s hard to say whether it would go to 15 mmta ... They’ve only ever done that once, in 2010.”

Atlantic LNG and Royal Dutch Shell declined to discuss LNG production figures or comment on any future developments or forecasts. BP was not available for comment.

    BP has sanctioned another gas project while appraising a further two discoveries and Shell has invested further, buying out Chevron’s (CVX.N) assets in the country - trends that should increase and maintain Trinidad’s LNG output in the medium term.

    Nevertheless, although LNG exports rose in the first four months of this year, flows to North and Latin America have fallen, according to Thomson Reuters Eikon data.

    Graphic: Trinidad LNG production - reut.rs/2ryJN9L

    Instead, cargoes have gone as far as China, which received twice as much in the first four months of this year as last year; as well as India, with a 50 percent increase in volumes; the UK, where flows have just exceeded last year’s; and Thailand.

    “LNG cargos are making some incredible trips. You’ve seen trips from Norway to China, big trips around the bottom of South Africa,” Bernstein analyst Oswald Clint said, explaining changing trade flows dictated by high Chinese demand.

    The explosion of U.S. LNG supplies - thanks to new export facilities - from just a single cargo leaving in January 2016 to 27 tankers carrying 4.1 mcm LNG in January this year, has not only supplied China but also flooded the regional market.

    “I don’t think it (Trinidad’s increased production) is disruptive,” Clint said, of the North and Latin American LNG markets. “It’s more about whether there is sufficient material uplift against greenfield capacity expansion. The quantity is not big enough to cause a big enough disruption.”

    Graphic: Trinidad LNG exports - reut.rs/2wpl64i

    Reporting by Sabina Zawadzki; Editing by Susan Fenton

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