The global LNG market grew at a much faster rate in 2017 than had beenexpected, the CEO of France-based Total said Thursday, a welcome developmentas the oil major looks to optimize its LNG business through its growingportfolio flexibility.
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* Consumption rose by 10% in 2017, above Total's expected 5%
* Engie LNG acquisition to grow managed portfolio to 40 mil mt
* Total backs expansion of US Cameron LNG export plant
Patrick Pouyanne told analysts in London after the release of Total'sfourth-quarter results that global LNG consumption rose by 10% last year,double the company's forecast of 5%.
"Everyone was quite pessimistic on gas prices with the start of new LNGprojects. But the low gas price led to a big increase in demand," Pouyannesaid.
Total is betting on LNG, announcing in November the $1.5-billionacquisition of Engie's portfolio of upstream LNG assets.
That will mean Total's managed portfolio of LNG volumes rising from 16million mt/year now to over 40 million mt/year -- or 10% of the global LNGmarket.
"The growing demand for LNG supports the group's strategy to developalong the integrated gas value chain, as illustrated by the announcedacquisition of Engie's LNG portfolio," Pouyanne said.
LNG is now a key pillar of Total's corporate strategy, with Pouyannesaying the Engie acquisition was a "unique opportunity" to make a step-changeas Total looked to take positions across the LNG value chain.
"We have strong belief that the LNG market will become more commoditized,and size and flexibility is of the essence," Pouyanne said.
"We have positions in all the main regions of LNG supply, including inthe US, and we have a well balanced portfolio with customers in all the mainregions including in Asia -- in Japan, South Korea and Taiwan -- and also inChina," he said.
VALUE CHAIN OPTIMIZATION
The LNG business, he said, is a matter of optimizing the full value chainin terms of cost.
Pouyanne gave the example of the high cost of transportation in theglobal LNG market, so the ability to optimize cargoes to reduce transportcosts was crucial.
"To send LNG from Norway to Asia can cost $2.50/MMBtu in transportationon one vessel, so you have room for optimization. We can leverage that throughthe flexibility of merging the two portfolios," Pouyanne said.
In the US, Total will take over Engie's stake in the Cameron LNG plant inLouisiana, which will give it an "integrated" gas position tocomplement its position in the Barnett shale in Texas.
"We are economically integrated between Barnett and the Cameron LNGposition," Total said.
The 15 million mt/year, three-train facility should start by 2019, andTotal will be fully supportive of expanding the plant further, Pouyanne said.
"We strongly believe that the Henry Hub price will stay 'low for long'given the size of the resource and shale oil production that will bring moregas into the market," he said.
--Stuart Elliott, email@example.com
--Edited by Jonathan Dart, firstname.lastname@example.org