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France's Total buoyed by unexpected global LNG demand growth: CEO

London (Platts)--8 Feb 2018 930 am EST/1430 GMT


The global LNG market grew at a much faster rate in 2017 than had been expected, the CEO of France-based Total said Thursday, a welcome development as the oil major looks to optimize its LNG business through its growing portfolio flexibility.

* 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's fourth-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 LNG projects. But the low gas price led to a big increase in demand," Pouyanne said.

Total is betting on LNG, announcing in November the $1.5-billion acquisition of Engie's portfolio of upstream LNG assets.

That will mean Total's managed portfolio of LNG volumes rising from 16 million mt/year now to over 40 million mt/year -- or 10% of the global LNG market.

"The growing demand for LNG supports the group's strategy to develop along the integrated gas value chain, as illustrated by the announced acquisition of Engie's LNG portfolio," Pouyanne said.

LNG is now a key pillar of Total's corporate strategy, with Pouyanne saying the Engie acquisition was a "unique opportunity" to make a step-change as 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 in the US, and we have a well balanced portfolio with customers in all the main regions including in Asia -- in Japan, South Korea and Taiwan -- and also in China," he said.

VALUE CHAIN OPTIMIZATION

The LNG business, he said, is a matter of optimizing the full value chain in terms of cost.

Pouyanne gave the example of the high cost of transportation in the global LNG market, so the ability to optimize cargoes to reduce transport costs was crucial.

"To send LNG from Norway to Asia can cost $2.50/MMBtu in transportation on one vessel, so you have room for optimization. We can leverage that through the flexibility of merging the two portfolios," Pouyanne said.

In the US, Total will take over Engie's stake in the Cameron LNG plant in Louisiana, which will give it an "integrated" gas position to complement its position in the Barnett shale in Texas.

"We are economically integrated between Barnett and the Cameron LNG position," Total said.

The 15 million mt/year, three-train facility should start by 2019, and Total 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 more gas into the market," he said.

--Stuart Elliott, stuart.elliott@spglobal.com

--Edited by Jonathan Dart, jonathan.dart@spglobal.com




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