December 22, 2021

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Europe's Price Premium Spurs LNG Cargo Diversions

The massive price spike on the European benchmark Dutch TTF hub has thrust the continent into a rare premium position over Asia for spot LNG volumes. This has resulted in a wave of cargo diversions from Asia back toward Europe in recent days.

The TTF front-month January 2022 contract has reached new all-time highs in consecutive sessions in the last several days, primarily aided by Russian supply restrictions, including a second day Wednesday with no westerly flows on the Yamal-Europe pipeline. and low storage stocks.

The TTF front month closed at €180.3 per megawatt hour ($59.7 per million Btu) on Tuesday, Dec. 21, up from €147/MWh ($48.7/MMBtu) day on day.

However, in Asia, traditionally the premium region for spot LNG, the price surge has been capped by lower demand and ample supply.

Northeast Asian spot LNG prices were assessed $41/MMBtu by Energy Intelligence on Dec. 21, which meant that Europe has flipped into the premium position for spot LNG.

US Cargo Diversions

Energy Intelligence already suggested on Dec. 15 that the rapidly soaring TTF benchmark price could outpace gains in Asia spot LNG prices, which could lead to cargoes being diverted from Asia to Europe to take advantage of the price increase.

On the same day, the first cargo diversion occurred when the 174,000 cubic meter capacity Minerva Chios, laden with a cargo from the US Sabine Pass plant, after crossing the Suez Canal and sailing in the India Ocean, turned back toward Europe, data from analytics firm Kpler showed.

The vessel, likely under charter to Royal Dutch Shell, is now located in the Red Sea and is set to cross the Suez Canal in the next day to reach the Mediterranean Sea.

The 173.4 Mcm Maran Gas Vergina did an even longer voyage. It diverted back toward Europe before it reached Japan's Sodegaura terminal, its original destination.

The vessel lifted a cargo from the US Cove Point plant on Nov. 20, but after sailing through the Atlantic Ocean, the Mediterranean Sea and crossing the Suez Canal and subsequently the Red Sea and the Indian Ocean, it turned back on Dec. 17 and is about to re-enter the Red Sea, according to Kpler.

Another potentially diverted vessel is the 177 Mcm Marvel Crane, which after loading at the US Cameron plant, headed south in the Caribbean Sea, which usually indicates a destination in South America or Asia. However, on Dec. 17 it turned east and started broadcasting the UK's South Hook terminal as its destination with expected arrival on Dec. 30.

African Cargoes Rerouted

Some cargoes from Africa are also being redirected to Europe.

Nigeria LNG's 170 Mcm LNG Finima II was heading towards Asia in the Indian Ocean, after lifting from the Bonny export facility on Nov. 29, when it suddenly turned north on Dec. 15 and began broadcasting France's Fos Cavaou as its destination. The vessel is now heading toward the Red Sea and is expected to arrive in the French terminal on Jan. 2.

The 162 Mcm Maran Gas Sparta was also diverted from its route toward Asia and is now heading north in the Atlantic Ocean.

The vessel, chartered by Royal Dutch Shell, lifted a cargo from Equatorial Guinea's Punta Europa plant on Dec. 14 and was heading south, towards the Cape of Good Hope, before changing course on Dec. 20.

Power Prices Follow Suit

Before Covid-19 and the recent gas price crisis, power prices in the UK and the EU were much lower than today.

In the UK, the November 2018 contract was roughly €70/MWh, falling to €51 and €49 in 2019 and 2020 as Covid-19 quashed demand. Spot day-ahead prices are now above €400/MWh and touched €484/MWh on Dec.15 as news emerged that French nuclear power output was lower due to unplanned safety-issue outages and less pipeline gas was coming from major supplier Russia.

Across Northwest Europe, a similar picture has emerged. Last December, monthly baseload power prices in Germany, France and the Netherlands were in a €43-€48/MWh range. This week they have jumped to a range of €396-€452/MWh, with the top end of the range seen in France, where nuclear outages are aggressively supporting prices.

Given that the faults in safety systems at some French nuclear plants could extend well into the new year, there is unlikely to be a respite from the high power prices, especially if the weather turns colder over the festive period.

Cargo Diversions
VesselOriginDiverted FromDiverted ToDate of Course Change
Minerva ChiosSabine PassFar EastEuropeDec 15
LNG Finima IIBonnyChinaFos Cavaou (France)Dec 15
Maran Gas VerginaCove PointSodegaura (Japan)EuropeDec 17
Marvel CraneCameronChinaSouth Hook (UK)Dec 17
Maran Gas SpartaPunta Europa (Eq. Guinea)AsiaEuropeDec 20

Dániel Stemler, Madrid and Jason Eden, London

Sempra Infrastructure Brings on Another Large Investor

Sempra has agreed to sell a non-controlling 10% interest in Sempra Infrastructure Partners (SIP) to a subsidiary of the Abu Dhabi Investment Authority (ADIA) for $1.785 billion in cash. The deal is expected to close next summer.

“As an investor with a global footprint, we expect ADIA will help our team build out a growth platform with an increasingly global capability,” said Jeff Martin, chairman and CEO of Sempra.

This is the second such transaction conducted for SIP since it was created earlier this year combining Sempra LNG and Mexican subsidiary IEnova. Back in October, Sempra completed the sale of a 20% non-controlling interest in SIP to investment firm KKR for $3.37 billion in cash.

The combined SIP business, now 70% owned by Sempra, consists of three growth platforms — clean power, energy networks, and LNG and net-zero solutions. The latter platform is looking toward a series of LNG projects under construction and in development (see table below).

ADIA's Plan

ADIA, founded in 1976, is a globally diversified investment institution that invests funds on behalf of the Government of Abu Dhabi through a strategy focused on long-term value creation.

"In North America, few businesses are as well positioned as Sempra Infrastructure to build the new energy systems for the 21st century," said Khadem AlRemeithi, executive director of the Real Estate & Infrastructure Department at ADIA. "We look forward to building on the partnership with Sempra and KKR to advance the business prospects of Sempra Infrastructure,” he added.

Last year, ADIA revealed a 5% stake in one of Sempra's leading US rivals, Cheniere Energy.

Abu Dhabi as a whole saw a strategic shake-up earlier this year.

By the Numbers

The SIP transaction with ADIA implies an enterprise value for Sempra Infrastructure of $26.5 billion, including asset-related debt of approximately $8.6 billion.

Sempra said that proceeds from the stake sale will be used to help fund incremental capital expenditures at Sempra’s utilities and repurchase $500 million of the company’s stock, of which $300 million was completed in the fourth quarter of this year, while also supporting the company’s balance sheet.

The transaction is expected to be accretive to earnings as the proceeds are deployed.
lng211222_table.svg

Michael Sultan, Washington

EU Energy Subsidy Guidelines Leave Opening for Gas

The European Commission has indicated that it will no longer approve subsidies by EU member states for the most polluting fossil fuels — a move intended to align EU rules on state aid with the bloc's energy and climate policies.

The Commission said it is unlikely to approve subsidies for coal, oil, diesel and lignite because these fuels have "negative environmental effects" that are incompatible with the EU's plans to achieve net zero-carbon emissions by 2050.

However, it did leave the door open for national governments to subsidize investments in natural gas under certain circumstances.

The new guidelines will be formally adopted in January and member states will have to comply with them by 2024.

State aid for new investments in natural gas will only be approved if member states can demonstrate that they will contribute to decarbonization of their energy mix and will not "lock in" the consumption of fossil fuels, the Commission said.

Subsidies for gas projects would be permissible, for example, if accompanied by binding commitments to capture carbon emissions, close down gas-fired power plants over time, or replace fossil gas with renewable or low-carbon gas.

"To meet the Union's 2030 and 2050 climate targets, there needs to be a clear downward trajectory for all fossil fuels including natural gas," according to a document setting out the new guidelines.

The Commission has previously calculated that the EU's consumption of fossil gas must be reduced by 66% to 71% by 2050 to achieve the bloc's net zero target.

EU Competition Commissioner Margrethe Vestager said a "special clause" will also allow state aid for investments in natural gas projects that help less affluent EU member states to transition from coal to gas.

The Commission is expected to take a decision in January on whether natural gas and nuclear power can be designated as sustainable fuels within the EU's investment classification system.

That decision has been delayed several times because of internal disagreements.
Jaime Concha, Copenhagen

New Fortress Inks MOU With Mauritania to Develop Energy Hub

US-based New Fortress Energy (NFE) has signed a memorandum of understanding with the government of Mauritania for the development of an energy hub in the West African country.

The project would utilize offshore gas reserves to produce gas, LNG and blue ammonia for domestic use as well as for exports.

It is not clear if the project would have anything at all to do with the Greater Tortue Ahmeyim liquefaction infrastructure off Mauritania and neighboring Senegal.

NFE was founded in 2014 by Montana-born Wes Edens, an alumnus of both Lehman Brothers and BlackRock Financial Management. The energy infrastructure company has made a slew of investments in the LNG space in 2020 and this year.

Gas-to-Power

As part of the hub project, New Fortress would supply gas to the 180 megawatt power plant of local electric utility Somelec, north of the Mauritanian capital of Nouakchott, and to a future 120 MW combined cycle power plant, the developer said in a statement.

The company will use its "Fast LNG" midsize liquefaction technology to produce the LNG offshore Mauritania. "Fast LNG" provides a cheaper — and yes, faster — deployment solution compared to conventional floating liquefaction units, New Fortress said.

The developer plans to use the same technology in other parts of the world including in the US.

A Bigger Fortress

The memorandum of understanding with Mauritania, which is New Fortress' first involvement in the African continent, follows a series of other deals and acquisitions this year.

In January, the firm announced the acquisition of Brazilian Hygo Energy from fleet owner Golar LNG and from North American asset manager Stonepeak Energy. The company has a series of LNG import projects under way in Brazil.

More recently, in September, New Fortress purchased a 40% stake in Sri Lankan power producer West Coast Power and the rights to develop a new LNG import terminal offshore that country's capital Colombo.

Mauritania's Hub

lngi211222-Mauritania.svg


Dániel Stemler, Madrid

Woodside Eyes Hydrogen Supply to Singapore

Australian LNG independent Woodside has signed a memorandum of understanding (MOU) to study supplying liquefied hydrogen to Singapore and potentially Japan.

Woodside is planning two hydrogen/ammonia production hubs in Australia — H2Perth in Kwinana and H2TAS in Tasmania. A feasibility study for H2Perth, with planned production capacity of up to 1,500 tons per day, is due to be concluded in mid-2022. H2Perth will initially target 300 tons per day of hydrogen production, or 20% of the expected total capacity. Exports are slated to start in the second half of the decade.

Woodside said H2Perth is ideally located in Western Australia for shipping to Singapore and Japan and the project site is close to existing gas, power, water and port infrastructure.

The MOU was signed with Singapore’s Keppel Data Centres and town gas providers City Energy, Osaka Gas Singapore, and City-OG Gas Energy Services.

Keppel, Singapore, Others

Keppel Data said this latest collaboration in the upstream hydrogen supply chain would complement its existing cooperation with other firms for the mid to downstream hydrogen segments, including transportation, storage and regasification. It is part of another consortium consisting of Kawasaki Heavy Industries, Linde Gas, Mitsui OSK and Vopak LNG to explore supply infrastructure to import liquefied hydrogen to power its data centers.

Singapore currently imports LNG via its sole terminal operated by Singapore LNG (SLNG) to meet its power needs. SLNG is now also exploring hydrogen as a cleaner and more sustainable fuel and seeking synergistic ways of making use of its terminal infrastructure.

The Singapore government is in the process of reviewing its previous nationally determined contribution target, which stated an aim of “achieving net-zero emissions as soon as viable in the second half of the century."

Meanwhile, Shell and Total's new gas deal with Oman this week contained a hydrogen element.
Clara Tan, Singapore


In Brief

Denmark to Issue Permit for Pipeline

Denmark is expected to issue a new environmental permit for the Baltic Pipe project by March. The pipeline will link Norwegian gas fields to Poland via Denmark.

A new permit would allow work on the Danish section of the line to restart after it was halted when Danish authorities revoked a previously issued permit in May.

The Baltic Pipe is part of Poland's plans to diversify its gas and LNG imports once its long-term gas supply contract with Russia's Gazprom expires at the end of 2022.

The Baltic Pipe is expected to start partial operations on Oct. 1, 2022, by using the existing Danish gas grid. Its full capacity of 10 Bcm/yr is expected to become available from Jan. 1, 2023.
Jaime Concha, Copenhagen


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India37.5338.0937.4738.1036.9036.7438.8036.0738.6737.5536.5036.0836.58
Sodegaura, Japan37.7139.6939.7039.8737.5432.3539.0935.8438.9140.3836.5035.1637.85
Zeebrugge, Belgium61.2858.6357.8958.8060.4561.0059.8857.9459.6857.9960.6159.0260.75
Huelva, Spain40.5438.1937.5538.3339.7539.4139.3037.4339.1237.6139.8138.2639.82
Isle of Grain, UK52.9450.3749.6650.5252.1852.6651.7749.7151.3949.7652.2950.7752.43
Everett, US2.610.480.930.602.191.950.011.641.33-0.042.90----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback19. Jul2. Aug16. Aug30. Aug13. Sep27. Sep11. Oct25. Oct8. Nov22. Nov6. Dec20. Dec01020304050Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia41.0041.200.200.20
SW Europe48.0041.24-6.76-6.76
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.113.983.873.80
NBP, UK (futures)-2.5957.7460.3344.75
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-5.1655.3360.4942.14
Zeebrugge (Belgium)-1.8538.3340.1928.09
German NCG-2.4644.9147.3732.54
NBP (UK)-7.1453.9561.1042.60
US Markets
US Spot Prices
Sabine Pass, Louisiana0.053.973.923.76
Corpus Christi, Texas0.013.813.803.59
Cove Point, Maryland-1.163.674.832.93
Elba Island, Georgia0.173.973.803.57
Nymex Henry Hub Futures
Near Month0.113.983.873.80
Second Mth0.093.863.773.76
Third Mth0.073.713.643.67
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaJan '21Feb '21Mar '21Apr '21May '21Jun '21Jul '21Aug '21Sep '21Oct '21Nov '21Dec '21020406080Energy Intelligence