June 27, 2022

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Hoegh Confirms One FSRU for Australian Southeast

Norwegian shipowner Hoegh confirmed it will be providing a floating storage and regasification unit (FSRU) to Australian Industrial Energy (AIE), which is planning a terminal at Port Kembla in New South Wales. The confirmation puts an end to speculation on whether AIE would lose its FSRU to Europe amid a rush to replace Russian piped gas with LNG imports.

Hoegh LNG Holdings said the contract with AIE will have a duration of 15 years with early termination options for AIE after the fifth and 10th year. AIE is entitled to time the start-up of the contract between 2023 and 2025, depending on its requirements, Hoegh said.

AIE signed a conditional charter agreement with Hoegh last November and is slated to charter Hoegh Galleon. However, the start-up date has been facing delays as AIE has yet to firm up domestic gas supply deals. AIE recently placed the start-up in late 2023, from mid-2023 previously.

AIE is nonetheless seen as the front-runner to be Australia’s first LNG importer as it has secured all necessary approvals. Its planned terminal is among a list of import projects aimed at alleviating gas supply shortages on Australia’s east coast, where a power crisis recently erupted that added urgency for Australia to source more gas. Escalating fuel prices and a loss in coal-fired power generation are among the reasons for power shortages and big spikes in power prices on the east coast, prompting the government to call for more gas supplies to come on line to boost gas-fired power generation.

Another import contender, Viva Energy, which is planning a terminal near its existing refinery at Geelong in Victoria, looks vulnerable to losing its FSRU from Hoegh. It signed a heads of agreement with Hoegh last December, but has yet to take a final investment decision. Market sources said Viva has turned to Japan's MOL as the alternative provider of an FSRU.

Hoegh has already signed to supply two FSRUs each to German utilities RWE and Uniper, two of which are expected to start operations by the end of this year with a 10-year charter. Hoegh has not named which vessels will be heading to Germany.

Western Australia has abundant gas resources and LNG capacities, but they are not easily diverted to the east coast due to a lack of infrastructure.
Clara Tan, Singapore

Gazprom Signs EPC for Mini LNG Plant

Gazprom has signed an engineering, procurement and construction (EPC) contract for a mini LNG plant on the end of the Power of Siberia export pipeline to China, the company said Monday.

Gazprom Helium Service signed the EPC contract with Russian engineering firm Fito, which will start preparation work on the construction site next month.

Helium Hub

The 12,500 ton per year LNG project, operated by Gazprom Helium Service, will provide fuel to Gazprom’s LNG-fueled trucks that will be transporting liquefied helium to a helium export hub.

The hub launched last year in the Pacific port of Vladivostok.

The hub is designed to export most of 60 million cubic meters per year of helium produced at Gazprom’s Amur gas processing plant. The helium is to be delivered to Vladivostok in a liquefied state in containers via LNG-fueled trucks.

The new mini LNG plant will be located near the Amur plant and also supply local needs.

The first customer of the mini plant will be a heating plant in the Amur region’s town of Belogorsk, Gazprom Helium Service said without providing the launch timeline.

The LNG facility has previously been expected on line in 2023.

Amur Problems

The Amur plant is designed to refine 45 Bcm/yr of East Siberian gas from the Power of Siberia pipeline into 38 Bcm/yr to be exported to China. The Amur plant is preparing to launch the third of six, 7 Bcm/yr gas processing trains. The first two, however, which launched last year, are not operational at the moment because of fire incidents in October 2021 and January 2022. Both are now undergoing restoration and pre-commissioning.

One of three 20 MMcm/yr helium separation, liquefaction and packaging units launched last year, is not working either, which experts say is the reason behind a sharp rise in helium prices in Russia. The Amur plant operator, Gazprom Pererabotka Blagoveshchensk, earlier in June said it had started commissioning works at the second helium unit.

Russia’s Small-Scale LNG Plans

The mini LNG plant is one of nearly 50 small-scale LNG projects planned in Russia, as the Kremlin sees LNG as one of the drivers to increase domestic consumption of natural gas as export prospects face long-term risks from the country’s growing isolation.

Russia’s small-scale LNG industry almost fully relies on domestic technology and equipment which makes it immune to the EU technology sanctions imposed in April. The sanctions, however, do hit large LNG developments, where dependence on foreign technology, equipment and engineers is critical.

Russia nevertheless believes it is still on track to expand LNG exports to 140 million tons/yr by 2035, up from 30 million tons in 2021, despite a reliance on domestic technology, which has yet to be made commercial and working.
Staff Reports

Taiwan Raises Electricity Rates Amid LNG Price Surge

Taiwan's Ministry of Economic Affairs (MOEA) announced Jun. 27 an average 8.4% rise in electricity rates in response to steep global price pressure on LNG and coal.

Taiwan was the world's fifth-largest LNG importer in 2021, according to Kpler data, coming in at eighth place so far in 2022.

The mandated price rise is the first in Taiwan`s power rates since April 2018 and likely to trigger hikes in transportation costs and other services as well as boost manufacturing costs.

Deputy Economics Minister Lin Chuan-neng said that the higher prices were a response to soaring fuel prices triggered by the Russian invasion of Ukraine Feb. 24.

Selective Impact

Lin stated that rates for high-voltage users, numbering about 22,000 mostly industrial users, will rise an average 15% from NT$2.70 (US$0.09) per kilowatt hour to NT$3.10/kWh and from NT$2.24/kWh to NT$2.57/kWh for extra high-voltage users.

However, Lin said rates would not rise for most households, small businesses and domestic business sectors affected by the Covid-19 pandemic, such as agriculture and fisheries, food processing, department stores, restaurants, movie theaters, gymnasiums and other low-voltage users.

``We will not be able to entirely reflect the 20% average rise in fuel prices, but will be able to have a rational adjustment that can provide more financial resiliency for Taipower and other power suppliers,” Lin said.

Taipower President Wang Yao-ting added that the state–owned power company will begin talks with independent power producers on adjustments in power procurement contracts based on the new rate structure.

Big Numbers

Taipower Vice President Wang Chen-yung said that the higher global fuel prices will add an estimated NT$300 billion (about US$10 billion) in fuel costs compared to last year.

Wang said world crude oil prices were forecast to reach US$107/bbl, LNG costs will average NT$19.68 per cubic meter (US$0.66) and coal prices will reach US$307 per metric ton and that the overall impact on fuel costs would be about 20%.

In the wake of the outbreak of the Russian war against Ukraine, state-owned CPC Taiwan hiked the price for LNG supplied to electric power companies, including Taipower and six independent power producers. There were three hikes, effective Mar. 1, Apr. 1 and May 1, from NT$11.54 per cubic meter (US$0.39) to NT$16.75 per cubic meter.

Created with Highcharts 9.0.0(million tons)TAIWAN'S LNG IMPORTS2008200920102011201220132014201520162017201820192020202120220510152025Source: Kpler

Dennis Engbarth, Taipei

EU Warns on Gas Security, Promotes Renewables

The EU must step up efforts on gas storage to achieve an “additional margin of safety through the winter,” European Commissioner for Energy Kadri Simson said Monday.

At a press conference in Luxembourg, Simson acknowledged that supply risks for the EU remain high, with Russia’s use of natural gas as a “weapon” designed to increase prices and undermine supply security.

She said further gas cutoffs could not be ruled out, noting that Russian state giant Gazprom’s planned maintenance scheduled for Jul. 11-21 could put further pressure on EU supplies.

She urged EU member states to quickly update their contingency plans; only six countries across the bloc appear to have such plans in place, she said.

However, gas storage levels are currently “over 56% more than the historical average," she noted.

Last month Europe received deliveries of up to 12.8 billion cubic meters of LNG, keeping the EU on track for its target of 50 Bcm by year's end.

The EU is also working to finalize a new memorandum of understanding with Azerbaijan on piped gas in a bid to diversify supply, Simson said.

Gas Storage Obligation

The European Council on Monday adopted new regulations on gas storage.

They require underground storage on members' territory to be filled to at least 80% of capacity before this winter and to 90% for future winters.

Overall, the EU will attempt to fill 85% of the bloc's total underground storage capacity in 2022, according to a statement. The storage target can be partially met by counting stocks of LNG or alternative fuels, the European Commission said.

The filling obligation will be limited to a volume corresponding to 35% of the average annual gas consumption of member states over the last five years. Those without storage capacity should store 15% of their annual domestic gas consumption "in stocks located in other member states,” the commission said.

Storage capacity filling obligations will end on Dec. 31, 2025.

Renewables Promoted

Separately, Simson said the EU is aiming to hike the role of renewables in the energy mix from 32% to 40% by 2030 and reduce final energy consumption at the bloc level by a binding 36%.

Member states also will have to increase their national climate plan contributions to be updated in 2023 and 2024 "in order to collectively achieve the new target,” a separate statement said Monday.

The commission's "Fit for 55" package, announced last year, aims to align the EU’s climate and energy legislative framework with its 2050 net-zero goal, including a 55% reduction in greenhouse gas emissions from 1990 levels by 2030.

Sector-specific targets were also outlined.

In transport, member states can choose between a binding 13% reduction in greenhouse gas intensity by 2030 or a binding target of at least 29% renewable energy in the total energy mix by 2030.

Targets for advanced biofuels as a share of renewable energy supplied to the transport sector were set at 0.2% this year, 1% in 2025 and 4.4% in 2030.

The commission also agreed that 35% of the hydrogen used in industry should come from renewable fuels “of non-biological” origin by 2030 and 50% by 2035. It also set a target of a 1.1% annual average increase in renewable energy use for industry.

Energy Efficiency

The council agreed to reduce EU-level energy consumption by 36% for final energy consumption and 39% for primary energy consumption by 2030. The 36% reduction target is binding. The targets use a new baseline and correspond to a 9% reduction target compared to 2020.

The commission defines final energy consumption as energy consumed by end-users, while primary energy consumption “also includes what is used for the production and supply of energy."
Tom Pepper, London


In Brief

Doha Signs Up for Zero-Methane Initiative

State-owned QatarEnergy said Monday that it has joined an industry initiative committing participants to nearly eliminate methane emissions from operated oil and gas assets by 2030.

The methane push was launched by the Oil and Gas Climate Initiative (OGCI) in March this year.

QatarEnergy said it is the first company to join the initiative outside OGCI’s 12 existing members, which include Saudi Aramco, BP, Chevron, Exxon Mobil, Petrobras, TotalEnergies and others.

The move is consistent with recent QatarEnergy policies. Even before its rebrand, the firm was investing heavily in climate mitigation technologies.

It plans to add carbon capture and storage, solarization and flare-reduction capacity to its 32 million ton/yr LNG mega-expansion, currently under construction.

Last year the company said it was targeting 0.2% methane intensity by 2025.

More broadly, the announcement represents a fresh commitment from a key emitter to collaborate with its peers to standardize the measurement of reporting of methane emissions — a major challenge to date in attempts to reduce greenhouse gases escaping into the atmosphere.
Rafiq Latta, Nicosia

Algeria’s Sonatrach Restarts Arzew LNG Facilities After Earthquake

Algeria’s Sonatrach has restarted the liquefaction trains of its LNG plant in Arzew, following an earthquake, which caused a power outage at the facilities, the state-owned energy company announced on social media.

An earthquake with a magnitude of 4.5 on the Richter scale hit Algeria’s Oran province, in the country’s northwest, at 8:17 p.m. on Sunday, Jun. 26, according to the US Geological Survey.

Sonatrach did not share exact details on the impact of the earthquake on its facilities, but it denied reports that a fire broke out in the industrial area.

Restart Ongoing

“Sonatrach also notes the restart of its industrial units in Arzew, after some of them stopped automatically due to power outages,” the company said in a statement.

A market source told Energy Intelligence that all 12 trains of the GL1Z and GL2Z plants went off line following the earthquake and that their restart would take at least 24 hours.

The nameplate capacity of the 12 trains totals about 16.1 million tons, but total Algerian LNG exports haven't been at that level since 2009 (see graph).

The same source said that the one-train GL3Z plant — with another 4.7 million tons of nameplate capacity — has been shut since March for maintenance and is expected to restart operation in October-November due to availability issues with the necessary spare parts.

Four ballast vessels are currently broadcasting Arzew as their destination for arrival in the next two days, according to ship-tracking data from Kpler.

Created with Highcharts 9.0.0(million tons)ALGERIA'S LNG EXPORT HISTORY20082009201020112012201320142015201620172018201920202021202205101520Source: Kpler

Daniel Stemler, Madrid


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India22.7823.2422.8623.2322.4222.2523.7221.8823.6322.8822.0921.8022.20
Sodegaura, Japan23.4124.8424.8724.9523.3719.7724.4722.2424.3225.3122.6021.7023.60
Zeebrugge, Belgium33.3631.5531.1631.6432.8033.1832.4131.1232.2431.1332.9331.9033.04
Huelva, Spain26.5024.8224.4624.9125.9525.7425.6124.3225.4624.4326.0124.9626.04
Isle of Grain, UK16.0914.4614.1314.5415.6215.9315.3414.0715.0814.0915.7114.7915.81
Everett, US4.683.103.493.184.384.220.013.943.702.744.89----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback24. Jan7. Feb21. Feb7. Mar21. Mar4. Apr18. Apr2. May16. May30. May13. Jun27. Jun102030405060Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia26.0026.070.300.07
SW Europe34.5027.18-1.10-7.32
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.286.506.22--
NBP, UK (futures)+0.2721.0920.8224.63
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF0.4640.1439.6837.97
Zeebrugge (Belgium)----26.6625.72
German NCG0.9136.6635.7534.30
NBP (UK)-1.1016.9318.0320.24
US Markets
US Spot Prices
Sabine Pass, Louisiana0.276.095.82--
Corpus Christi, Texas0.186.065.88--
Cove Point, Maryland-0.125.625.74--
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month0.286.506.22--
Second Mth0.276.556.28--
Third Mth0.286.546.26--
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaJul '21Aug '21Sep '21Oct '21Nov '21Dec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22020406080Energy Intelligence