June 28, 2022

WWW.ENERGYINTEL.COM

Asian LNG Prices Jump, Buoyed by Europe and Heat Waves

Asian spot LNG prices jumped over the last week hoisted by higher European gas hub prices and by early heat waves that are lending support to Asia’s summer cooling demand.

Northeast Asian spot LNG soared by $11 to $37 per million Btu, according to Energy Intelligence assessments this week for deliveries four to eight weeks ahead. This is the highest level seen in Asia since early March when spot prices hit $55/MMBtu.

Asian prices skyrocketed on the back of higher European gas hub prices that have crossed the $40/MMBtu threshold in recent days, a first since end-March. Europe continues to attract cargoes like a magnet to compensate for lower piped gas from Russia. This is in turn limits supply to Asia where demand has increased of late amid an early and severe heat wave.

Thailand's PTT LNG recently imported the first cargo for its new Nong Fab terminal, which arrived from Qatar. As Southeast Asia’s largest LNG market, Thailand has been increasing its LNG imports this year due to output declines at its mature domestic fields. PTT LNG said previously it will accelerate the start-up of its second LNG terminal at Nong Fab by opening the first phase of 2.5 million tons per year in mid-2022 and the second phase of 5 million tons/yr in December.

Japan's Heat Wave

The country is bracing for power shortages as the rainy season ended early and temperatures have climbed in an early onset of summer heat, prompting the government to issue a warning over the weekend for its population to conserve electricity in the Tokyo area during peak hours. Government officials said power demand has exceeded expectations and warned that reserve power generating capacity would drop close to the minimum of 3%, the level for ensuring stable electricity supplies, during peak hours.

Jera, the country's largest power utility, said Monday it would take several measures to address an "extremely tight power supply-demand" situation this summer. Besides avoid conducting maintenance in summer, a company spokesman said Jera would resume operations of its old LNG-fired plants, which have been mothballed. Jera plans to restart the 600 megawatt Anegasaki Unit 5 on Jun. 30 while the 700 MW Chita Unit 5 would be ready to restart on Jul. 1, depending on the supply-demand balance in the Chubu area.

Jera expects to start commercial operations of a new coal-fired 1.07 gigawatt No. 5 unit at Taketoyo power plant in August and start trial operations at a new LNG-fired 650 MW Unit 1 at Anegasaki power plant in the same month. Both new units would contribute to Japan's summer power supply.

Jera is one of the term offtakers of Freeport LNG in the US, which has declared force majeure until September.

Pakistan Declines Qatar’s Sole Offer

The South Asian country has emerged as the latest casualty of prohibitive LNG prices triggered by Russia’s invasion of Ukraine and lack of new LNG capacity.

Pakistan LNG is understood to have rejected the only offer it received last week from QatarEnergy Trading, which offered $39.80/MMBtu for a Jul. 30-31 delivery cargo. This was the only offer Pakistan has received for its latest tender that sought four cargoes for July delivery. The Qatari cargo would have made it Pakistan's costliest cargo since LNG imports started in 2015.

Pakistan LNG earlier scrapped two tenders for a Jul. 3-4 delivery cargo as it did not get even a single valid bid.

The inability to secure LNG cargoes is expected to deepen Pakistan’s energy crisis and force the country to burn more fuel oil and coal for power generation and slash electricity consumption in order to stave off blackouts.

Sellers have largely shunned Pakistan’s supply tenders that sought fixed-price offers, which prove challenging in a volatile market. Sellers are also likely concerned with Pakistan’s credit standing as the country is in the midst of a payment crisis on dwindling foreign exchange reserves, which constrains its ability to pay for oil and gas imports.

Pakistan LNG is seeking to defer payments to Qatar and in talks to source more term volumes from the Mideast exporter, its biggest LNG supplier under two long-term contracts. A Qatari cargo is slated to arrive in Pakistan on Jul. 1, according to Kpler.
Clara Tan, Singapore and Marc Roussot, Singapore

Czech Utility Books Capacity at Dutch Eemshaven LNG Terminal

Czech utility CEZ has booked regasification capacity at the Dutch Eemshaven LNG terminal, which is expected to become operational by the end of this year.

“I can confirm that Czech Republic, in cooperation with CEZ Group, has reserved capacity at the Eemshaven LNG terminal,” a spokeswoman at Dutch grid operator and future terminal operator, Gasunie told Energy Intelligence.

CEZ is the first company to book capacity at the 5.7 million ton per yearr import terminal, although others will likely follow soon, with Gasunie “currently finalizing the various bids” it has received in its tender for regasification capacity.

Hub Project

The EemsEnergyTerminal will consist of two floating storage and regasification units (FSRU), located in the northern tip of the Netherlands.

In March, Gasunie reached an agreement with Belgian shipowner Exmar for the charter of its regasification barge S188 for five years.

Then, in May, Gasunie announced that it had signed a charter contract with US energy infrastructure company New Fortress Energy for the Golar Igloo FSRU, which is currently being used as a conventional LNG vessel.

Both FSRUs are set to arrive in Eemshaven at the end of August, said the spokeswoman.

Czech LNG Plans

This announcement reflects the eagerness of the Czech Republic, and other landlocked Central European countries, to use LNG to ease dependence on Russian pipeline supplies.

The Czech industry and trade ministry is already mediating negotiations between CEZ and domestic energy supplier Prazska Plynarenska and Qatar over a potential LNG supply agreement, a ministry spokesman told Energy Intelligence earlier this month.

Nonetheless, the volumes that CEZ will import into the Eemshaven terminal are unlikely to be physically delivered to the Czech Republic, instead these will probably be swapped to save transportation and tariff costs.
Daniel Stemler, Madrid

G7 Endorses Price Caps, Cracks Door to Fossil Finance

Leaders of the G7 will look for ways to cap the prices for Russian oil and natural gas in a complex proposal aimed at limiting revenues available for Russia’s war in Ukraine and boosting their own flagging economies.

In a communiqué from the three-day G7 summit held in Germany, leaders called on governments globally — in consultation with the private sector — to investigate ways to limit the prices paid for Russian hydrocarbons.

The European Union has already proposed a ban on insuring vessels carrying Russian crude that would take effect at the start of next year.

The G7 proposal suggests a similar, if more nuanced approach, of prohibiting “all services” that support Russian seaborne exports “unless the oil is purchased at or below a price to be agreed in consultation with international parties.”

"This is a step that G7 leaders can take right now to get aligned around a set of objectives that's going to both limit Putin's revenues and squeeze the resources that he has to wage war," said a senior US administration official, "and, secondly, to increase stability and the security of supply in global oil markets."

Any action to cap prices would require a coordinated effort on the part of governments from the US, UK and EU and benefit from the support of major importers like China and India.

Leaders said they would “invite all likeminded countries to consider joining” the effort.

Getting buy-in from China and India — both of which have resisted calls to join in EU and US sanctions regimes — could prove difficult.

The proposal also leaves open the possibility of a price cap on natural gas, although it gives no detail on the possible mechanisms under consideration.

Kremlin spokesman Dmitry Peskov said any limits on the price of Russian gas sold into Europe were a matter for state export giant Gazprom.

“They will probably insist on changing the terms of the existing contracts and changing the price … This is a matter of negotiations,” he said.

Fossil Fuel Finance

The G7 leaders also softened their stance on financing fossil fuel projects abroad. It is the latest in a series of moves by countries to relax plans to curb production and consumption of coal and natural gas as prices skyrocket and the threat of outright shortages looms this winter.

In the communiqué, they qualified what had been a blanket ban on financial support for unabated fossil fuel projects by saying that such projects could still be acceptable “in limited circumstances clearly defined by each country.”

Specifically, they singled out the need for additional sources of LNG to supplant volumes of Russian gas imported into Europe.

“In these exceptional circumstances, publicly supported investment in the gas sector can be appropriate as a temporary response,” the communiqué says.

The language was widely seen as a concession to Germany, which has begun talks with Senegal to cooperate on gas development.

But any additional support for fossil fuels should still be “consistent with a 1.5º warming limit and the goals of the Paris Agreement.”

Production Problems

The G7 leaders pledged to increase their own domestic energy production and release stored volumes to help alleviate the strain on tight markets.

The US and Canada are the only two countries in the group that could significantly increase supply and both are constrained by private companies in the oil and gas sector that have emphasized capital discipline and returns to shareholders over spending on new production.

The International Energy Agency has helped facilitate coordinated releases of global stocks to some effect but such moves are seen as short-term fixes not long-term solutions.

The dynamic leaves the G7 to turn to Opec, where many members outside the large Mideast producers have struggled themselves to meet their production quotas, to help supply global markets.

The communiqué praised “Opec’s recent responses,” which included marginally accelerating production this month but asked for “continued action” from the producers group.

Noah Brenner, London

Shell to Supply LNG-Fueled Container Ships

Supermajor Shell and the CMA CGM Group, one of the world's largest container shipping companies, have agreed to work closely together to accelerate decarbonizing of the marine sector.

The companies have signed a multiyear LNG supply agreement, under which Shell will supply LNG to CMA CGM’s 13,000 20-foot equivalent unit vessels in the Port of Singapore, starting from the second half of 2023.

The simultaneous operation (SIMOPS) LNG bunkering will be undertaken by FueLNG, a joint venture between a unit of Shell in Singapore and Keppel Offshore & Marine. The operation will utilize the FueLNG Bellina that is already in operation and an 18,000 cubic meter LNG bunker vessel that will come into service in 2023, "further enhancing the reliability of its LNG bunkering operations," Shell said.

But the debate over the next steps in bunkering continues with some in the industry advocating a rapid move into LNG bunkering, while others look closely at ammonia and other fuels.

LNG on Decarbonization Pathway

“CMA CGM continues to see the potential in LNG as a marine fuel ... by using LNG as a marine fuel, the industry immediately places itself on a decarbonizing pathway," said Tahir Faruqui, general manager and head of downstream LNG at Shell, adding that "LNG is a fuel in transition and offers a credible pathway to liquefied biomethane and the hydrogen-based fuel liquefied e-methane; both having the potential of being net zero.”

The two companies also agreed to a memorandum of understanding covering advancement of low-carbon marine fuels, including LNG and hydrogen blending, methane slip abatement technologies and fuel cell technology development. The two companies will also explore voluntary and mandated trading mechanisms for carbon credits and engage in joint advocacy for net-zero emissions policies.

Earlier this month, US-based Eagle LNG Partners agreed to provide bunkering services for LNG-fueled cruise ships owned by holding company Royal Caribbean Group.
Michael Sultan, Washington


In Brief

Spot LNG Prices Soar Again

Northeast Asian spot LNG prices soared $11 to $37 per million Btu, according to Energy Intelligence assessments for deliveries four to eight weeks ahead. That was their highest level since early March, when spot prices reached $55/MMBtu.

Spot prices in Southwest Europe were assessed $2.70 higher at $37.20/MMBtu.

Asian spot prices skyrocketed on the back of TTF hub prices now at their highest since late March.

Also, China, South Korea and Japan all face abnormally high temperatures that have boosted power and cooling needs.

In the Iberian Peninsula, Portuguese storage is now full, while Spanish storage sites are filled to 72% of capacity, according to data from Gas Infrastructure Europe, reflecting the massive influx of LNG into the region. The EU average is just over 57% full. Spain and Portugal combined have received 13.2 million tons of LNG so far this year, according to Kpler, the highest first-half volume on record.

Created with Highcharts 9.0.0($/MMBtu)REGIONAL SPOT PRICESNortheast AsiaSouthwest EuropeJul '21Aug '21Sep '21Oct '21Nov '21Dec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Jul '…020406080Energy Intelligence

Daniel Stemler, Madrid and Marc Roussot, Singapore

Algeria Announces Large Gas Find

Algeria’s state-owned Sonatrach said it has made a potentially important natural gas discovery near its linchpin Hassi R’Mel gas complex in the center of the country.

The find was made in the Lias Carbonate "LD2" reservoir within the perimeter of the Hassi R’Mel gas field.

Preliminary evaluation showed a potential volume of 100 Bcm-340 Bcm of gas condensate.

"These volumes constitute one of the largest reserves re-evaluations of the last 20 years," Sonatrach said in a statement.

The timing of the announcement is fortuitous. Algeria, previously Europe’s third-largest gas supplier, has re-emerged as a vital component of the continent's aim to reduce its dependence on Russian piped gas by up to two-thirds this year.

Algeria plans to expand gas exports to the EU, with deals for an additional 3 Bcm/yr this year and up to 9 Bcm/yr more by 2024.

Sonatrach said a work program is already under way to confirm these estimated volumes and fast-track production by as much as 10MMcm/d from November this year.
Tom Pepper, London


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India23.2123.6723.2923.6622.8522.6824.1522.3124.0623.3122.5122.2322.62
Sodegaura, Japan23.8425.2725.3025.3823.8020.1924.9022.6624.7525.7423.0222.1324.02
Zeebrugge, Belgium38.1436.2835.8636.3737.5637.9637.1635.8336.9935.8537.6936.6337.81
Huelva, Spain29.0827.3727.0027.4628.5228.3028.1726.8628.0226.9728.5827.5028.60
Isle of Grain, UK18.6617.0116.6717.0818.1818.5017.9016.6117.6416.6318.2717.3418.38
Everett, US5.173.593.973.664.864.710.014.434.193.225.38----
Created with Highcharts 9.0.0($/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 Asia0.0026.500.4326.50
SW Europe0.0029.762.5829.76
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.056.556.506.81
NBP, UK (futures)-0.6320.4621.0925.25
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF0.1540.0839.9238.23
Zeebrugge (Belgium)--28.52--27.09
German NCG-1.1735.6936.8634.53
NBP (UK)2.5819.5016.9324.23
US Markets
US Spot Prices
Sabine Pass, Louisiana0.486.576.096.59
Corpus Christi, Texas0.496.556.066.53
Cove Point, Maryland----5.625.76
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month0.056.556.506.81
Second Mth0.026.576.556.78
Third Mth0.026.566.546.74
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaJul '21Aug '21Sep '21Oct '21Nov '21Dec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Jul '…020406080Energy Intelligence