June 29, 2022

WWW.ENERGYINTEL.COM

Shell Warns of Extended Labor Disruptions at Prelude

Shell will face extended industrial action from its union workers at its Prelude floating LNG facility offshore Western Australia, increasing risks of disruptions to its LNG loadings.

"We have issued a notice to customers that cargoes will be impacted until at least mid-July due to the industrial action," said a Shell spokesperson. Shell clarified on Wednesday it has not canceled any cargoes, but only flagged that cargoes may be delayed or canceled.

The industrial action is now expected to end on Jul. 14 after several extensions. It comprised a list of 29 union “bans,” which have been in place since the industrial action started on Jun. 10 due to disputes over a new enterprise agreement. The industrial action was last expected to end on Jun. 30.

Examples of the bans include bans on when and how workers would moor vessels and on restarting compressors or turbines in the event of a trip.

Shell has put forward a new labor package, which would undergo a three-day voting process starting Jul. 7. Results will be known on Jul. 11.

Terrible Timing

The possible disruption of Prelude loadings comes at a time when summer cooling demand is rising. Asian spot prices are edging up due to early and severe heat waves in some countries and higher European gas hub prices.

But despite the extended industrial action, Shell insists there is no plan to shut down the 3.6 million ton per year Prelude facility.

“However, the cumulative effect of the industrial action may force a shutdown if safety of our workforce is impacted,” said the spokesperson.

Prelude has offloaded three cargoes since Jun. 10 with the most recent cargo offloaded on Jun.26 on Oceanic Breeze, which is heading to Japan.

Since start-up in 2019, the facility, which should be exporting about 300,000 tons of LNG per month, has only been at that level a few times (see graph).

The plant shut due to an electrical problem in February 2020, and again due to a fire in December 2021.

Created with Highcharts 9.0.0(tons)PRELUDE FLNG EXPORTSJan '19Jan '20Jan '21Jan '22Jul '19Jul '20Jul '21050,000100,000150,000200,000250,000300,000350,000Source: Kpler

The Buyers

Shell owns an operated 67.5% stake in Prelude, alongside Inpex, Korea Gas and Taiwan’s CPC, all of which are also buyers of Prelude volumes.

Other Prelude buyers are Osaka Gas under a portfolio contract with Shell, while Japan’s Jera and Shizuoka Gas have purchased Prelude volumes from Inpex.
Clara Tan, Singapore

QatarEnergy Schedules Next LNG Signing

QatarEnergy appears to be gearing up to announce another partner award on its giant North Field East LNG expansion project.

The state-owned gas giant has invited international media to attend “an important signing ceremony and press conference” next week on Jul. 5 in the presence of Energy Minister and QatarEnergy CEO Saad al-Kaabi at the company’s headquarters in Doha.

This is the fifth invitation QatarEnergy has extended this month, after it consecutively selected TotalEnergies, Eni, ConocoPhillips and Exxon Mobil as equity investors in the $28.75 billion North Field East (NFE) LNG development.

TotalEnergies and Exxon both received the biggest stakes. They each hold 25% stakes in joint ventures with QatarEnergy at 75%. The JVs in turn hold 25% each in NFE's overall production capacity, giving each company a 6.25% position in the total capacity across four trains, the equivalent of 2 million tons per year of LNG each. The JVs formed between QatarEnergy, Eni and ConocoPhillips give the later two companies 12.5% of a pair of JV's, giving them 3.125% each in overall NFE production, or about 1 million tons/yr each of LNG.

A total of 18.75% of NFE has been awarded so far to foreign investors, below the up to 30% of NFE that QatarEnergy had said was available for equity investment. This could potentially point to another major taking a stake in the NFE scheme. Shell is seen to be still in the race for a potential portion while Chevron is understood to have withdrawn from the race.

Qatar's North Field East Partners
PartnerEquity % Vol. (million tons)
TotalEnergies6.25%2.0
Eni3.1251.0
ConocoPhillips3.1251.0
Exxon Mobil6.252.0
Awarded, So Far18.756.0
Likely Remaining to Award11.25%3.6

Yousra Samaha, Dubai

New Road to Morocco

German utility RWE is preparing to start gas exports from Spain to Morocco through the Maghreb–Europe (GME) pipeline following its restart, Energy Intelligence understands.

A source close to the matter told Energy Intelligence that exports could start “very soon,” with RWE forging ahead obtaining the necessary permits.

Although the exact details were not immediately clear, RWE will most likely deliver LNG cargoes from its portfolio to Spain and after regasification will flow the volumes into Morocco.

An RWE spokesperson declined to comment on the matter.

Maghreb-Europe Reversal

Flows in the 13 billion cubic meter per year Maghreb–Europe gas pipeline restarted on Tuesday, Jun. 28, as Spain has begun to send gas to Morocco, according to data by Spanish grid operator Enagas.

Although the exported volumes were initially low, real-time data by Enagas showed that flow rates rose to above 200,000 cubic meters per hour in the early afternoon on Wednesday.

The Maghreb-Europe pipe, which runs from Algeria through Morocco into southern Spain, had been idle since last November, when Algeria cut off gas supplies to Morocco, and stopped flows to Spain and Portugal after failing to renew the transit contract with the Iberian countries.

But Spain and Morocco have agreed to use the pipeline in reverse flow mode (Spain-to-Morocco direction), allowing Morocco access to Europe’s largest LNG market.

Morocco has been planning to build its own LNG import infrastructure to replace Algerian supplies, but in the meantime, it is understood that the country is looking to purchase LNG cargoes on the global market, unload them in Spain and flow the volumes into its territory through the Maghreb-Europe pipe.

First Cargo

The restart of the pipeline suggests that Morocco was indeed able to buy an LNG cargo, although it was not clear which one of the cargoes that have been unloaded at Spanish terminals in recent days was for the North African country.

Nonetheless, it is more likely that such a cargo would be delivered to a southern Spanish terminal rather than a northern one.

Two cargoes were unloaded on Jun. 25, one at the Huelva terminal and another at the Cartagena terminal, according to ship-tracking data by Kpler.
Daniel Stemler, Madrid

Russia's Five-Month LNG Production Grows

Russia’s LNG production rose 9% on the year to 14.3 million tons in the first five months of 2022, according to data released by the federal state statistics service on Wednesday.

The growth is mainly due to a ramp up of the 900,000 ton per year Train 4 at Novatek’s Yamal LNG plant. The plant now operates well above its four-train nameplate capacity of 17.4 million tons.

In May, Russian LNG production, almost entirely exported, increased 3.4% on the year but decreased 1.1% on the month to 2.8 million tons, the statistics service said.

For comparison, Kpler stats on Russian LNG exports — for the first five months of 2022, and for May — closely match those of the Russian government (see graph).

Created with Highcharts 9.0.0(million tons)RUSSIAN LNG EXPORTSJan '19May '19Sep '19Jan '20May '20Sep '20Jan '21May '21Sep '21Jan '22May '220123Source: KplerFebruary 2019 Total: 2.46

LNG to Europe

Russian LNG is proving to be less toxic than other Russian hydrocarbons amid the war in Ukraine.

While pipeline gas exports, handled solely by Gazprom, dropped sharply because of market and non-market factors, such as various gas pipeline capacity restrictions, part of the lost volume is being made up by an increased inflow of Russian LNG, mainly from Yamal.

The higher supply of Yamal LNG to Europe can be attributed to an increased volume of spot sales from the project. The ramped-up Train 4 is solely designated for spot sales. Unprecedented heights for spot prices in Europe make it an increasingly attractive destination for spot cargoes from the project.

LNG to China

Russia’s LNG imports to China are also growing, mainly because Yamal’s oil-linked long-term contracts are more attractive to Chinese buyers than pricey spot supplies.

A big portion of Yamal’s output is sold under long-term contracts to Asia, including under a 3 million ton/yr contract with China National Petroleum Corp., which also holds a 20% stake in the project. Gazprom’s Sakhalin-2 plant sells LNG to China solely on spot.

While China’s overall LNG imports have decreased, supplies from Russia increased 22% on the year to some 1.8 million tons in January-May, according to Chinese customs data.

In May, Russian LNG exports to China jumped 54% on the year but decreased 14% on the month to around 400,000 tons.

Natural Gas Production

Russia’s natural gas production, excluding associated gas produced by oil companies, decreased 3.6% on the year to 275 billion cubic meters in January-May, the country’s statistics service said.

The decrease is mainly caused by a drop in pipeline gas exports from Gazprom, which is Russia’s largest gas producer.

In May, natural gas production fell 10.8% on the year to 49 Bcm, the statistics service said.
Staff Reports


In Brief

India’s May LNG Imports Rise

India’s LNG imports rose 5% on month in May supported by strong demand from the fertilizer sector as the summer sowing season gathers pace.

The world’s fourth-largest LNG buyer imported 2.53 Bcm of LNG last month compared with 2.41 Bcm in April, according to the latest data published by the oil ministry. The imports were however down 3.8% on year, the data showed.

Kpler data painted a generally similar picture (see graph).

Fertilizer Piles Up Gains

The fertilizer sector saw LNG consumption jump 10.8% on month in May to 1.25 Bcm, the data showed.

That gain offset a dip in demand from power, which saw imports decline 16% on month to 141 MMcm, and demand from the city gas distribution sector, which saw imports decline 5.9% on month to 428 MMcm, the data showed.

India’s domestic gas production also rose 3.6% on month in May to 2.85 Bcm. This helped boost India’s total gas consumption by 4.2% on month in May to 5.38 Bcm.

Price Impact

Despite a rise in volumes, India’s LNG import bill in May contracted 7.7% on month to $1.2 billion, underlining the impact of lower prices.

Despite an uptick in LNG demand in May, India’s LNG consumption outlook remains clouded and will largely depend on prices.

India’s dependence on LNG for the first two months of the current financial year that began Apr. 1, has contracted to 46.9% compared with 51.1% in the same period last year.

Created with Highcharts 9.0.0(million tons)INDIA'S LNG IMPORTS PEAK?200820102012201420162018202020220123Source: Kpler

Rakesh Sharma, New Delhi


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India22.9623.4123.0323.4022.5922.4223.8922.0523.8023.0522.2621.9722.37
Sodegaura, Japan23.5925.0125.0525.1223.5419.9424.6422.4124.4925.4822.7721.8723.77
Zeebrugge, Belgium42.2640.3539.9240.4541.6742.0741.2539.9041.0839.9141.8040.7141.92
Huelva, Spain31.2629.5329.1529.6230.6930.4730.3429.0130.1929.1230.7529.6630.78
Isle of Grain, UK20.8419.1618.8119.2420.3520.6720.0718.7619.8018.7820.4519.5020.55
Everett, US5.493.904.283.975.185.020.014.744.503.535.69----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback24. Jan7. Feb21. Feb7. Mar21. Mar4. Apr18. Apr2. May16. May30. May13. Jun27. Jun102030405060Energy IntelligenceFriday, Jun 10, 2022 Netback: 21.93

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia0.0026.24-0.2626.24
SW Europe0.0031.952.3131.95
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.076.506.576.86
NBP, UK (futures)+0.9021.2220.3222.37
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF2.9442.7239.7838.39
Zeebrugge (Belgium)1.7230.4528.7327.77
German NCG3.2139.1735.9536.04
NBP (UK)2.3221.6919.3721.57
US Markets
US Spot Prices
Sabine Pass, Louisiana0.116.686.576.58
Corpus Christi, Texas0.056.606.556.49
Cove Point, Maryland6.516.510.005.86
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month-0.076.506.576.86
Second Mth-0.066.496.566.87
Third Mth-0.056.526.576.84
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaJul '21Aug '21Sep '21Oct '21Nov '21Dec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22020406080Energy Intelligence