July 6, 2022

WWW.ENERGYINTEL.COM

Inpex Eyes LNG Investments Beyond Australia

Japan’s Inpex plans to diversify its LNG portfolio through investments in the Middle East and the US to meet growing demand.

The firm said it is now holding talks with Abu Dhabi National Oil Co. (Adnoc) for participation in its Fujairah LNG project while looking at options in the US for brownfield and greenfield investments. Inpex’s sole liquefaction production is in Australia where it operates the 8.9 million ton per year Ichthys project in Darwin.

Sharp spikes in LNG prices triggered by Russia's war in Ukraine and supply tightness due to a lack of new LNG capacities have prompted the Japanese government to call for new LNG investments using public finance.

Japan is a major buyer of Russian LNG from the Sakhalin-2 project which was recently issued with a decree for the transfer of operatorship to a new company.

Deepening Foothold in the UAE

An Inpex spokesman said the Fujairah LNG project is one of the numerous projects and initiatives under discussion with Adnoc, its long-standing partner. Inpex is a partner in several upstream projects in Abu Dhabi such as the onshore Adco concession and offshore oil fields Lower Zakum and Upper Zakum.

Inpex CEO Takayuki Ueda said LNG exports from Fujairah could meet demand from Asia and Europe. "Considering the location, [planned LNG exports from] the UAE could give itself a remarkably strategic position for targeting both European and Asian markets," he reportedly said in an interview.

"For us, how we meet growing demand in Asia is meaningful as well as it is more certain [than Russian uncertainty]," he added.

Adnoc recently picked McDermott to conduct front-end engineering and design work on the 9.6 million ton/yr project in the emirate of Fujairah, outside the strategic Strait of Hormuz waterway.

Inpex and Adnoc are also working together on an ammonia supply chain, produced from natural gas, for exports to Japan.

Fujairah LNG Exports

lngi211118_Gulf_Oman_Qatar-Fujairah.svg



First Foray in the US LNG Sector

Inpex is also evaluating options to secure US Henry Hub-linked LNG from the US. A sudden burst in Europe's postwar LNG demand has led many traders, portfolio players and end-users to commit to more than 40 million tons/yr of destination-free supplies from the US this year so far.

Japanese trading houses and utilities are already major term offtakers from and investors in existing US operating projects at Cameron, Freeport and Cove Point. However, not many Japanese firms are involved in any of the pre-sanctioned projects in the US, except for Jera which made a $2.5 billion investment in Freeport LNG to support a brownfield expansion while Mitsui and Mitsubishi are involved in Sempra's Cameron Phase 2 project.

For the existing Ichthys facility, Inpex has announced plans to debottleneck the 8.9 million ton/yr plant to 9.4 million tons/yr by 2024.

Created with Highcharts 9.0.0(million tons)ICHTHYS LNG EXPORTSJapanTaiwanChinaSouth KoreaIndonesiaPhilippinesMalaysia201820192020202120220246810Source: Kpler

Clara Tan, Singapore

Russia's Yakutia LNG Still on Radar

The proposed Yakutia LNG project remains on the list of Yatec's strategic priorities, according to the Russian company’s annual report published late on Tuesday.

“The company considers the possibility of expanding the supply of gas to the markets of China, India, Japan and South Korea by launching the Yakutia LNG project,” the report said.

But Yatec provided no update on the status or timelines for the 18 million ton per year project. In an interview with Energy Intelligence in November 2021, Yatec CEO Andrei Korobov said Yakutia LNG might see a final investment decision in early 2023 and start operations in 2027.

Proposed Yakutia LNG

lngi211103-Ayan Yakutia.svg


Sanctions Risks

Like other large Russian LNG projects, Yakutia LNG looks at risk after the EU in April banned the export of key liquefaction equipment to Russia. Important foreign investors and technology partners have also decided to withdraw from Russia in response to Moscow’s Feb. 24 invasion of Ukraine.

Yatec, controlled by Russian businessman Albert Avdolyan's A-Property, planned to rely on foreign technology and competence and was in discussions with potential investors, both Russian and foreign. France’s TechnipFMC completed pre-Feed (front-end engineering and design) for Yakutia LNG last year and a consortium of Japan’s JGC and Norway’s Aker Solutions in January this year won a tender for Feed work.

A-Property did not comment on whether Feed work is in progress and whether it is considering shifting to domestic partners and technology, the latter a tactic that compatriot Novatek believes can help Russia achieve its ambitious target to produce up to 140 million tons/yr by 2035, up from 30 million tons in 2021.

State-run Gazprom however believes the target looks too ambitious amid the technology sanctions and that Russia needs to review all of the proposed LNG projects to see if they are viable and doable in the new reality.

Exploration on Track

Yatec has kept its exploration plans on track to feed the future Yakutia LNG, the annual report said.

The project involves a significant expansion of gas production in Yatec’s legacy region of Sakha (Yakutia) to 28 billion cubic meters per year from below 2 Bcm/yr currently, as well as construction of the LNG plant in the coastal village of Ayan in the Khabarovsk region to be fed through a 1,358 kilometer gas pipeline from Yakutia (see map above).

Last year, Yatec produced 1.905 Bcm of gas, up 7% from 2020. But this year production is expected to decrease 5% to 1.815 Bcm, Deputy CEO in Charge of Gas Production and Processing Sergei Kuznetsov was quoted in the annual report as saying.

Production should increase in the long run thanks to the exploration and acquisition of new upstream blocks. Yatec increased its natural gas reserves by 16% to 452.5 Bcm last year and plans to further expand them by 25% to 567 Bcm by the end of this year.

In the first quarter of 2022, Yatec finalized acquisition of the new Sobolokhsky Block in Yakutia, won at a tender in December 2021, which harbors gas resources of 8 Bcm, the company said.

Reserves of more than 500 Bcm should be enough for the first 9 million ton/yr phase of Yakutia LNG, while Yatec plans to further expand the reserves to 1 trillion cubic meters by 2026 to feed Phase 2, the company said earlier.
Staff Reports

Eni Repositions LNG Vessel to Europe Amid Russian Supply Fears

Italian major Eni has repositioned its Portovenere LNG vessel from the Far East to the Mediterranean Sea.

The company is looking to diversify its Italian LNG supply as uncertainty over Russian pipeline gas supplies keeps growing.

The 65,000 cubic meter Med Max-class vessel had been located in the Pacific Basin since 2016, and was primarily supplying Eni’s Chinese customers, first from the Malaysian Bintulu plant and subsequently from Indonesia’s Bontang facility, according to data by commodity analytics firm Kpler.

However, in May, the vessel was repositioned to the Mediterranean Sea and Energy Intelligence understands that it will supply Italy from various sources in the region.

Meanwhile, in Asia, Eni has seemingly replaced the Portovenere with the 140,624 cubic meter Seapeak Galicia, which has been supplying a wide range of the Italian firm's customers across the Far East from Bontang.

Potential Supply Sources

After arriving to the Mediterranean Sea, in early June the vessel was reloaded at Spain’s Sagunto terminal and on Jun. 19, it unloaded the cargo at the Italian Panigaglia terminal, Kpler showed.

However, since then it has been loitering ballast in the Tyrrhenian Sea and it is not clear when its next loading is going to happen.

Reloads from Spain could remain a viable option for Eni to diversify its supply to Italy, using the Portovenere, mainly due to the geographical proximity and the flexibility they offer. The company is already present on the Spanish market through its local subsidiary, Eni Espana Comercializadora de Gas.

Nonetheless, the high costs associated with reload operations could favor other supply sources in the Mediterranean, most notably Egypt.

Eni could use the Portovenere for deliveries from the 5 million ton/yr Damietta liquefaction plant, where the major is a stake and capacity holder.

Since the plant’s restart last year, Eni has not brought any cargo from the facility to Italy, data by Kpler showed.

Supply Fears

Eni has been particularly impacted by the Russian supply cuts in recent months, as it is one of the main European customers of state exporter Gazprom.

The uncertainty around the future of Russian supply was most likely one of the key drivers behind the decision to reposition the Portovenere and look for alternative supply options in the form of LNG.

In fact, the ongoing supply uncertainty has ramped up Italian LNG purchases this year, with imports gradually rising since February, according to Kpler. Last month, Italy imported 1.04 million tons of LNG, the highest monthly import figure on record (see graph below).

Created with Highcharts 9.0.0(million tons)ITALY'S LNG IMPORTSQatarAlgeriaUnited StatesTrinidad and TobagoEgyptNorwayNigeriaEquatorial GuineaSpainAngolaRussian Federation2020.012020.022020.032020.042020.052020.062020.072020.082020.092020.102020.112020.122021.012021.022021.032021.042021.052021.062021.072021.082021.092021.102021.112021.122022.012022.022022.032022.042022.052022.062022.0700.20.40.60.811.2Source: Kpler

Daniel Stemler, Madrid

NextDecade Signs Yet Another Deal

NextDecade has signed another LNG offtake deal — the second in as many days — with another Chinese company.

NextDecade has now signed a 20-year sale and purchase agreement (SPA) with Guangdong Energy Group for the supply of LNG from the proposed Rio Grande LNG export project in Brownsville, Texas.

Guangdong will buy 1 million tons per year of LNG indexed to Henry Hub and delivered on an ex-ship basis. Guangdong also has the right to purchase an additional 0.5 million tons of LNG from Rio Grande.

The LNG will be supplied from the first train at Rio Grande LNG, which is expected to start commercial operations as early as 2026.

The firm deal follows a "binding heads of agreement" with Guangdong announced back in March.

The deal also follows NextDecade's SPA with a unit of China gas signed on Tuesday.

Rio Grande LNG Binding Deals
DateBuyerCountryVol. (million tons)Duration (yrs)First DeliveryPrice Indexf.o.b. /d.e.s.Deal Type
4/1/2019ShellPortfolio2.0020NABrent (3/4) and HH (1/4)f.o.b.SPA
4/6/2022ENNChina1.50202026HHf.o.b.SPA
5/2/2022EngieFrance1.75152026NAf.o.b.SPA
7/5/2022China GasChina1.00202027HHf.o.b.SPA
7/6/2022Guangdong EnergyChina1.00202026HHd.e.s.SPA
Total7.25

Rio Grande Timeline

"Based on current expected demand for LNG and assuming the achievement of further LNG contracting and financing," NextDecade anticipates making a positive final investment decision (FID) on up to three liquefaction trains — each train 5.4 million tons — at Rio Grande in the second half of 2022, with FIDs on the remaining two trains to "follow thereafter."

The total project is expected to be five trains for a total of 27 million tons of LNG export capacity.

With this latest deal, NextDecade now has firm buyers for 7.3 million tons of Rio Grande LNG export capacity. That amounts to about 68% of the first two liquefaction trains, if the company goes forward on a "minimum of two trains" as described back when a deal with Engie was signed in May.

Guangdong

“We are pleased to announce this SPA with Guangdong Energy, one of the largest power generation companies in Guangdong Province in Southeastern China,” said Matt Schatzman, NextDecade chairman and CEO.

Rio Grande LNG's "differentiated offering of a lower carbon-intensive LNG continues to drive our commercial momentum and we look forward to working with Guangdong Energy over the coming years to help further reduce their greenhouse gas emissions," he added.
Michael Sultan, Washington


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India37.3237.8037.3937.8036.9336.7538.3236.3538.2237.4136.5736.2736.68
Sodegaura, Japan37.8839.4039.4339.5237.8334.0339.0036.6238.8439.9137.0136.0838.08
Zeebrugge, Belgium36.2134.4234.0334.5135.6636.0435.2733.9935.1034.0035.7934.7735.90
Huelva, Spain31.4529.7629.3929.8430.9030.6830.5529.2630.4029.3630.9629.9030.98
Isle of Grain, UK20.0818.4518.1218.5319.6119.9219.3318.0719.0718.0819.7018.7919.81
Everett, US4.112.582.962.653.813.660.013.393.162.224.31----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback31. Jan14. Feb28. Feb14. Mar28. Mar11. Apr25. Apr9. May23. May6. Jun20. Jun4. Jul102030405060Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia0.0040.69-0.3140.69
SW Europe0.0032.14-10.7632.14
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.015.515.526.50
NBP, UK (futures)-1.6833.0534.7420.83
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF3.8152.2348.4241.66
Zeebrugge (Belgium)0.5935.1634.5731.23
German NCG1.2450.6849.4540.16
NBP (UK)-10.7620.9331.6921.29
US Markets
US Spot Prices
Sabine Pass, Louisiana-0.035.645.676.68
Corpus Christi, Texas0.055.655.606.60
Cove Point, Maryland-0.205.085.286.51
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month-0.015.515.526.50
Second Mth0.005.485.496.49
Third Mth0.005.495.506.52
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaAug '21Sep '21Oct '21Nov '21Dec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22020406080Energy Intelligence