July 8, 2022

WWW.ENERGYINTEL.COM

Germany OKs Gas Bailout, Emergency Supply Measures

Germany’s parliament has passed a series of amendments to allow Berlin to provide financial support to German energy companies in case of a gas-import supply emergency.

The measures would also enable the government to activate coal and oil plants if gas supplies are cutoff.

Europe has been bracing for life without Russian gas as concerns grow that Nord Stream 1 flows will not restart after the Jul. 11-21 planned maintenance of the Gazprom pipeline.

German Economy Minister Robert Habeck has said the gas market situation is “tense” and that he can’t rule out a worsening situation.

The new measures are “about doing everything possible to maintain the basic supply in the coming winter and to keep the energy markets running as long as possible, despite high prices and growing risks,” Habeck said.

Habeck has warned of a “Lehman-style crisis” of cascading effects if energy companies go bankrupt due to the high gas prices, alluding to the bank failure that set off a global financial crisis in 2008.

The French government also presented a draft bill Thursday that would give Paris the power to order gas-fired power plant operators to restrict or suspend operations in case of a supply emergency.

Government Action

The amendments include two measures that would help energy companies bear the extra costs associated with buying replacement gas supplies in the event of a Russian supply cutoff. One would pass on the additional costs only to a company’s own customers; the second would evenly distribute the costs across all gas consumers on the German gas grid.

The measures would be temporary and would only come into play if the German grid regulator Bundesnetzagentur declares a state of emergency over gas supplies.

Other amendments include giving Berlin the power to quickly limit the operation of gas-fired power plants for a period of up to nine months in the event of a supply emergency. Combined heat and power gas plants would only be allowed to run when there is no alternative for heating.

As previously announced, out-of-service coal, lignite and oil power plants will be placed on call and used temporarily in case of a gas cut, with capacity of up to 10 gigawatts.

“Domino effects in the energy market must be avoided at all costs, otherwise the security of energy supply cannot be maintained,” the head of German utility association BDEW Kerstin Andreae said.

German newspaper Handelblatt reported Berlin is considering providing up to €2 billion ($2.03 billion) in aid to gas importer VNG in case of a halt in Russian gas supplies.

Uniper Applies for Bailout

German utility Uniper on Friday applied to the German government for additional federal funds as well as a proposal for the state to buy a stake in the company as part of the recently approved legislative package.

Russian-sourced gas makes up an outsized proportion of Uniper’s long-term supply contract portfolio, with 200 terawatt hours (TWh) of its 370 TWh portfolio coming from Russia.

“The measures are aimed at ceasing the current accumulation of substantial losses, covering Uniper’s liquidity needs and protecting Uniper’s investment-grade credit rating,” a company statement said.

In parallel, Uniper’s largest shareholder, Finland’s Fortum, has also proposed to Berlin a restructuring of the German utility to establish a “security of supply company” owned by the state.

Uniper CEO Klaus-Dieter Maubach told reporters Friday that this does not mean that the company is close to bankruptcy. He added that the company is expected to come to an agreement with the government in weeks.

Habeck said Friday it was “clear” that Berlin would not allow such an important company to go bankrupt, which could lead to repercussions on the global energy market.

A €2 billion credit line with state bank KfW announced in January has not been used, Maubach said.

'Not Plausible'

Uniper is in daily contact with Gazprom over the gas supply situation, Maubach says. He says Gazprom's stated reasons for the curtailment are “not plausible” and that the Russian company's actions represent a breach of contract.

Russia has blamed the low gas flows on a turbine stuck in Canada.

Uniper expects Gazprom to pay damages in compensation and has demanded Gazprom tell them when the supply curtailments will end, he added.

Maubach called the situation a “big disappointment” and said Uniper is looking into “every option on the legal side” if supplies halt completely.
Jaime Concha, Copenhagen

Philippines to Push Ahead With First LNG Imports This Year

Singapore-based infrastructure developer AG&P remains focused on importing the first LNG cargo to the Philippines by the end of this year despite current high spot prices.

“We are aiming to have the first commissioning cargo flow through the terminal by December from the spot market,” Karthik Sathyamoorthy, AG&P’s president for LNG terminals and logistics, told Energy Intelligence at the sidelines of the Asia Pacific LNG & Gas Summit organized by dmg events. Commissioning will start between October and December, he said, adding there was a slight delay from the third quarter due to supply chain issues in China.

Sharp spikes in spot LNG prices have led to doubts whether plans by emerging markets such as the Philippines and Vietnam would be derailed or delayed. These markets are planning first LNG imports which are critical to supplement domestic gas supply to meet growing power demand.

Philippines' First Terminal

AG&P is building a hybrid offshore and onshore terminal at Batangas Bay in the Philippines which looks likely to be the first operational terminal in the country after rival developer First Gen delayed its terminal to 2023.

AG&P's 5 million ton/yr terminal would comprise a 137,000 cubic meter floating storage unit (FSU) and two onshore tanks each of 60,000 cubic meters which would be ready in 2024 and 2025, respectively. The terminal would operate on a tolling basis with power utility San Miguel Corp. (SMC) as its first anchor tenant.

Sathyamoorthy admits that the current high-priced environment has led to a dilemma for emerging markets on whether they should delay imports of LNG or risk a terminal becoming a white elephant.

“We see the current high-priced environment as an opportunity to build new capacity and create downstream demand…and we believe there would be an LNG oversupply after 2025,” he said, noting new terminals take years to be built. Current spot prices are not attractive, said Sathyamoorthy, but there is too much at stake if LNG does not flow to feed SMC’s existing 1,200 megawatt llijan power plant. The power plant is now sourcing gas from Philippines' sole Malampaya gas field whose output has been declining.

According to Sathyamoorthy, SMC has secured a short-term LNG supply contract and a medium-term contract. First supplies would begin from 2023. He declined to name the suppliers.

To make LNG more affordable for the Philippines, the AG&P executive said the import prices of LNG would be blended with the price of domestic gas. He declined to reveal more details.

Acting as an LNG Aggregator

Besides supplying to the power sector, AG&P is also creating new demand by developing city-gas distribution networks and connecting industrial customers with LNG trucks. “They are looking at price certainty and short contracts such as two to five years," he said, adding they would start with small volumes in 2023 and ramp up in 2024.

Sathyamoorthy expects the capacity of the terminal to be ramped up to at least 3 million tons/yr from the second half of 2024.

He envisions AG&P acting as an LNG aggregator for its nonpower customers because having several customers accessing the FSU may lead to scheduling issues due to the capacity limitations of the facility.

AG&P is now in the market looking for a 10-year LNG supply deal which can be supplied to its nonpower customers in the Philippines and India from 2024. Talks are under way with Mideast suppliers, said Sathyamoorthy.

Longer-term Ambition

The Philippines terminal would be the first terminal in AG&P’s broader goal to build a total of five terminals in Asian emerging markets by 2028. The other countries are India, Pakistan, Indonesia and Vietnam where FSU and FSRU solutions are being considered.

In India, AG&P is planning a 4 million ton/yr FSU at Karaikal, near Chennai. The firm has already built city-gas distribution networks in the five states of Rajasthan, Andhra Pradesh, Karnataka, Kerala and Tamil Nadu.

On Pakistan, Sathyamoorthy said there is currently strong lobbying for the government to deregulate the country’s LNG imports so that the private sector can buy LNG on their own and access existing and new FSRUs. The centralized approach of having state-controlled FSRUs and state procurement is causing a problem, he said. “We know there are private buyers in Pakistan which want to buy LNG and they have the credit ability to buy. But they cannot do it.”

Mitsubishi’s subsidiary Tabeer Energy and Karachi-based Energas are two other firms which are eyeing to build their own FSRUs in Pakistan. Sathyamoorthy declined to comment whether AG&P is working with these firms.
Clara Tan, Singapore

Trinidad's LNG Exports Expected to Fall Again This Year

The urgent demand for gas and LNG that followed Russia's invasion of Ukraine has not proved enough to reverse Trinidad's fortunes.

Amid the attendant disruption of Russian gas supplies, between January and June of this year, sales of LNG from Trinidad and Tobago to Europe more than doubled. Exports, however, are still expected to fall year on year by the end of 2022

“The health of the energy sector in Trinidad and Tobago isn't good and that was underscored by poor participation in a deepwater bid round which closed last month,” says Kevin Ramnarine, who served as the country’s Minister of Energy and Energy Affairs from 2011 to 2015.

“The high prices of oil, gas and ammonia have, however, provided some relief…[But] Trinidad is not well placed to fully capitalize on Europe's sudden hunger for LNG because we are now running three trains and not four and our overall LNG production is down...less natural gas production means less LNG production.”

BP, a major stakeholder in the Trinidad's once 15.3 million ton per year capacity Atlantic LNG, is trying to address the problem.

"In Trinidad our team understands the need to get more gas to global markets, particularly in Europe given existing energy challenges," said BP in a statement to Energy Intelligence.

"We are making steady progress on our Cassia Compression project which we expect to achieve first gas before the end of 2022 and we are also looking forward to starting up a small pools drilling program with a rig returning in Q4 2022 to drill four wells in our existing producing fields. Once successful, gas from these activities will go towards fulfilling our existing contractual commitments with Atlantic LNG and with the National Gas Company for supply of gas to the domestic petrochemical industry."

Speaking at the Gas Exporting Countries Forum (GECF), in Doha, Qatar in February, Trinidad’s Prime Minister Keith Rowley admitted that his country had lost “billions” in potential revenue from LNG, blaming the coronavirus pandemic for stalling the momentum of new upstream projects but noting, hopefully, “the recovery is on track.”

Shell, a major stakeholder in Trinidad's LNG export plant, is also optimistic.

"Our strategy in Trinidad and Tobago is one of growth based on the quality of our acreage and bringing more gas to market in support of the country’s energy future," Shell said in response to a request for comment. "We have been growing our operations based on the needs of our business and will continue to do so, as required. Nothing has changed in our strategy."

Created with Highcharts 9.0.0(million tons)TRINIDAD'S LNG EXPORT DECLINE2014201520162017201820192020202120220246810121416Source: Kpler

Venezuelan Complication

Speaking at a conference in Suriname earlier this month, Trinidad’s Minister of Energy Stuart Young blamed the country’s underperformance in the LNG sector on the United States sanctions on Venezuela, saying “there is one single decision again being taken by a developed country, in the form of sanctions, that prevents us from fulfilling the equation that we are unique, in the world: proven reserves right next to existing capacity to produce LNG and fertilizers.”

Rhetorically, at least, Trinidad and Tobago’s energy future often seems tied up in the mercurial politics of its sprawling southern neighbor.

Prime Minister Rowley has been a vocal ally of Venezuelan President Nicolas Maduro since taking office in 2015, two years after Maduro himself ascended to power following the death of Hugo Chavez.

While Maduro is viewed by many Venezuelans and regional governments as being an illegitimate usurper, given to authoritarian policies and human rights abuses, Rowley has frequently attacked measures taken against Maduro’s government and engaged in harsh rhetoric against the Venezuelan opposition and Venezuelan migrants in Trinidad, some of the over 5 million Venezuelans who have fled their nation’s economic and social collapse.

Since 2018, US companies have been legally forbidden from doing business with Venezuela’s state oil company, Petroleos de Venezuela SA (PDVSA), but oil exports by Venezuela surged by 61% in June from the previous month, buoyed by shipments to Italy's Eni and Spain's Repsol.

The exports were facilitated by oil-for-debt exchanges, which were recently allowed by the US State Department as a way for Europe to make up for the shortfall caused by Russia's invasion of Ukraine and subsequent sanctions. In another sign of possible détente, US investment firms Gramercy Funds Management and Atmos Global Energy announced earlier this week that they were forming a joint venture with Caracas-based Inelectra Group to explore possible oil and gas projects.
Michael Deibert, Washington


In Brief

Croatia's HEP Seeks LNG Supply For Next Gas Year Via Tender

Croatian utility HEP has issued an LNG buy tender seeking seven cargoes for delivery during the upcoming gas year, which runs between October 2022 and September 2023, to the Krk import terminal.

HEP is looking to receive one cargo in each of October and December 2022 and February, April, June, July, September 2023, according to the official tendering document seen by Energy Intelligence.

The first three cargoes must have a quantity of 160,000 cubic meters, while the remaining four cargoes have to be 142,500 cubic meters.

Although in its previous tenders HEP accepted both fixed and hub-indexed price offers, this time it only requested offers in fixed unit prices.

The tender closes on Jul. 12 at 12:00 AM (CET), although bids must be valid until Jul. 14 until 14:00 PM (CET).

Possible Headwinds

HEP does not have a term supply contract with any company and procures LNG through a single yearly tender. This is the utility’s third buy tender.

However, in the current market environment purchasing LNG via tenders is becoming increasingly difficult due to the soaring prices and high volatility, particularly for the smaller market participants.

“I think it’s not a good timing to buy with this high volatility. Not sure if they are going to get good offers to be honest,” a Europe-based LNG trader told Energy Intelligence.

Created with Highcharts 9.0.0KRK FSRU IMPORTS (cubic meters of LNG)Jan'21Feb'21Mar'21Apr'21May'21Jun'21Jul'21Aug'21Sep'21Oct'21Nov'21Dec'21Jan'22Feb'22Mar'22Apr'22May'22Jun'22Jul'220100,000200,000300,000400,000500,000Source: Kpler

Daniel Stemler, Madrid

Taipower Shifts Proposed Location of Fourth LNG Import Terminal

Taiwan Power proposed Jul. 7 to reduce the footprint of a future LNG receiving terminal to secure approval for the plant's environmental impact assessment.

The utility plans to construct two 1,300 MW LNG-fueled generators at Hsiehho, just west of Keelung Port, to replace the existing Hsiehho power station, which has four oil-fired generators with a combined capacity of 2,000 MW.

LNG — to what would be the country's fourth LNG import terminal — is to be supplied initially by a floating storage and regasification unit (FSRU).

Taipower's original plans for the site were bitterly opposed by environmentalists and local residents for the damage to coral and associated marine life.

The new proposal would relocate the two LNG storage tanks and regasification facility eastward, further away from the Waimushan Fishing Harbor and closer to Keelung Harbor. The shift would also entail a reduction in the scope of landfilled area for these installations from 18.6 hectares to 14.5 hectares and reduce the volume of landfill from 3.5 Bcm to 1.95 Bcm.

The new proposal was announced by Taipower Acting Chairman Vincent Tseng Wen-sheng before a meeting of a special expert committee reviewing the environmental impact assessment.

Tseng said that the proposal would not change the expected schedule for the commencement of commercial operation of the first new LNG unit at Hsiehho as early as 2027.

Tseng added that the state-owned utility did not anticipate a major increase in the project`s total budget of NT$124 billion (US$4.1 billion).
Dennis Engbarth, Taipei


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India38.2838.7638.3638.7637.9037.7239.2737.3439.1738.3837.5537.2537.66
Sodegaura, Japan38.8740.3640.3940.4838.8335.1039.9737.6439.8140.8638.0237.1039.06
Zeebrugge, Belgium31.9230.2129.8530.2931.3931.7631.0229.8130.8629.8231.5230.5531.63
Huelva, Spain31.5829.9229.5730.0031.0330.8230.6929.4430.5429.5331.0930.0631.12
Isle of Grain, UK20.2118.6318.3118.6919.7520.0619.4818.2519.2318.2719.8518.9619.95
Everett, US4.182.693.072.763.893.750.013.483.252.354.37----
Created with Highcharts 9.0.0($/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 Asia0.0041.640.3641.64
SW Europe0.0032.26-5.5232.26
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.266.036.305.73
NBP, UK (futures)-5.1530.7435.8928.99
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-4.5450.7455.2744.17
Zeebrugge (Belgium)-6.3831.3337.7131.23
German NCG-4.5248.9353.4541.89
NBP (UK)-5.5321.0526.5920.09
US Markets
US Spot Prices
Sabine Pass, Louisiana0.576.405.835.72
Corpus Christi, Texas6.146.140.005.70
Cove Point, Maryland-0.365.095.455.10
Elba Island, Georgia0.486.405.92--
Nymex Henry Hub Futures
Near Month-0.266.036.305.73
Second Mth-0.305.976.265.71
Third Mth-0.295.966.255.73
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaAug '21Sep '21Oct '21Nov '21Dec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22020406080Energy Intelligence