July 21, 2022

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Woodside Boosts Production in Post-Merger

Woodside Energy reported significantly higher production in the second quarter ending Jun. 30, boosted by contribution from former BHP’s petroleum business following the completion of their merger on Jun. 1.

Production in the second quarter was hoisted by 60.2% to 33.8 million barrels of oil equivalent from the prior quarter, which also represents a 49.1% increase from a year ago.

Woodside targets to produce 145 million-153 million boe for the full year — including production from former BHP’s assets — of which 77 million-79 million boe would be LNG and 36 million-40 million boe crude and condensate. This compares with Woodside’s pre-merger production of 91.1 million boe in 2021.

Higher LNG Revenue

In addition to the contribution from former BHP, Woodside also benefited from a full quarter of accelerated Pluto production processed at its operated North West Shelf (NWS) LNG complex through the Pluto-KGP Interconnector which started up in March. Woodside accelerated production from its offshore Pluto fields and increased output of LNG at NWS, which was uncontracted and sold in the bullish spot market.

Woodside produced a total of 19.8 million boe of LNG in the April-June period — from NWS, Pluto and Wheatstone liquefaction facilities — up 21% from the previous quarter and 10.5% from a year ago. Woodside now owns one-third of NWS, after taking over BHP's stake.

Total revenue in the second quarter rose 43.6% to $3.4 billion from the previous quarter and more than doubled from a year ago.

About 20%-25% of Woodside’s LNG production in 2022 have exposure to gas hub pricing, such as European indices Title Transfer Facility (TTF), National Balancing Point (NBP) and Japan Korea Marker whose prices have been trending high due to tight supplies and increased demand from Europe. Its remaining LNG portfolio is priced against oil.

Woodside said it has entered into a number of hedges for Henry Hub and TTF commodity swaps for its Corpus Christi LNG offtake to protect against downside pricing risk. Woodside has an 850,000 ton per year long-term contract with Cheniere’s Corpus Christi facility which is priced against the US benchmark Henry Hub.

As a result of hedging and term sales, Woodside said approximately 94% of Corpus Christi volumes in 2022, approximately 73% in 2023 and approximately 27% of 2024 have reduced pricing risk.

Created with Highcharts 9.0.0(million tons)WOODSIDE'S LNG EXPORTS North West Shelf, Pluto and WheatstoneJapanChinaSouth KoreaTaiwanThailandSingapore RepublicKuwaitIndonesiaSpainJul'20Aug'20Sep'20Oct'20Nov'20Dec'20Jan'21Feb'21Mar'21Apr'21May'21Jun'21Jul'21Aug'21Sep'21Oct'21Nov'21Dec'21Jan'22Feb'22Mar'22Apr'22May'22Jun'22Jul'220123Source: KplerJul'20 Japan: 1.75



Scarborough Update

On its key Scarborough-Pluto Train 2 project which was sanctioned last year, Woodside said construction work has started at the Pluto LNG site in Western Australia.

“All major equipment items for Scarborough have been procured and construction has begun at the Pluto Train 2 site,” said Woodside CEO Meg O’Neill. “First steel for Scarborough’s floating production unit topsides was cut, pipeline manufacturing is 25% progressed and the subsea trees for initial start-up of the project are all complete.” The new Train 2 will have a capacity of 5 million tons/yr with start-up scheduled for 2026.

The Scarborough-Pluto Train 2 project would account for 45% of Woodside’s $4.3 billion to $4.8 billion in capital expenditure allocated for this year. O’Neill said talks are still ongoing to sell down Woodside’s current 100% stake in the upstream Scarborough field. It has already sold a 49% stake in Pluto Train 2 to Global Infrastructure Partners.

Woodside added it has decided to stop the sell-down process of its 82% equity at the Sangomar oil project in Senegal. It has been looking for potential buyers to reduce its stake to 40%-50%. First oil is expected in 2023.

“Following extensive discussions with potential new partners, we have decided to discontinue the sell-down of equity in Sangomar,” according to O’Neill.
Clara Tan, Singapore

Nord Stream Back on Line, But Flows Throttled

The Nord Stream 1 gas pipeline from Russia to Germany resumed operations on Thursday after a 10-day maintenance shutdown that many had feared might be extended indefinitely.

However, the pipeline is operating at reduced capacity, as it has for much of the summer, providing only limited relief to the tight European gas market and hindering Europe's plans to stockpile enough gas ahead of the coming winter.

Gas started to flow at some 2.1 million cubic meters per hour in the first hour of resumed operations on Thursday, then rose to 2.8 MMcm/hour, according to the Nord Stream AG operating company, which is controlled by Russian gas giant Gazprom.

That was in line with the daily nomination of 68 million cubic meters per day, or 2.8 MMcm/hour, which represents 40% of the pipeline's capacity.

Nord Stream had been operating at 40% of capacity since mid-June, before halting flows for annual maintenance on Jul. 11.

Moscow has attributed the low flow rate to sanctions-related problems with a Siemens Energy gas turbine from one of the Nord Stream 1 compressor stations in Russia.

However, many politicians and pundits in Europe believe the reduced flows of gas are meant to give Moscow geopolitical leverage in its standoff with the West over Russia's five-month-old war in Ukraine.

The turbine had been stranded in Canada after an overhaul because of Ottawa's sanctions against Moscow, but a waiver allowed for its return to Germany.

Further Cuts Possible

Fears that Nord Stream 1 would not resume operations after the planned shutdown turned out to be wrong, but further cuts in flows are still possible.

Russian President Vladimir Putin has said that flows could dip to 30 MMcm/d sometime around Jul. 26, when another turbine is scheduled to be sent away for routine maintenance.

He added that this could be avoided if the turbine that was returned by Canada can be brought back on line in time.

However, Putin and Gazprom have also suggested that certain necessary conditions have not yet been fulfilled.

Pressure on Europe

Europe says the the Kremlin has deliberately weaponized its gas exports, with more than half of EU member states already impacted by reducted deliveries from Russia.

To cope with the shortage and replenish storage volumes, the European Commission has proposed that EU nations should reduce their gas consumption by 15% over the next six months.

Moscow denies having deliberately cut exports, with Putin arguing that Europe's current energy problems are a result of its own policy failures and western sanctions.

Despite such protestations, Russia and state-controlled Gazprom appear to be betting that frustration over the gas shortage and high prices for both oil and gas will weaken western resolve and undermine public support for Ukraine in the West.

Despite the sharp decline in its gas exports, Gazprom has generated windfall revenues as a result of record-high gas prices.

Similarly, despite western sanctions, Russia has benefited from high prices for crude oil and refined products, which are an even greater source of revenue for Moscow.

Russia currently has no outlet for the gas that it has been withholding from the European market, because neither its domestic market nor growing exports to China are capable of absorbing those volumes in the short term.

Customers Confirm Restart

Gazprom’s European customers confirmed that they had started to receive additional gas from Russia on Thursday morning.

OMV said Gazprom had told the Austrian company that it would receive about 50% of the gas it had asked for in its daily nominations, up from an average of 30% earlier this month.

Italy's Eni had also received reduced Russian gas volumes during the Nord Stream 1 maintenance outage, but said on Thursday that its volumes had risen to a rate of 36 million cubic meters per day from a previous average of 21 MMcm/d.

For more coverage of the Ukraine crisis, visit Ukraine Crisis: Energy Impact >

Staff Reports

India’s LNG Imports Stay Weak in June

India’s LNG imports contracted 3.3% on month in June amidst high prices and as a former Gazprom unit has not been able to deliver cargoes under its term deal with state-owned Gail India.

The world’s fourth largest LNG buyer imported 2.45 billion cubic meters of the super-cooled fuel last month compared with 2.53 billion cubic meters in May, the data published by the federal oil ministry showed. India's LNG imports were down 9.5% compared with June last year.

But despite the fall in volumes, the LNG import bill in June rose by half on year to $1.2 billion, though it was flat on month.

Indian buyers have been avoiding spot cargoes that are priced three times as high as what they are paying under term deals.

India's Gas Demand
BcmJun '22May '22%Chg. Jun '21
LNG Imports2.452.53-3.32.71
Domestic Production 2.752.85-3.52.71
Total Consumption 5.205.38-3.45.42


Gazprom Marketing and Trading Singapore, which has a contract to supply three to four cargoes a month to Gail, has not been able to meet its contractual obligation as its parent Gazprom Germania has been blacklisted by Russia after it was acquired by Germany.

Slowing Growth

Ratings agency Crisil has cut its estimates for India’s LNG imports growth to just 1%-3% in the current financial year, to about 25-27 million tons (33-35 Bcm), from 15%-17% growth that it had forecast earlier.

“We expect [the] surging price of LNG in the global market, owing to geopolitical tensions as well as low inventory levels to put pressure on the growth of LNG imports,” Hetal Gandhi, director, Crisil Research said.

Domestic Production

India’s domestic gas production also suffered a dent, contracting 3.5% on month in June to 2.75 Bcm. This led total gas consumption, including imports, to fall 3.4% on month to 5.2 Bcm (see table).

The International Energy Agency (IEA), in its third quarter gas market outlook, trimmed its forecast for India’s total gas demand growth. It revised its total consumption forecast for 2025 down by nearly 18 Bcm, or 19% compared to the level anticipated a year ago. IEA cited an unfavorable global LNG price environment and the uncertainties facing natural gas in India’s price-sensitive energy economy.

IEA has forecast that two-thirds of India’s incremental demand will be met by domestic production and the rest by imported LNG, which even after an 11% increase in inflows foreseen in 2021-25, will stay slightly below a 2020 peak due to high prices. That will not bode well for billions of dollars being invested by developers in LNG import capacity.

India's LNG Terminals

ln211217-India.svg


Rakesh Sharma, New Delhi


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India32.7333.1732.8133.1632.3932.2233.6331.8933.5432.8332.0731.8032.17
Sodegaura, Japan33.4134.7734.8034.8833.3830.0034.4232.3234.2835.2232.6431.8133.58
Zeebrugge, Belgium42.8641.1340.7541.2242.3342.7041.9440.7341.7940.7442.4541.4842.56
Huelva, Spain48.0346.2945.9046.3847.4647.2347.0945.7946.9545.8947.5246.4347.54
Isle of Grain, UK33.3231.6931.3531.7632.8533.1632.5631.3232.3131.3232.9432.0333.04
Everett, US7.626.216.556.267.357.220.016.956.745.887.81----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback14. Feb28. Feb14. Mar28. Mar11. Apr25. Apr9. May23. May6. Jun20. Jun4. Jul18. Jul102030405060Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia0.0035.98-0.4635.98
SW Europe0.0048.722.5448.72
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.077.938.016.60
NBP, UK (futures)+3.3335.4632.1328.35
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-1.5045.0846.5853.47
Zeebrugge (Belgium)--------
German NCG-1.6644.2245.8850.77
NBP (UK)2.5434.1531.6129.36
US Markets
US Spot Prices
Sabine Pass, Louisiana0.458.007.556.86
Corpus Christi, Texas0.317.627.316.68
Cove Point, Maryland1.228.897.675.97
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month-0.077.938.016.60
Second Mth-0.087.827.906.51
Third Mth-0.097.787.876.50
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaAug '21Sep '21Oct '21Nov '21Dec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22020406080Energy Intelligence