July 25, 2022

WWW.ENERGYINTEL.COM

Gazprom Squeezes Nord Stream Gas Flows Again

Russian gas giant Gazprom said it will further reduce gas exports to Europe via the Nord Stream 1 pipeline to around 20% of capacity from Wednesday.

The move ratchets up pressure on Europe, which is scrambling to stockpile enough gas for the coming winter heating season.

Europe depends heavily on Russian gas and has accused Moscow of using its gas as a weapon in retaliation for European support to Ukraine, which has been under attack from Russian forces for the last five months.

Gazprom said on Monday that it would deliver 33 million cubic meters of gas per day from Wednesday — down from 68 MMcm/d or 40% of capacity over the last few days.

The state-controlled pipeline gas exporter said the reduction in capacity was caused by problems related to the maintenance of turbines at the Portovaya compressor station at Portovaya.

Gazprom has been citing problems with the turbines as the reason for reduced gas flows since mid-June, but German and European officials say this is untrue and that Moscow is deliberately restricting flows.

Created with Highcharts 9.0.0(MMcm)RUSSIAN GAS FLOWS TO EUROPENord StreamUkrainian TransitBelarusian TransitTurk Stream to EuropeImatra to Finland5-1-225-4-225-7-225-10-225-13-225-16-225-19-225-22-225-25-225-28-225-31-226-3-226-6-226-9-226-12-226-15-226-18-226-21-226-24-226-27-226-30-227-3-227-6-227-9-227-12-227-15-227-18-227-21-227-24-22020406080100120140160180Source: Gazprom, GTSOU, Nord Stream AG, Entsog, Energy Intelligence

Turbine 'Ready to Ship'

Siemens Energy said on Monday it had supplied the necessary paperwork to send one turbine back to Russia from Germany and that Gazprom is responsible for obtaining the necessary customs documents.

Until early June, Nord Stream 1 had been shipping Russian gas to Germany at rates close to its full capacity of around 170 MMcm/d.

Volumes dipped to around 40% of capacity in mid-June when Gazprom started citing the turbine problems, then for 10 days until Jul. 21 volumes sank to zero as the pipeline underwent annual maintenance.

There was much relief when gas deliveries resumed at 40% of capacity last week, although President Vladimir Putin had referred to the possibility of a further dip in volumes as another turbine was taken off line for maintenance.

Last week's restart at 40% of capacity had allowed Germany — Europe's biggest gas consumer — to inject more gas into storage ahead of the winter, but the latest reduction in flows will disrupt that effort.

Storage Injections Disrupted

Two days after Nord Stream 1 came back on line last week, Germany's net storage injection returned to its pre-shutdown level of around 90 MMcm/d (see graph).

That is still relatively low, however, compared with early June storage injections, when the pipeline was still operating close to its full capacity.

Germany had to slow the pace of injections during the 10-day maintenance period and there were even two days of net withdrawals from storage.

Germany and other EU countries have been hoping to fill gas storage facilities to 80% of their capacity by Nov. 1 to avert a shortage during the cold winter months, when gas is used to heat homes and other buildings.

Because of the uncertainties around supplies of Russian gas, the EU has been discussing measures to reduce the bloc's gas demand by 15% for the six months from August through March.

Meanwhile, Germany had to provide a €15 billion ($15.3 billion) rescue package last week to utility Uniper — its largest importer of Russian gas — after it ran up heavy losses because of tight gas supplies and high prices.

Uniper has described the low supplies of Russian gas as a breach of contract, but Gazprom and the Kremlin have argued that Europe's gas crisis is attributable to its sanctions against Russia and poor energy policy decisions.

Staff Reports

No Plan B as Brussels Tries to Bridge Gas Gap

European diplomats are racing to rally enough support for proposed rules that would require member states to cut their use of natural gas by 15% if supplies run short this winter because of low deliveries from Russia.

A dozen or so of the 27 EU member states have raised concerns about the proposal since it was made public last week.

But diplomats involved in the negotiations say there is no "Plan B" to fall back on if members fail to agree on a policy before a scheduled summer recess.

The European Commission had proposed a voluntary 15% reduction in consumption across EU countries compared to their five-year average, with a goal of saving 45 billion cubic meters of gas from August to March.

However, the reduction would become mandatory if an emergency were declared because of short supplies or high prices.

The EU's current Czech presidency has led the negotiations and proposed a series of amendments to build consensus among the member states.

Created with Highcharts 9.0.0MMcm/dEU, GERMANY GAS STORAGEEU Net InjectionEU Storage LevelGermany Net InjectionGermany Storage Level6. Jun13. Jun20. Jun27. Jun4. Jul11. Jul18. Jul020040060080030%45%60%75%90%Source: Gas Infrastructure Europe, Energy Intelligence

Exemptions

Most importantly, diplomats are preparing a number of exemptions that could help blunt the impact of mandatory gas demand reductions on certain countries and industries.

Examples include carve-outs for some energy-intensive industries, countries with poor connections to the European gas grid and the Baltic countries that are connected to Russia's electricity grid, Energy Intelligence understands.

Those exemptions would reduce the total gas savings, but a senior EU diplomat disputed the idea that they would seriously undermine the proposal, saying the net impact would remain close to a 15% reduction.

Officials have also made changes to some of the technicalities of the process for triggering mandatory curbs on the use of gas.

In particular, EU member states — rather than the commission — would vote on whether or not to declare an emergency.

Negotiators also cut the duration of the pact to just one year as they debate what is at least the second revised version of the package.

Spain, Portugal Push Back

The exemptions could help gain support from those countries which have pushed back more strongly.

That group includes Spain and Portugal, which have minimal connections to the European gas grid and have therefore developed alternative supply strategies focused around LNG imports.

Energy officials from both countries have argued that blanket cuts will only hurt their gas-consuming industries without providing any additional volumes to EU members that face reduced supplies from Russia.

The proposal has also been criticized as a measure that would mainly help Germany if Russia should decide to cut off all exports of gas to the country via the Nord Stream 1 pipeline, while offering few benefits to other countries.

Nord Stream 1 has been flowing gas at just 40% of its full capacity, with Russia saying this is because Western sanctions have delayed crucial maintenance work.

The EU argues that Moscow is deliberately withholding gas to punish European countries for supporting Ukraine since it was invaded by Russian troops in February.

Meanwhile, Gazprom said on Monday that it would further reduce deliveries via Nord Stream 1 to just 33 million cubic meters per day — or 20% of its total capacity — as early as Wednesday.
Noah Brenner, Brussels

Taiwan's Power Plans

Taiwan plans to step up expansion of both LNG and renewable power sources to cope with rising demand for electricity and to reduce the power industry's carbon footprint.

The country's path forward was detailed in a revised long-term development plan, covering 2022-28, released by Taiwan's Bureau of Energy (BOE) on Jul. 22.

Taiwan was the world's fifth-largest LNG importer in 2021 with 19 million tons, and year-to-date is the seventh-largest LNG importer with 11.4 million tons.

Taiwan is targeting a 50% power share for LNG, 30% for coal and 20% for renewables by 2025.

Created with Highcharts 9.0.0TAIWAN'S POWER SOURCES 2021GigawattsCoal (35.4%)Coal (35.4%)LNG (32.4%)LNG (32.4%)Renewables (19.5%)Renewables (19.5%)Nuclear (4.9%)Nuclear (4.9%)Pumped Storage (4.4%)Pumped Storage (4.4%)Oil (3.5%)Oil (3.5%)Source: Taiwan Bureau of Energy

Created with Highcharts 9.0.0TAIWAN'S POWER OUTPUT 2021Billion kilowatt hoursCoal (44.3%)Coal (44.3%)LNG (37.2%)LNG (37.2%)Nuclear (9.6%)Nuclear (9.6%)Renewables (6%)Renewables (6%)Oil (1.8%)Oil (1.8%)Pumped Storage (1.1%)Pumped Storage (1.1%)Taiwan's Power Output 2021

Rising Power Demand

According to the National Electricity Power Resources Supply and Demand Report for 2021, total power demand in Taiwan rose 4.5% over the previous year to 283.4 billion kilawatt hours, exceeding the annual average growth of 1.6% during 2012-21. Domestic industrial production and exports soared last year in line with the rebound in global demand, which led to a lift in inflation-adjusted gross domestic product by 6.57%.

The BOE forecasts that annual power demand growth will rise from an average of 1.6% from 2012-21, to 2.3% from 2022-2028, and that day time peak loads will increase from 38.70 billion kwh in 2021 and 39.70 billion kwh in 2022 to 45.93 billion kwh by 2028.

Annual total power demand is expected to rise from 288.4 billion kwh in 2021 to 294.9 billion kwh in 2022 and to 331.1 billion kwh by 2028.

Peak loads have already topped the BOE's forecast for 2022 several times in July.

LNG-Fired Growth

The BOE outlook anticipates continued expansion in LNG fueled capacity through 2028.

Current plans call for the introduction of 18.84 gigwatts in installed LNG-fueled capacity. Taipower-operated power plants such as Datan, Hsingta, Senpa, Taichung, Hsiehho and Tunghsiao as well as the Sun Ba independent power project in Tainan City amount to a total increase of 16.97 GW when retiring capacity, namely two 386 megawatts combined cycle units at Tunghsiao, are deducted in December 2024.

In addition, the BOE long-term power resource development plan has allocated additions of “new LNG power sources” of 1,500 MW in June 2025, 1,200 MW in 2026, 1,300 MW in 2027 and 1,300 MW in 2028.

A BOE spokesperson told Energy Intelligence that the allocations reflected plans for additional LNG-fueled generators to be added by Taipower itself or farmed out to IPPs.

Renewables Falling Short

BOE reported that the government was continuing to follow its energy transition policy of actively promoting renewable power sources, specifically to boost capacity in solar to 20 GW and in wind to 5.6 GW by 2025.

The BOE said that the share of renewables in annual total power output had risen from 4.1% in 2015 to 6.0% in 2021 and was expected to reach 8% this year and 15.1% by 2025, short of the 20% anticipated in the original energy transition power share target of 50% LNG, 30% coal and 20% renewables by 2025.

The reasons for the likely shortfall includes a faster than expected increase in the denominator of power demand growth and delays in linking offshore wind farm projects to the national grid operated by state-owned Taipower, BOE said. The delays were due mainly to difficulties in accessing specialized marine and engineering personnel due to the Covid-19 pandemic.

Thanks to continued increases in solar and acceleration of offshore wind project grid linkages, the BOE report said the 20% power share target should be realized in October 2026 and rise to 21% in 2027 and 23% by 2028.

For the first time, the long-term projection includes a plan for Taipower to bring a 500 MW biomass power plant on line in 2026 and mandates installation of 1.5 GW in power storage equipment, including 1.0 GW by Taipower itself, during 2023-2025.

Nuclear Falling Out

The BOE affirmed that Taipower`s last two nuclear power generating units, the 951-MW Maanshan-1 and Maanshan-2 pressurized water reactors at Taiwan`s southern tip, will retire as scheduled in June 2024 and May 2025, respectively, as the deadline has already passed for any application for extension.
Dennis Engbarth, Taipei


In Brief

EIG and Fluxys Complete Acquisition of Chile's Quintero LNG Terminal

Institutional investor EIG and Brussels-based energy infrastructure firm Fluxys have completed their acquisition of Chile's Quintero LNG regasification terminal.

EIG and Fluxys acquired stakes held by Spanish energy company Enagas and Canadian investment company OMERS Infrastructure.

The deal was agreed to in March, with Enagas announcing that it had agreed to sell its 45.4% shareholding in Quintero for $661 million.

With 3.75 million tons/yr of regasification capacity, Quintero is Chile's largest LNG import facility. In 2021, 67% of the country's natural gas imports arrived via the terminal.

The terminal is located in Quintero Bay in Chile's central Valparaiso Province.

Fluxys said in a press release that the terminal represents "a key energy infrastructure business supporting Chile’s decarbonization strategy by fostering the uptake of renewables and the phasing out of coal."

Created with Highcharts 9.0.0(million tons)QUINTERO LNG IMPORTSTrinidad and TobagoUnited StatesEquatorial GuineaQatarAustraliaOthers20082009201020112012201320142015201620172018201920202021202200.511.522.533.5Source: Kpler

Michael Deibert, Washington


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India32.9233.3733.0033.3632.5932.4133.8232.0833.7433.0232.2631.9932.36
Sodegaura, Japan33.6034.9735.0035.0733.5730.1934.6132.5134.4735.4132.8332.0033.77
Zeebrugge, Belgium46.8245.0544.6545.1346.2746.6545.8744.6345.7244.6446.4045.4046.51
Huelva, Spain44.7443.0342.6543.1244.1843.9643.8142.5443.6742.6444.2343.1844.26
Isle of Grain, UK30.0128.4228.0828.4929.5529.8629.2728.0529.0228.0629.6428.7529.74
Everett, US6.935.525.865.576.656.530.016.266.055.207.11----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback21. Feb7. Mar21. Mar4. Apr18. Apr2. May16. May30. May13. Jun27. Jun11. Jul25. Jul102030405060Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia0.0036.170.2936.17
SW Europe0.0045.42-0.7245.42
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.438.738.307.48
NBP, UK (futures)+1.0038.4837.4823.25
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF1.8250.5048.6947.48
Zeebrugge (Belgium)--30.33--24.46
German NCG-12.9333.7846.7145.20
NBP (UK)-0.7230.8631.5819.33
US Markets
US Spot Prices
Sabine Pass, Louisiana0.398.528.137.56
Corpus Christi, Texas0.258.348.097.29
Cove Point, Maryland-0.557.888.437.61
Elba Island, Georgia--8.52----
Nymex Henry Hub Futures
Near Month0.438.738.307.48
Second Mth0.388.578.207.38
Third Mth0.398.558.177.37
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaAug '21Sep '21Oct '21Nov '21Dec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22020406080Energy Intelligence