August 2, 2022

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Mitsui, Mitsubishi Cut Value of Sakhalin-2 Stakes

Japanese trading houses Mitsui and Mitsubishi have written off a combined 217.7 billion yen ($1.7 billion) in the value of their equity stakes in the Sakhalin-2 LNG project in Russia’s Far East.

Mitsui, which owns a 12.5% stake in the Russian project, said it has reduced the value of its stake by 136.6 billion yen to 90.2 billion yen. The trading house said this was derived after reassessing the risk exposure based on the latest credit rating of the Russian government and the situation surrounding the 9.6 million ton/yr Sakhalin-2 project.

Mitsubishi has also cut the value of its 10% stake by 81.1 billion yen to 62.3 billion yen. The firm said the financial impact is negligible as the company's equity capital is more than 7 trillion yen.

Japanese investors are facing much higher risks in Russia after Russian leader Vladimir Putin signed a decree at end-June to transfer the ownership of the Sakhalin-2 upstream and LNG project from the Bermuda-registered Sakhalin Energy Investment to a new Russian-registered entity. Existing partners are allowed to apply for stakes in the new company, subject to Moscow’s approval.

The Japanese government wants Mitsui and Mitsubishi to retain their stakes in the project to ensure LNG security for Japan.

Meanwhile, both trading houses reported strong quarterly profits for the April-June period. Mitsubishi’s net profit soared by 185% to 533.95 billion yen while Mitsui reported a 44% jump in net profit to 275 billion yen, buoyed by higher prices of commodities and raw materials.

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

Created with Highcharts 9.0.0(million tons)SAKHALIN-2 LNG EXPORTSJapanSouth KoreaTaiwanChinaKuwaitIndiaThailandIndonesiaSingapore Republic20092010201120122013201420152016201720182019202020212022024681012Source: Kpler2010 Japan: 6.08

Clara Tan, Singapore

Golden Pass Gets a FERC Win

Golden Pass LNG has received the go-ahead from the US Federal Energy Regulatory Commission (FERC) to accelerate construction to a 24/7 pace.

The Texas-based three-train LNG export project, owned by QatarEnergy and Exxon Mobil, is slated to come on line in phases between 2024 and 2026, but had been suffering from Covid-19 and supply chain-related delays.

The acceleration, approved over the strenuous objections of the Sierra Club, illustrates that Democratic-led FERC may not be as restrictive in approving gas and LNG projects as some in the industry had feared — although the commission did not act hastily.

FERC took 17 months to grant the approval, including ordering a fresh environmental assessment (EA) as part of its stepped-up effort to ensure increased scrutiny of projects' potential environmental impacts. In the end, it ruled that the changes were in the public interest.

"I have seen a marked improvement in the way DOE [Department of Energy] and the White House are approaching the need for US LNG. They see the geopolitical value," an industry source told Energy Intelligence. However, "FERC isn’t reading off the same script."

The approval allows the company to increase the on-site workforce and extended work hours to achieve 24/7 construction of the 18.1 million ton per year terminal.

No Action — Not An Option

As discussed in the FERC filing, to have taken no action on the acceleration request would have led to more environmental impact, not less.

"Under the no-action alternative, environmental impacts would remain consistent with those analyzed in the July 2016 FEIS [final environmental impact statement], but with additional unforeseen impacts due to extended construction timelines," the commission said.

"Without the proposed increase in traffic volume and work hours, the project will not be able to meet its original schedule, significantly prolonging construction."

Sierra Club Objection

The Sierra Club had pushed for FERC to require a supplemental EIS, but the commission disagreed.

"An EIS would be appropriate where there would be significant adverse impacts on resources ... however, Golden Pass LNG is not proposing new facilities or even changes to authorized facilities; it is proposing changes to the size of its construction workforce and the daily duration of previously authorized activities," FERC said.

"The impacts of the proposed changes to construction activities will be temporary, and mitigated to levels that will not significantly impact the affected resources," it added.

The Changes

Golden Pass is now able to increase the project workforce from 2,900 to 7,700 personnel and is authorized for peak shift construction traffic of 1,200 heavy vehicles, 1,500 passenger vehicles, and 200 buses, according to the filing.

The project also requested expansion of the set of activities that can be performed 24/7 — with 80% of this construction to be conducted during daytime hours.

The construction period for the authorizations requested would extend through Dec. 31, 2025, the filing said.
Michael Sultan, Washington

Israel, Lebanon Close In on Maritime Border Deal

Israel and Lebanon could be edging closer to a resolution of their maritime border dispute in the East Mediterranean gas basin.

Israel was scheduled to consider a proposal from Lebanon at a cabinet meeting on Wednesday led by Prime Minister Yair Lapid.

US energy envoy Amos Hochstein expressed optimism in Beirut this week that the two sides would continue to make progress and said he hoped to return to the region "to make the final arrangement.”

The US has been encouraging Israel and Lebanon to settle the dispute in a region that is well-placed to supply gas to Europe, which is seeking to reduce its dependence on imports from Russia.

Recent momentum toward a deal has been driven in part by US and Israeli concerns over Lebanese Shiite group Hezbollah's threat to attack Israel's Karish gas field unless a deal is agreed by September.

The process has also been pushed forward by the dire economic situation in Lebanon and its desire to receive deliveries of gas from Egypt under an agreement supported by the US.

Ultimately, Beirut is seeking a deal that would give it full control over its Qana offshore prospect in Lebanese Block 9 and pave the way for exploration in currently disputed waters.

Hezbollah appears to be supporting Beirut's position by providing a credible threat to Israeli oil and gas infrastructure.

"If the other side challenges us and continues their plans to produce gas from Karish in the near future, without reaching an agreement with Lebanon ... then this could mean escalation," says a senior Lebanese official.

The official emphasized that the US is aware the Lebanese government cannot exert control over Hezbollah in this regard.

Meanwhile, an Israeli diplomat confirms that Israel "has a sincere interest in reaching a resolution to the maritime issue with Lebanon, has conveyed this message, and it's now up to the Lebanese side to decide whether they are willing or able to go forward."

An agreement between Israel and Lebanon could also speed up the implementation of a US-backed agreement to deliver Egyptian gas to Lebanon to alleviate chronic power outages across the country.

Lebanon, Syria and Egypt agreed a gas supply deal in June under which Egypt would ship 650 MMcm/yr of natural gas to Lebanon via Syria.
Tom Pepper, London and Rafiq Latta


In Brief

Spot LNG Prices Take Another Leap

Northeast Asian spot LNG prices increased by $4 week-on-week to $47/MMBtu, its highest level since March, according to Energy Intelligence assessments for deliveries four to eight weeks ahead.

Spot prices in Southwest Europe were assessed $2.49 higher at $47.45/MMBtu.

Asian spot LNG prices jumped this week following an uptick in Asian buying interest for winter as well as bullish European gas hub prices, driven by new disruptions of Russian gas to Europe.

More Japanese and Korean buyers are heard to be seeking cargoes amid a heightened sense of uncertainty over possible supply disruptions from the Sakhalin-2 project in Russia’s Far East and its impact on meeting Asian winter demand.

China’s national meteorological center renewed an orange warning of a heat wave on Jul. 28, while Japan and South Korea also warned of heat waves in parts of those countries.

Asian supplies remain tight due to a prolonged industrial action at Shell’s 3.6 million ton/yr Prelude facility, while Inpex’s 8.9 million ton/yr Ichthys facility is undergoing maintenance until Aug. 5.
Created with Highcharts 9.0.0($/MMBtu)REGIONAL SPOT PRICESNortheast AsiaSouthwest EuropeAug '21Sep '21Oct '21Nov '21Dec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22020406080Energy Intelligence

Daniel Stemler, Madrid and Clara Tan, Singapore


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India43.7044.1643.7744.1543.3443.1744.6442.8144.5543.8043.0042.7243.09
Sodegaura, Japan44.3345.7645.7845.8744.3040.7845.3843.1945.2446.2343.5342.6644.50
Zeebrugge, Belgium35.4133.8033.4533.8834.9135.2634.5533.4234.4133.4435.0334.1335.13
Huelva, Spain46.7645.0844.7045.1646.2145.9945.8544.5945.7144.6946.2745.2246.29
Isle of Grain, UK31.3029.7329.4029.8030.8531.1530.5729.3730.3329.3830.9430.0631.03
Everett, US6.505.145.475.196.236.110.015.855.654.836.68----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback28. Feb14. Mar28. Mar11. Apr25. Apr9. May23. May6. Jun20. Jun4. Jul18. Jul1. Aug102030405060Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia0.0047.004.6647.00
SW Europe0.0047.458.7247.45
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.587.718.288.99
NBP, UK (futures)+1.4944.0142.5242.87
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF2.0960.7858.6958.63
Zeebrugge (Belgium)----29.6133.52
German NCG2.8260.3157.4956.85
NBP (UK)-1.7032.1433.8440.78
US Markets
US Spot Prices
Sabine Pass, Louisiana-0.247.928.169.39
Corpus Christi, Texas-0.467.347.80--
Cove Point, Maryland-0.027.427.448.35
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month-0.587.718.288.99
Second Mth-0.567.708.268.83
Third Mth-0.567.788.338.79
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaAug '21Sep '21Oct '21Nov '21Dec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22020406080Energy Intelligence