August 16, 2022

WWW.ENERGYINTEL.COM

Gazprom: Winter Gas Prices May Go Through Roof

European spot gas prices could exceed $4,000 per thousand cubic meters this winter — or more than $110 per million Btu — Russian gas giant Gazprom said on Tuesday.

Spot prices hit new highs of more than $2,500/Mcm this week and could rise at least another $1,500/Mcm, if the current trend continues, Gazprom said in a statement that described its price outlook as "conservative."

The company said Europe still needs to inject 23.8 billion cubic meters of gas into storage if it wants to match the stockpile it had at the start of the 2019-20 winter heating season, which equated to 97% of storage capacity.

Meanwhile, EU data shows that the 27-nation bloc is on track to reach its 80% storage target by November, as injections into storage continue despite the current tight market. EU gas stocks are currently just under 75% full.

Futures Price Hits New High

The front-month September Dutch TTF gas futures contract set a new intraday high of €251 per megawatt hour — or $2,630/Mcm ($75/MMBtu) — on Tuesday but drifted lower to end the day at $223 for a gain of just 1.3% versus Monday's close.

EnergyScan analysts attribute the surge in spot gas prices over the past several days to high levels of storage injection activity in a relatively illiquid market.

European gas stocks continue to grow thanks to robust LNG imports, and high volumes of pipeline gas coming in from Azerbaijan and Norway, but the limited pipeline flows from Russia are keeping prices high, according to EnergyScan.

Gazprom has helped drive gas prices up by delivering less gas to Europe. The government-controlled company denies that it is deliberately withholding supply and says the reduced flows are a consequence of European sanctions against Russia.

Some observers have suggested that Gazprom might be trying to sabotage the EU's storage injection campaign to persuade European governments to ease sanctions against Russia and dial down their support for Ukraine.

Gazprom's Exports Sink

In the first half of August, Gazprom exported 1.76 Bcm, or 117 MMcm/d to Europe (excluding Turkey), Energy Intelligence calculates based on gas transmission data.

The Nord Stream pipeline to Germany operated at only 20% of capacity and the Ukrainian transit route at 55% of available capacity.

However, deliveries to Europe via the Turk Stream pipeline are now running at full capacity after Gazprom started to send additional volumes to Hungary last week.

Gazprom's exports to Europe (including Turkey) and China totaled 3.2 Bcm, or 213 MMcm/d, in the first 15 days of August, down 59% from the same period of last year, according to Gazprom's data.

Supplies to China remain stable and above contractual levels, Gazprom said, which suggests they now exceed 41 MMcm/d, compared with 27 MMcm/d a year ago.

Germany Secures LNG Supplies

Germany — Europe's biggest gas consumer — signed a memorandum on Tuesday with gas importers Uniper and RWE Supply & Trading to keep two floating LNG terminals at Brunsbuettel and Wilhelmshaven fully supplied this winter.

The two companies will team up with EnBW Energie Baden-Wurttemberg and Verbundnetz Gas (VNG) to purchase the LNG.

Economy Minister Robert Habeck, who signed the memorandum was quoted as saying that the deal was part of Germany's efforts "to make ourselves independent and less susceptible to blackmail from [Russian President Vladimir] Putin."

Germany's gas consumption fell by some 25% year on year in June, according to power industry association BDEW. Germany received less gas from Russia in June as Gazprom cut Nord Stream flows to 40% of capacity in mid-month.

In the first half of this year, Germany's gas consumption fell by 15% year on year, reflecting mild spring weather, high gas prices, a weaker economy and consumers' efforts to save energy.

The 27 EU countries are seeking to reduce their gas consumption by 15% from August through March of next year.

Created with Highcharts 9.0.0(MMcm/d)RUSSIAN GAS FLOWS VIA KEY ROUTES TO EUROPENord StreamUkrainian TransitTurk Stream to Europe4. Jul11. Jul18. Jul25. Jul1. Aug8. Aug15. Aug020406080Source: Gazprom, GTSOU, Nord Stream AG, Entsog, Energy Intelligence
Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia0.0051.005.6851.00
SW Europe0.0053.45-1.9553.45
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)--
NBP, UK (futures)--------
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF--------
Zeebrugge (Belgium)--------
German NCG--------
NBP (UK)--------
US Markets
US Spot Prices
Sabine Pass, Louisiana0.719.278.567.88
Corpus Christi, Texas0.518.808.297.64
Cove Point, Maryland0.658.267.617.50
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month--
Second Mth--
Third Mth--
For more coverage of the Ukraine crisis, visit Ukraine Crisis: Energy Impact
Staff Reports

German Utilities Ink Deal on LNG Supply To FSRUs

Germany’s federal economy ministry and German utilities Uniper, RWE and EnBW have signed a memorandum of understanding to supply LNG to the future floating storage and regasification units (FSRUs) in Brunsbuttel and Wilhelmshaven.

Uniper, RWE, ENBW and its subsidiary VNG said they are committed to fully utilize the terminals from the beginning of 2023 until Mar. 31, 2024. Combined, the FSRUs will have an annual regasification capacity of 12.5 billion cubic meters.

The two FSRUs will be operated by Uniper and RWE on an interim basis until a special purpose entity takes over operations, according to a statement by the ministry.

“The MoU offers the necessary security that these FSRUs will be fully utilized for the next two winters, and thus make a maximum contribution to security of supply in Germany and Europe,” said Robert Habeck, federal minister for economic affairs and climate action.

Both Uniper and RWE already have various long-term LNG supply contracts and are also active on the spot market. Meanwhile, EnBW is set to start receiving US LNG from the beginning of 2024 through a long-term contract with US exporter Venture Global, according to data by Kpler.

Four FSRUs

In May, RWE and Uniper secured four FSRUs on behalf of the German government, as the country accelerated its plans to cut its dependence on Russian pipeline supplies following the Ukraine invasion.

RWE optioned two FSRUs from Norwegian shipowner Hoegh LNG, each with 170,000 cubic meters of capacity, while Uniper obtained the other two FSRUs from Greek shipowner Dynagas, both with 174,000 cubic meters of capacity.

The ministry's statement did not specify which two of the four FSRUs will be positioned at Brunsbuttel and Wilhelmshaven.

Daniel Stemler, Madrid


In Brief

Prelude Extends Strike Once Again

An ongoing strike at Prelude floating LNG facility off Western Australia has been extended by another week to Sep. 1, operator Shell said.

The protected industrial action was last expected to end on Aug. 25 after it started on Jun. 10. Production of the 3.6 million ton/yr facility has been suspended due to work bans and is expected to hit Shell's LNG production in the third quarter.

Prelude typically exports four cargoes every month. The extended Prelude suspension comes amid an already tight market featuring spot LNG prices that are now hovering at the $50/MMBtu level in Asia.

The strike has led Shell to postpone a planned turnaround originally due from this fall to July 2023 at the earliest. Shell's application to lift the strike and impose a cooling period to prepare for the turnaround has been rejected by Australia's workplace tribunal Fair Work Commission.

Shell is understood to have been active in bidding for spot cargoes to supply to its term customers in Asia.

Created with Highcharts 9.0.0('000 tons)PRELUDE'S LNG EXPORTS Aug'20Sep'20Oct'20Nov'20Dec'20Jan'21Feb'21Mar'21Apr'21May'21Jun'21Jul'21Aug'21Sep'21Oct'21Nov'21Dec'21Jan'22Feb'22Mar'22Apr'22May'22Jun'22Jul'22Aug'22050100150200250300350Source: Kpler

Clara Tan, Singapore

Spot LNG Prices Keep Rising in Europe, Asia

Northeast Asian spot LNG prices jumped by $5.50 to $51/MMBtu, according to World Gas Intelligence assessments for deliveries four to eight weeks ahead.

Spot prices in Southwest Europe were assessed $8.70 higher at $53.45/MMBtu. The UK National Balancing Point (NBP) day-ahead price was assessed $12.89 higher at $45.72/MMBtu, while the September front-month NBP ICE contract was up $8.07 at $50.96/MMBtu.

Netbacks for Mideast sellers in Asia were about $2.45/MMBtu lower than in Southwest Europe, while UK/Belgian netbacks were $5.42/MMBtu lower than in Asia.

Asian spot LNG prices soared once more mostly following stronger European gas hub prices as regional demand remains tepid. LNG inventories continue to be comfortable to meet high power needs resulting from an extended heat wave in Northeast Asia.

In China, a red heat wave warning has been in place since Aug. 13. with temperatures exceeding 40ºC earlier this week and are set to remain between 35ºC and 39ºC in most parts of the country, according to the National Meteorological Centre.

Created with Highcharts 9.0.0($/MMBtu)REGIONAL SPOT PRICESNortheast AsiaSouthwest EuropeSep '21Oct '21Nov '21Dec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22020406080Energy Intelligence

Daniel Stemler, Madrid and Marc Roussot, Singapore


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India47.7548.2047.8248.1947.4347.2548.6546.9348.5747.8647.1046.8447.17
Sodegaura, Japan48.4549.8049.8249.9048.4245.1449.4347.3949.3150.2447.7046.8848.59
Zeebrugge, Belgium45.0843.5143.1543.5844.6044.9344.2343.1444.1043.1544.7243.8344.80
Huelva, Spain52.7751.1550.7751.2352.2452.0351.8850.6951.7650.7852.3051.3052.31
Isle of Grain, UK42.3240.7740.4240.8441.8742.1741.5840.4241.3540.4341.9641.1042.05
Everett, US7.506.276.566.317.267.160.016.906.736.007.66----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback14. Mar28. Mar11. Apr25. Apr9. May23. May6. Jun20. Jun4. Jul18. Jul1. Aug15. Aug102030405060Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia0.0051.005.6851.00
SW Europe0.0053.45-1.9553.45
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.609.338.737.83
NBP, UK (futures)+2.3653.3450.9843.08
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF1.0767.0866.0256.63
Zeebrugge (Belgium)----39.5330.98
German NCG-0.6764.2764.9454.52
NBP (UK)-2.0543.1745.2234.49
US Markets
US Spot Prices
Sabine Pass, Louisiana0.719.278.567.88
Corpus Christi, Texas0.518.808.297.64
Cove Point, Maryland0.658.267.617.50
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month0.609.338.737.83
Second Mth0.609.318.717.83
Third Mth0.589.378.797.90
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaSep '21Oct '21Nov '21Dec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22020406080Energy Intelligence