August 24, 2022

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Shell Strikes Enterprise Agreement With Australian Unions

Shell has struck an in-principle enterprise agreement with Australian unions which would pave the way to the end of an ongoing protected industrial action (PIA) at its operated floating Prelude facility off Western Australia.

A Shell spokeswoman confirmed an agreement has been reached with the Australian Workers’ Union (AWU) and Electrical Trades Union (ETU). “Our strong preference was for this to be resolved through an agreement and confident this was the best outcome,” she said. "The process to formally lift the work bans in place under the PIA is expected to be completed shortly, which will enable the facility to commence the process to prepare for a hydrocarbon restart."

The strike, which started on Jun.10 and was extended several times, was last expected to end on Sep.1. The PIA has led to a shutdown of the 3.6 million ton/yr Prelude due to work bans.

It is unclear whether there would be a change in the Sep.1 end date as the PIA needs to be formally withdrawn by the unions to Australia’s industrial relations tribunal Fair Work Commission (FWC).

The agreement has come at a time when Asian spot prices have hit record highs of $60 per million Btu due to soaring European gas hub prices and the need to meet approaching winter heating demand. Prelude typically exports four cargoes each month.

The Offshore Alliance, a partnership between AWU and Maritime Union of Australia, said its members had a meeting with Offshore Alliance and ETU Wednesday on the settlement of the bargaining claims which were secured during negotiations mediated by FWC deputy president Melanie Binet. “76 days of lawful Protected Industrial Action to secure an EBA which prevents jobs being outsourced to low-wage labor hire contractors, is a fight worth having,” it said in a Facebook post. “There has never before been an industrial battle in this country where an employer has lost $1.5 billion in production during an industrial dispute.”

The Offshore Alliance said it will be providing more details on the bargaining outcomes later in the week. It said Shell has agreed that if it increases the use of contract labor, it will not reduce the number of employees covered by the new agreement.

The FWC had earlier helped reduce the union’s outstanding bargaining claims. But Shell had not agreed to a job security provision preventing it from outsourcing operational jobs under their direct hire to subcontractors. The unions are using a recent enterprise agreement for 2022-26 reached with Inpex, the operator of the Ichthys project, as a benchmark in their negotiations with Shell.
Clara Tan, Singapore

Qatar to Invest $3 Billion in Pakistan

Qatar Investment Authority aims to invest $3 billion in Pakistan, Qatar’s Emiri Diwan said in a statement Wednesday, but did not provide any details.

The statement came after Pakistan Prime Minister Shehbaz Sharif met Emir Sheikh Tamim bin Hamad al-Thani and other officials in Doha to hold discussions on trade, investment and economic cooperation. However, neither side made any comments on additional LNG supplies that Pakistan desperately needs to keep lights on.

Sharif, along with key members of his cabinet and senior officials, reached Doha, its largest supplier of LNG (see graph), for a two-day visit Tuesday.

Giving context for his visit to Doha, Sharif had said in a Twitter post Monday that geopolitical tensions have affected supply chains and rising energy and food prices have added more woes which calls for exploring new avenues for cooperation between the two countries.

Tough Tenders

Pakistan has been witnessing load shedding due to gas rationing as a three-fold jump in spot LNG prices on year has priced it out of the market.

Its last four consecutive tenders for cargoes went largely unanswered amidst tight markets and also due to doubts about the country’s capacity to pay since it is facing a balance of payments crisis.

Earlier this month, the country came up with a fresh tender for 72 cargoes, or an average of one cargo a month over a 6-year period.

Created with Highcharts 9.0.0(million tons)PAKISTAN'S LNG IMPORTSQatarNigeriaUnited StatesEgyptEquatorial GuineaUnited Arab EmiratesAngolaAlgeriaOmanOthers201520162017201820192020202120220246810Source: Kpler

Other Help

Apart from Qatar, Saudi Arabia has extended deferred payment on petroleum products to Pakistan, and the UAE is investing $1 billion in a bid to help Pakistan battle its current economic crisis.

The investment pledges by the Gulf nations will help Pakistan revive a loan facility from the International Monetary Fund which had asked Islamabad to shore up its foreign exchange reserves to $10 billion. Reserves stood at just $7.9 billion for the week ended Aug. 12, barely enough for six weeks of imports.
Rakesh Sharma, New Delhi

Russia's LNG Production Keeps Rising

Russia produced 19.1 million tons of LNG in the first seven months of 2022, up 9.6% from the same period last year, the federal state statistics service said on Wednesday.

The country is on track to post full-year growth from around 30 million tons produced in 2021, without any considerable capacity additions and despite the geopolitical and trade risks faced by Russia following its Feb. 24 invasion of Ukraine.

Russian LNG doesn’t look as toxic as oil or pipeline gas at this stage, which helps the country increase production this year, mainly contributed to by the launch of the 900,000 tons per year Train 4 at Novatek’s Yamal LNG plant in the Arctic in May 2021 and the plant’s overall overperformance this year.

The country’s long-term plans to significantly expand LNG exports are however clouded by the exodus of key investors, lenders and contractors as well as by the EU sanctions that ban the export and transit of key liquefaction equipment for Russian LNG plants.

July Production

In July, Russia produced 2.3 million tons of LNG, up 25% from the same month last year, the state statistics service said.

That is mainly due to low production in July 2021 when the Gazprom-controlled Sakhalin-2 plant stopped operations for maintenance that lasted more than a month until mid-August.

Last year’s major shutdown allowed the project to skip annual summer maintenance this year and contribute to Russia’s overall year-to-date production growth.

Compared with June levels, Russia’s LNG production decreased 7%, according to the state statistics service.

That can partly be attributed to unusually hot weather in the Arctic possibly affecting the July output of Yamal LNG, which in June produced well above its nameplate capacity of 17.6 million tons/yr, according to sources.

Yamal Stops Supplies to GM&T

Yamal is understood to have stopped long-term contract sales to Gazprom Marketing & Trading Singapore (GM&T Singapore) this week.

That means Yamal will sell these volumes on spot via shareholders, which include France’s TotalEnergies and China National Petroleum Corp. (CNPC), at a time of rallying spot prices.

The Kremlin imposed blocking sanctions on GM&T in May but allowed Yamal to keep supplying the trader under its 2.9 million ton per year contract within 90 days which expired this week.

GM&T Singapore is a subsidiary of Germany-based Securing Energy for Europe (Sefe), formerly known as Gazprom Germania, which was controlled by Russia’s Gazprom before being taken over by Berlin in April. Moscow imposed sanctions on Sefe and its subsidiaries in response to the takeover.

Russia’s waiver for Yamal supplies to GM&T Singapore was aimed to ensure stable supplies to India, whose importer Gail has an offtake contract with GM&T Singapore for the same 2.9 million tons/yr from Yamal.

But GM&T Singapore preferred to sell the volumes on spot, taking advantage of the record high prices, which reportedly allowed it to pay fines to Gail for cancelled cargoes and still make a profit.

Sakhalin-2 Cancels Cargo

Separately, the new operator of Sakhalin-2, Sakhalinskaya Energiya, or Sakhalin Energy, has scrapped a shipment to at least one Asian customer due to payment issues as well as delays signing revised contracts, Bloomberg reported Wednesday citing traders.

It also told customers to pay in rubles or other currencies if sanctions lead to issues with payment in dollars, according to a Bloomberg report.

Some buyers in Japan, the key market for Sakhalin-2, have reportedly re-signed the contracts with the new operator, which is understood to have offered the same terms as in the contracts with the previous operator, Bermuda-registered Sakhalin Energy Investment Co.

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

Staff Reports

Guangdong Energy Progresses With Huizhou Terminal

Guangdong Energy Group has completed the lifting of roofs for three storage tanks at its Huizhou LNG terminal project this week.

As a key oil and gas infrastructure project of China’s 13th Five-Year Plan, the Huizhou LNG terminal project began construction in July 2021. The first phase of the project has three LNG storage tanks, each with an effective volume of 200,000 cubic meters.

The first phase, with an investment of 6.6 billion yuan ($962 million), will involve construction of the three LNG storage tanks and related ancillary facilities, as well as one berth for receiving and discharging LNG vessels of 80,000 to 266,000 cubic meters, with a maximum annual LNG receiving capacity of 6.1 million tons. 

The LNG terminal project is due to be put into operation by the end of 2023. The second phase of the project will be launched as soon as possible. When completed, its maximum annual handling capacity can be increased to 10 million tons.

Guangdong Energy Group recently signed a 20-year deal with NextDecade for 1 million tons/yr of supply from its Rio Grande project in Brownsville, Texas in the US.

Formerly known as Guangdong Yudean Group, Guangdong Energy Group is the largest power producer in southern Guangdong province and is partly owned by the Guangdong State-owned Assets Supervision and Administration Commission (SASAC), which has broad control over its strategy and operation. The company is mandated to ensure local energy security.

China was the largest LNG importer in 2021, according to Kpler, but is running behind Japan once again in year-to-date 2022. Nevertheless, the Chinese LNG import infrastructure buildout continues.
Staff Reports, Beijing

Angola Increasing LNG Exports to Spain

Spain is scheduled to receive two LNG cargoes from Angola in September, doubling the volumes that it has received from the Sub-Saharan African country during the first eight months of the year.

Angola, like many suppliers, has pivoted heavily toward Europe in 2022 (see graph below).

The Sonangol Sambizanga and the Sonangol Benguela, each with 160,500 cubic meters of capacity, are set to deliver cargoes from Angola’s Soyo plant to Spain on Sep. 2 and Sep. 10, respectively, according to a Spanish cargo arrival schedule obtained by Energy Intelligence.

The former will unload its cargo at the Cartagena terminal, while the latter will deliver to Bilbao.

According to the arrival schedule, the cargo delivered by the Sonangol Sambizanga will be for the Spanish subsidiary of Italian major Eni, while the buyer of the cargo delivered by the Sonangol Benguela is UK major Shell, with the trading arm of France’s TotalEnergies also involved in the trading of the cargo.

Eni and TotalEnergies each hold a 13.6% stake in project operator Angola LNG.

Created with Highcharts 9.0.0(million tons)ANGOLA'S LNG EXPORTSAsiaEuropeAmericasAfrica2016201720182019202020212022012345Source: Kpler

Spanish Imports

Spain has only received one cargo from Angola so far this year, which was also delivered by the Sonangol Sambizanga on Jul. 29.

Last year, Spain imported four cargoes from Angola, totaling 0.27 million tons of LNG, with all of them being delivered in November and December, according to data by commodity analytics firm Kpler.

In fact, Spain imported the most Angolan LNG in Europe in 2021, followed by the Netherlands, which imported 0.20 million tons and Greece with 0.07 million tons. No other European country received LNG from Angola last year.

European Imports Rising In 2022

However, this year European imports of Angolan LNG have changed radically.

France has already received 0.47 million tons from the African nation, followed by the UK with 0.27 million tons and the Netherlands with 0.20 million tons, data from Kpler showed.

Italy, Belgium and Turkey also imported LNG from Angola this year.

Total Angolan LNG exports to Europe have already reached 1.37 million tons so far this year, a new all-time high, up from 0.61 million tons during the whole of last year.
Daniel Stemler, Madrid


In Brief

Australia Awards CCS Permits

Australia has awarded two offshore GHG storage permits and invited bids for new offshore oil and gas exploration acreage.

The announcements show that the new government is trying to strike a balance between emissions reduction and energy security.

Japan's Inpex, France's TotalEnergies and Australia's Woodside Energy jointly won a permit for a GHG storage area in the Bonaparte Basin off the coast of the Northern Territory.

Inpex will hold a 53% operated interest in the block. The company said that its Ichthys LNG plant would be a "natural user of this CCS solution."

Woodside also won a GHG storage permit in the Browse Basin, offshore Western Australia.

The permits are the first that Australia has awarded for GHG storage since 2014.

"I want to see the industry convert its ambition for CCS into reality. I want the industry to convert its talk about CCS into action," said Resources Minister Madeleine King.

Separately, the government if offering about 47,000 square kilometers in 10 areas for offshore oil and gas exploration in the Bonaparte, Browse, Carnarvon and Gippsland basins.
Marc Roussot, Singapore


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India56.8657.3256.9257.3156.5256.3457.7956.0157.7056.9756.1955.9156.25
Sodegaura, Japan57.5358.9258.9459.0357.5054.1358.5456.4358.4159.3856.7555.9257.67
Zeebrugge, Belgium49.6748.0947.7248.1649.1849.5248.8147.7248.6847.7349.3048.4249.39
Huelva, Spain72.9671.1770.7371.2672.3772.1471.9770.6771.8470.7672.4371.3272.44
Isle of Grain, UK59.0257.3356.9257.4058.5258.8558.2156.9557.9656.9558.6257.6758.71
Everett, US7.826.646.916.677.597.490.017.247.076.377.98----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback21. Mar4. Apr18. Apr2. May16. May30. May13. Jun27. Jun11. Jul25. Jul8. Aug22. Aug10203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia0.0060.150.1560.15
SW Europe0.0073.6611.3673.66
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)--
NBP, UK (futures)--------
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF--------
Zeebrugge (Belgium)--------
German NCG--------
NBP (UK)--------
US Markets
US Spot Prices
Sabine Pass, Louisiana-0.499.289.779.51
Corpus Christi, Texas-0.398.929.318.91
Cove Point, Maryland-0.568.769.328.44
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month--
Second Mth--
Third Mth--
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaSep '21Oct '21Nov '21Dec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '220255075100Energy Intelligence