August 31, 2022

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Gazprom Halts Nord Stream Flows for Maintenance

Gazprom stopped flows of Russian gas to Germany via the Nord Stream pipeline on Wednesday for three days of maintenance work.

The shutdown had been announced beforehand, causing a sharp rise in European gas prices last week, with the front-month Dutch TTF gas futures contract soaring well above €300 per megawatt hour.

Prices retreated somewhat at the beginning of this week, reflecting relatively high gas storage levels in Europe and support within the EU for intervention in the market to curb sky-high energy prices.

There was an early uptick on Wednesday when Nord Stream gas flows ceased, but prices resumed their decline later in the session, with the October Dutch TTF futures contract ultimately closing almost 10% lower at €239/MWh ($70.4/million Btu).

Eni said Gazprom had told it that gas deliveries to the Italian company would be reduced to 20 million cubic meters per day on Wednesday from 27 MMcm/d in recent days.

Supply Concerns

There are concerns that state-controlled Gazprom may not resume gas supplies via Nord Stream after the scheduled three-day outage, with Moscow perhaps opting instead to cut off supplies to try to undermine Europe's support for Ukraine in its war with Russia.

Gazprom has said that the pipeline will resume operations on Saturday morning, as long as no problems are encountered during the maintenance work.

The Russian gas giant is checking equipment at Nord Stream's Portovaya compressor station in Russia, including its only operational gas turbine.

Under normal circumstances the compressor station would have five working turbines, with a sixth held in reserve as a backup.

However, Gazprom says western sanctions have prevented crucial maintenance and repairs of the turbines by the German company Siemens Energy. European politicians have dismissed this as a flimsy pretext for Russia to disrupt gas supplies to the region.

Prior to the current closure, Gazprom had already reduced Nord Stream gas flows to just 33 MMc/d, or 20% of the line's capacity. Gazprom has indicated that flows will return to this reduced level upon successful completion of the maintenance.

More Gas for Hungary

While Gazprom has restricted its overall gas supplies to Europe, the company has shown willingness to supply gas to EU member states that have taken a more lenient stance toward Russia since its troops invaded Ukraine in February.

Hungarian Foreign Minister Peter Szijjarto said this week that Gazprom has agreed to supply up to 5.8 MMcm/d of additional gas to Hungary in September.

While most EU states support the 27-nation bloc's plans to reduce dependence on Russian oil and gas, Szijjarto said Russian gas is crucial to Hungary's energy security.

The additional gas will be supplied to Hungary via the Turk Stream pipeline and onshore pipelines running from Turkey to Bulgaria and Serbia.

In August, Gazprom supplied up to 2.6 MMcm/d in additional gas to Hungary, over and above volumes set out under its long-term supply contract with the Russian company.

Record Profits

Gazprom's profits have soared as a result of the high prices caused by the restriction of Russian gas exports to Europe.

The company posted a record net profit of 2.5 trillion rubles ($41.4 billion) in the first half of 2022, Chief Financial Officer Famil Sadygov said late on Tuesday.

That exceeds the 2.09 trillion ruble net profit posted for the all of last year, which itself was an annual record driven by a sharp increase in export prices.

The strong financial results and the significant cash reserves the company has accumulated have prompted its board to recommend the payment of its first ever interim dividend, Sadygov said.

The board has proposed paying a total of 1.2 trillion rubles in interim dividends, equal to 50% of adjusted net profit for the first half of the year.

Gazprom did not pay a 2021 dividend, instead paying increased taxes to the government and retaining the rest of its earnings for reinvestment.
Staff Reports

Mitsubishi Approved to Keep Sakhalin-2 Stake

Japan’s Mitsubishi has joined compatriot Mitsui in keeping its stake in the Sakhalin-2 upstream and LNG project in Russia’s Far East.

Tokyo is keen to keep equity participation and long-term LNG offtake contracts in Sakhalin, which it regards important for Japan’s energy security. Japan is the main sales market for Sakhalin-2. The project accounts for around 9% of Japan’s LNG imports.

The Russian government has approved Mitsubishi to get 10% in the project’s new operator, Russia-registered Sakhalin Energy LLC, the same stake it had in the previous operator, Bermuda-registered Sakhalin Energy Investment Co., according to a document published by Moscow on Wednesday.

The government earlier approved Mitsui to keep its 12.5% stake in the project.

Mitsubishi will hold its stake in Sakhalin Energy via the DGS Japan Co. subsidiary, according to the document. In Sakhalin Energy Investment Co., it held the stake via the Netherlands-registered subsidiary Diamond Gas Sakhalin.

The new operator was set up in early August, in line with a presidential decree of late June. The decree stipulated an option for the foreign shareholders of Sakhalin-2 to apply for their respective stakes in the new operator. The deadline is Sep. 4.

The only other foreign shareholder, Shell, is unlikely to keep its 27.5% minus one share stake in Sakhalin-2. Russia’s state-controlled Gazprom has 50.1% plus one share in Sakhalin-2.

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


In Brief

CPC Taiwan Hikes LNG Prices

State-owned CPC Taiwan has hiked its domestic rates for natural gas supply to power generation companies.

The hike will be 5%, effective Sept. 1, a company spokesperson stated, citing the impact of rising global LNG prices on the world's fifth-largest LNG importer.

As a result, state-owned Taiwan Power and independent power producers (IPPs) will pay NT$19.39 (US$0.638) per cubic meter, up from NT$18.47/cm in August. Industrial users will continue to pay NT$12.78/cm for LNG from CPC and households will continue to be charged NT$12.09/cm.

CPC already hiked prices 5% last month.

The CPC spokesperson said that the firm forecasts that import prices will continue to rise in September and added that "LNG prices should have a major adjustment," but said the utility will only raise rates by 5% for power generation customers "in accordance with the government`s policy of maintaining price stability and supporting industry and the people`s livelihood."

The CPC spokesperson said the rate hike will add NT$5.5 billion in revenue. According to CPC data, the average cost of LNG to the state-owned utility rose 5.34% in August to NT$16.52 per cubic meter from NT$15.68/cm in July.

Created with Highcharts 9.0.0TAIWAN'S LNG IMPORTS YEAR-TO-DATE 2022(million tons)AustraliaAustraliaQatarQatarUnited StatesUnited StatesPapua New GuineaPapua New GuineaRussian FederationRussian FederationIndonesiaIndonesiaMalaysiaMalaysiaOmanOmanPeruPeruNigeriaNigeriaEquatorial GuineaEquatorial GuineaUnited Arab EmiratesUnited Arab EmiratesSource: Kpler

Dennis Engbarth, Taipei

QatarEnergy Plans Blue Ammonia Plant

QatarEnergy plans to build the world’s largest blue ammonia plant, the company’s CEO and state minister for energy Saad al-Kaabi said during a signing ceremony on Wednesday. The agreements for the construction of Ammonia-7 Project were signed by QatarEnergy’s affiliates, QatarEnergy Renewable Solutions and Qatar Fertiliser Company.

The project was awarded to Germany’s Thyssenkrup and Mideastern construction company Consolidated Contractors Company. They will both be the contractors for the project.

The $1.156 billion plant is expected to come online in the first quarter of 2026 and will produce 1.2 million tons/yr of blue ammonia, al-Kaabi said. It will capture and sequester 1.5 MM tons of CO2/yr via the ammonia manufacturing process. The plant will be located in Mesaieed Industrial City and will be operated by QAFCO as part of its integrated facilities.

Part of Qatar's sustainability strategy is to reduce GHG emissions through the deployment of CCS technology in order to capture over 11 million tons/yr of CO2 by 2035.

Last week, QatarEnergy awarded Samsung C&T with an engineering, procurement and construction contract to build two mega solar power plants what will generate a total of 875 Mw of renewable electricity.
Yousra Samaha, Dubai


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India61.2461.7261.3061.7160.8960.7162.2160.3562.1261.3560.5460.2660.61
Sodegaura, Japan61.8763.3263.3363.4361.8458.3462.9260.7262.7963.8061.0660.2062.02
Zeebrugge, Belgium47.6246.0445.6846.1147.1347.4746.7645.6846.6345.6947.2546.3747.34
Huelva, Spain54.9753.3652.9853.4354.4454.2454.0852.9053.9652.9954.5053.5054.51
Isle of Grain, UK46.3644.7944.4344.8645.9046.2145.6144.4345.3844.4446.0045.1246.08
Everett, US7.456.256.536.297.227.120.016.866.695.987.61----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback28. Mar11. Apr25. Apr9. May23. May6. Jun20. Jun4. Jul18. Jul1. Aug15. Aug29. Aug10203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia0.0064.58-0.4264.58
SW Europe0.0055.66-5.2455.66
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.099.139.049.33
NBP, UK (futures)+1.0553.4952.4463.73
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-6.8368.1474.9786.31
Zeebrugge (Belgium)-8.7642.4851.24--
German NCG-4.7569.1173.8687.19
NBP (UK)-5.2547.2152.4559.16
US Markets
US Spot Prices
Sabine Pass, Louisiana-0.048.948.989.28
Corpus Christi, Texas-0.058.468.518.92
Cove Point, Maryland-0.128.388.508.76
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month0.099.139.049.33
Second Mth0.099.199.109.30
Third Mth0.099.339.249.37
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaSep '21Oct '21Nov '21Dec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Sep '…0255075100125Energy Intelligence