September 16, 2022

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Russian LNG Mini Plant Seeks Asian Investors

Asian investors have been offered equity and offtake in a newly proposed 160,000 ton per year mini plant in the Russian Arctic, dubbed Arkhangelsk LNG.

The developer, Russian industrial and engineering company Himmash-Apparat, is now in talks with Chinese and Indian, as well as Russian investors, and is ready to offer a five-year offtake contract for up to 80,000 ton/yr, CEO Sergei Agaurov told Energy Intelligence on the sidelines of the St. Petersburg International Gas Forum this week.

The focus on Asian investors is quite in line with Moscow’s strategy to deepen cooperation with non-Western countries that haven’t joined international sanctions against Russia over its invasion of Ukraine.

Himmash-Apparat now develops the project in a consortium with a local company called Arkhangelsk LNG and plans to invite new investors on a parity basis. It seeks to keep operational control over the project, Agaurov said.

The company plans to complete talks with investors in some 18 months, according to Agaurov.

The project is scheduled to launch two trains in 2025 and 2026.

Capex is now estimated at 4.5 billion rubles ($75 million), but Himmash-Apparat may adjust it thanks to the potential synergy from production of part of the equipment at affiliated facilities, Chief Process Engineer Pavel Guskov said.

Target Markets

Located in the town of Novodvinsk, in the Arkhangelsk region in northwestern Russia, Arkhangelsk LNG will primarily focus on the domestic market where it plans to supply off-grid heat and power plants as well as LNG to fuel mining trucks, railroad trains and sea and river vessels.

In terms of exports, the project would have normally focused on supplies to the closer European market (see map). But in the current reality of Russia’s bitter divorce with the West that is quite problematic.

To Asia, LNG could be supplied in tank containers via the Northern Sea Route (NSR), Agaurov said.

The project looks in line with Russia’s plans to strengthen ties with Asian countries, develop infrastructure for diversification of gas exports and increase domestic gas consumption as Europe plans to phase out Russian pipeline gas imports by 2027. The project would also help develop the strategic Arctic region and transportation via the NSR.

Chinese Technology

While Russia’s large LNG projects risk delays and cancellation due to the EU ban on exports of key liquefaction equipment for Russian LNG projects, small-scale plants look safe because Moscow has its own technology for mini plants.

However, Himmash-Apparat is considering using Chinese technology, which might appease Chinese investors. It is now in talks with four license holders from the Asian country, Agaurov said.

Himmash-Apparat is considering either nitrogen cycle or a mixed refrigerant liquefaction process for the plant, Guskov said. The plant’s nameplate capacity will be 150,000 tons/yr, but it will be able to produce up to 160,000 tons/yr, he said.

Project Status

Arkhangelsk LNG completed a prefeasibility study in February this year and has a firm agreement with the feedstock pipeline gas supplier, state-run Gazprom, to connect the plant to the gas transmission system.

The project will need some 210 million cubic meters of feedstock gas, depending on the technology.

Himmash-Apparat plans to complete the pre-design stage next April and start construction work in the third quarter of 2023.

Russia’s Mini Plants

Arkhangelsk LNG is one of dozens of small-scale LNG projects in Russia, which might get more attention from investors while large projects face technology and investment problems due to sanctions.

Himmash-Apparat joined the Arkhangelsk LNG project earlier this year. Its consortium partner, the Arkhangelsk LNG company, had initially planned a smaller facility of 12,000 tons/yr.

Russian now has 17 operational small-scale LNG plants with a combined capacity of 248,000 tons/yr and 14 plants in development stage with total capacity of another 312,000 tons/yr, according to the Russian LNG Map report by a think tank led by National LNG Association expert Alexander Klimentyev.

Russia’s large-scale capacity totals around 33 million tons/yr, following the recent launch of Gazprom’s 1.5 million ton/yr Portovaya LNG facility in northwestern Russia.

Arkhangelsk LNG

lng220916_Russia_Arkhangelsk_LNG.svg


Staff Reports

New Dutch LNG Import Terminal Starts Supplying Gas

A new LNG import terminal in the Netherlands has started feeding gas into the country's grid.

Grid operator Gasunie told Energy Intelligence the EemsEnergy LNG terminal in the northern port city of Eeemshaven started supplying gas into the grid on Sep. 14.

Some 5.5 million cubic meters per day of gas flowed into the grid from the terminal on Sep. 15, according to data from Entsog, the European network of gas grid operators.

Renominations were booked at around 16 MMcm/d for Sep. 16, with physical flows recorded as high as 0.93 MMcm per hour during the day.

The first LNG import cargo — carried by the Shell-chartered 173,400 cubic meter Murex vessel — arrived on Sep. 8. The cargo was loaded at Cheniere’s Sabine Pass terminal in the US.

The 8 Bcm/yr EemsEnergy terminal, operated by Gasunie, is made up of two floating storage and regasification units (FSRUs) — the Golar Igloo and the Eemshaven LNG.

All of the terminal's capacity has been sold to Shell, Czech utility CEZ and French utility Engie.

Gasunie says the terminal is expected to be operating at full capacity by the end of November or the beginning of December.

Two other LNG cargoes carried by the Shell-chartered 170,000 cubic meter Methane Becki Anne and the Cheniere-chartered 174,000 cubic meter Gaslog Georgetown, are expected to offload their cargoes in Eemshaven on Sep. 25 and Sep. 19 respectively, according to ship-tracking data from analytics firm Kpler.

The Methane Becki Anne loaded its cargo at the Elba Island terminal in the US, while the Gaslog Georgetown loaded at the Sabine Pass terminal.

The Netherlands is also expanding the regasification capacity of its 12 Bcm/yr Gate LNG import terminal in the port of Rotterdam by an additional 4 Bcm/yr to help reduce the country's dependence on Russian pipeline gas imports.

Dutch gas storage capacity was 84.78% full as of Sep. 14, according to the latest data available from Gas Infrastructure Europe — exceeding the EU storage target of 80% full before the start of winter.

The Netherlands imported 3% more natural gas year on year in the first half of 2022 for a total of 20.35 billion cubic meters, according to Statistics Netherlands.

LNG imports made up 8.2 Bcm of that total, a 57% year-on-year increase, with most of the cargoes coming from the US and Russia.

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

Taipower to Invest $18B to Decentralize and Bolster Power Grid

The world's sixth largest LNG importer is moving toward a “distributed model” grid to bolster its resiliency.

Five, mainly LNG-fueled, power plants in Taiwan will soon directly supply electricity to high-technology industrial zones under a 10-year US$18-billion plan to revamp the island's national power grid.

Taiwan saw record LNG imports of 19.8 million tons in 2021 and is on pace to beat that total in 2022, according to Kpler.

The new grid plan was announced by state-owned Taipower on Sep. 15.

No More Blackouts

Acting Taipower chairman and deputy economics minister Vincent Tseng Wen-sheng told reporters at Taipower's Taipei City headquarters that the plan, which received Cabinet approval late last month, would ensure that “no single incident will cause widespread blackouts.”

At present, Taipower's national grid features three 354 kilovolt (kV) north-south trunk lines and three ultra-high voltage substations located in the island's north, central and south, through which all power flows and is retransmitted. A trip caused by human error at the Lungchi ultra-high voltage substation on Mar. 3 triggered nationwide blackouts and, not for the first time, brought the vulnerability of this highly centralized system to public and political attention.

Premier Su Tseng-chang promised to submit a plan to the national Legislature to avoid any further such incidents by Sep. 30, said Taipower's Tseng, who added that the program will "bolster power grid resiliency" through adoption of a distributed structure, accelerated upgrading of basic systems and equipment and strengthening of defensive or protection systems.

Tseng said the scheme represented a sea change in the operating logic of Taiwan's electricity system from the past focus on centralization for efficiency. The new scheme moves over to a “distributive model” for resilience and to prepare for a rising share of variable renewable power sources in the island state's transition to net carbon neutrality by 2050 when 60-70% of power is expected to come from renewable sources.

A key component of the scheme will be direct transmission links from five Taipower power plants, mostly LNG-fueled generators, to high technology and industrial parks.

Created with Highcharts 9.0.0TAIWAN LNG IMPORTS YTD(million tons)AustraliaAustraliaQatarQatarUnited StatesUnited StatesPapua New GuineaPapua New GuineaRussian FederationRussian FederationIndonesiaIndonesiaMalaysiaMalaysiaOmanOmanOthersOthersSource: Kpler
Grid Logic

Taipower President Wang Yao-ting told reporters that a combined 14.5 GW, or about one-third of Taipower's total installed capacity, will be directly allocated to large-scale industrial users and thus reduce pressure on the three 345 kV trunk lines, which will be devoted to supplying the power needs of households and smaller-scale industry and commercial users.

A Taipower spokesperson told Energy Intelligence that the new direct transmission links "will shorten the distance of transmission between the power plants and high-intensity users in Taiwan`s most important science parks and high-tech industrial zones.”

In addition, Tseng said that Taiwan`s rising share of "green energy" from renewable power sources, especially solar and wind power, will be prioritized for local use in the regions where it is generated with surplus power being stored or sent to the national grid.

This portion of the plan will involve construction of seven substations in central Taiwan to be served by seven transmission lines to connect up to 11 GW of offshore wind power, while nine stations and 10 transmission lines will connect up to 6.5 GW of solar power. These links will be supplemented by 1.5 GW in storage capacity by 2025.

The program's funding will be divided as follows, NT$437.9 billion for five projects related to the promotion of distributed power grid projects, NT$125 billion for three projects to enhance the strength of the power grid and NT$1.7 billion for two programs aimed at bolstering the systematic defense capability of power grids.
Dennis Engbarth, Taipei

Another Atlantic Canada LNG Export Option

A Repsol subsidiary has asked the federal Canadian Energy Regulator (CER) for more time to consider LNG exports at an existing import terminal in Atlantic Canada.

Saint John LNG, known prior to the Repsol acquisition as Canaport LNG, "is currently accessing the feasibility of expanding its existing LNG facility, located in Saint John, New Brunswick, to add liquefaction capability," a filing this week with the CER said.

Saint John LNG is eyeing desperate European gas markets and skyrocketing spot LNG prices. Repsol confirmed last month that it is discussing exporting LNG to Europe.

However, adding liquefaction capability could take some time.

New Timeline

Because of the need for a "series of interconnecting pipelines, that would be used to deliver natural gas to its LNG facility, it is conservatively estimated that it would take at least three years for the subject pipelines to obtain required approvals and construct the necessary facilities," the company said in its filing, adding that the period would also be used to obtain approvals and expand the LNG facility.

Under its current licenses, Saint John LNG is authorized to start imports or exports before May 20, 2026, less than four years away. Saint John LNG is asking regulators to restore the original 10-year sunset provision and extend the required date of first exports/imports until May 20, 2032, an additional six years from the current expiration.

Momentum?

Canadian Prime Minister Justin Trudeau expressed support for Canadian LNG exports last month in a joint press conference with German Chancellor Olaf Scholz and again stated that Canada would be willing to consider easing red tape on new gas facilities.

Meanwhile, the long-dormant Bear Head LNG — a prepared industrial site on Nova Scotia's Cape Breton Island — was acquired by infrastructure fund Buckeye Partners back in May.

Interest has also recently been revived in GNL Quebec’s Energie Saguenay project north of Quebec City.
Michael Sultan, Washington


In Brief

China's Domestic Gas Production Rises in August

China’s domestic natural gas production in August was 17 Bcm, up 6.3% compared to the same period last year, with an average output of 550 MMcm/d, the country's National Bureau of Statistics said this Friday.

By end August, China’s domestic natural gas production had reached 143.7 Bcm this year, up 5.5% compared to the same period last year.

Higher domestic gas production is one of the factors pushing back against the need for China's gas imports.

China’s total natural gas imports fell to 71.05 million tons in the first eight months of this year, a drop of 10.2% year on year. The drop was mainly due to high international spot LNG prices and as Covid-19 restrictions took a toll on China’s natural gas consumption.

Kpler has China's LNG imports at 41 million tons, or about 58% of the gas import total, for the first eight months of 2022. China is currently the number two LNG importer in the world, after Japan, year-to-date.

A government report last month predicted China's domestic natural gas production will grow in 2022 to 220 Bcm, from 207.6 Bcm last year.

Chinese companies will be under pressure to reach that target over the last four months of this year, especially with the arrival of the heating season in northern China and reduced imports.
Staff Reports

Coral South Delay

Mozambique's Coral South floating liquefaction plant is being shutdown for a week amid what is already a tight world LNG market.

A source tells Energy Intelligence that moisture — or debris — are blocking filters on the 3.4 million ton per year floating plant and causing a high differential pressure across the filters.

So it looks unlikely that Coral South will be able to load its first cargo this month.

The plant was already said to be experiencing technical issues late last month.

The plant is operated by Italian major Eni, with partners Exxon Mobil, China's CNPC, Galp, Kogas and Mozambique's state-controlled ENH.
Michael Sultan, Washington


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India38.2738.7738.2738.7737.7937.6239.3537.1239.2538.3337.4237.0837.50
Sodegaura, Japan38.7040.3740.3940.5138.6034.3239.8937.2139.7340.9437.7136.6238.84
Zeebrugge, Belgium9.677.977.578.069.149.508.787.538.637.579.268.289.37
Huelva, Spain17.6115.8815.4615.9717.0316.8116.6915.3316.5515.4717.0915.9917.11
Isle of Grain, UK24.4822.6222.1622.7123.9324.2923.6322.1523.3522.1824.0322.9624.14
Everett, US5.824.074.464.165.485.300.015.014.753.666.06----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback11. Apr25. Apr9. May23. May6. Jun20. Jun4. Jul18. Jul1. Aug15. Aug29. Aug12. Sep10203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia42.0041.730.08-0.27
SW Europe37.7518.27-10.20-19.48
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.567.768.328.00
NBP, UK (futures)-10.9833.3544.3343.38
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-8.3647.3955.7556.25
Zeebrugge (Belgium)-19.7820.1839.9545.45
German NCG-6.6949.1655.8557.67
NBP (UK)-10.2125.3435.5538.42
US Markets
US Spot Prices
Sabine Pass, Louisiana-0.548.028.568.10
Corpus Christi, Texas----7.847.40
Cove Point, Maryland-0.526.757.277.10
Elba Island, Georgia0.168.027.86--
Nymex Henry Hub Futures
Near Month-0.567.768.328.00
Second Mth-0.567.818.378.04
Third Mth-0.567.978.528.18
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaOct '21Nov '21Dec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '220255075100125Energy Intelligence