September 19, 2022

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Exclusive: Total Poised For Fresh Qatar Win

TotalEnergies is understood to be well-placed for a stake in Phase 2 of Qatar’s 48 million ton per year LNG mega-expansion, expected to be awarded later this month.

Total could be announced as one of the first winners in the 16 million ton/yr North Field South (NFS) expansion, Energy Intelligence understands.

The French major declined to comment. Qatari Energy Minister Saad al-Kaabi, in a recent interview with Energy Intelligence, indicated that at least one company could be awarded a stake in NFS soon, but did not disclose any identities.

An initial award for NFS could come as early as Sep. 24, when state Qatar Energy is due to hold “an important signing ceremony” in Doha.

Selection for equity and LNG offtake volumes in NFS follows partner selection for Phase 1 of the expansion, North Field East (NFE), over the summer.

That race saw TotalEnergies, Exxon Mobil, Shell, Eni and ConocoPhillips win stakes in the biggest project in the history of the LNG industry.

At the time, al-Kaabi said that partners in NFS would come from the same pool of partners successful in the first phase. But companies must still submit competitive offers to be successful.

It is unclear how large a stake Total may take home. The French major won a 6.75% stake in Phase 1 following a strong courtship.

For a company targeting advantaged oil and gas, NFS presents attractive low-carbon LNG volumes that will remain profitable even if gas prices decline steeply from current highs.

Phase 2 is known to have slightly higher production costs than Phase 1, but still represents some of the lowest-cost LNG supply under development globally.

Profitability at Phase 2 will be boosted by lucrative associated liquids output, including 122,000 barrels per day of condensate, 5,000 tons per day of LPG and 2,000 tons/day of ethane.

Both phases will benefit from carbon capture, solar power and a suite of flare and methane leak reduction technologies. Total is a partner with QatarEnergy on its flagship Al-Kharsaah solar project.

Total has made gas and LNG in particular a strategic priority, but its Middle East and North Africa output is the most oil intensive of any of its IOC peers (see table).

The French major also needs to make up for some recent setbacks in its LNG portfolio.

Total’s 10% stake in Qatargas 1 expired at the end of 2021 and was not extended.

The company has been forced to step back from planned expansion of its Russian LNG activities and in April took a $4.1 billion impairment in connection with its stake in Arctic LNG-2.

And its massive LNG project onshore Mozambique has been delayed indefinitely by unrest.

Total already has three downstream and petrochemical joint ventures in Qatar, a 16.7% stake in Qatargas 2’s Train 5, 40% of the offshore Al-Khalij field and 30% in the 290,000 b/d Al-Shaheen offshore field, as well as a 24.5% stake in the Dolphin pipeline that supplies Qatari gas to the UAE and Oman.

QatarEnergy has partnered with Total on a number of notable exploration successes overseas, including in South Africa, Cyprus and Namibia.

TotalEnergies in the Middle East And North Africa
201920202021
Total's Qatar Oil Production ('000 b/d)104.098.098.0
Total's Qatar Gas Production (million cf/d)591.0589.0566.0
Total's Qatar Combined Output ('000 boe/d)210.0203.0199.0
Total's Qatar Gas as % of Total Mena Gas69.071.068.0
Total's Mena Oil-Gas Production Ratio (%)78.076.077.0
Total's Mena Combined Output ('000 boe/d)702.0624.0667.0
Total's Mena Combined as % of Total's Global Output23.321.723.7

Rafiq Latta, Nicosia

China's LNG Imports Tumbled Again Last Month

China imported 4.72 million tons of LNG in August, a drop of 28.1% from a year ago, according to data from the General Administration of Customs. The country’s LNG imports have been falling for eight consecutive months, which brought its total LNG imports year to date to 40.64 million tons, down 21.3% compared to the same period last year.

Meanwhile, China imported 4.13 million tons of pipeline gas in August, 9% higher compared with a year ago. Total pipeline gas imports for the first eight months were 30.4 million tons, up 11% compared with the same period last year, customs data showed.

Consultancy Wood Mackenzie forecasts that China’s LNG imports will fall to 66 million tons in 2022, a drop of 18% compared to 2021, which would be the largest annual decline since China started imports of LNG. In 2021, China overtook Japan as the world’s largest importer of LNG. Japan is now set to regain its position as the world’s largest importer of LNG this year.

China's import costs for both LNG and pipeline gas have increased significantly. Among them, the first eight months of LNG import costs rose 41.2% compared to one year ago, and pipeline gas import costs were up by 57.3%.

Natural gas demand has declined this year due to an economic slowdown in China and impact of its “zero-Covid” policy. From January to July, China’s apparent natural gas consumption fell 0.7% to 213.29 billion cubic meters (Bcm), according to Beijing's policymaker National Development and Reform Commission (NDRC). Due to high international spot LNG prices, Chinese buyers have retreated from the spot market while some of them are reselling LNG into the European market.

To secure China’s gas supply, the country is increasing its domestic gas production. China is also planning to increase its imports of lower-priced LNG and pipeline gas from Russia. Earlier this year, CNPC and Gazprom signed a 10 Bcm/year supplemental agreement via the "far eastern route," in addition to an existing 38 Bcm/yr Power of Siberia contract, which was signed in 2014.

Last week, the heads of state of China, Russia and Mongolia agreed to actively promote laying a Russia-China gas pipeline across Mongolia, dubbed as Power of Siberia 2.

China's Gas Consumption
Domestic Production (Bcm)%Chg Y-o-YTotal Gas Imports (Million Tons)%Chg. Y-o-YLNG Imports (Million Tons)%Chg. Y-o-YPipeline Gas Imports (Million Tons)%Chg. Y-o-Y
January-February37.26.70%19.86-3.80%12.68-8.70%7.186%
March 19.76.307.98-8.54.63-17.003.368.8
April17.74.708.09-20.34.35-34.503.749.3
May17.74.909.07-10.604.93-28.104.1526
June17.30.408.72-14.604.82-26.003.911.50
July17.18.208.7-6.90%4.74-15.403.968
August176.308.85-15.204.72-28.104.139
Total143.75.50%71.05-10.20%40.64-21.30%30.411%

Staff Reports

Australia's Origin Energy Exits Beetaloo Basin

Origin Energy said it will sell its stake in its Beetaloo Basin shale gas project in Australia’s Northern Territory and review all its other upstream exploration permits, excluding those linked to the Australia Pacific LNG (APLNG) plant.

The announcement is a major change for Origin, which said in April it would forge ahead with exploration for its Beetaloo project mired with controversies and opposition from environmentalist groups.

Origin said it now prefers to invest in other opportunities in line with the energy transition rather than in capital-intensive oil and gas projects that include uncertain exploration and appraisal phases.

However, Origin said, “gas will continue to play an important role in the energy mix and it remains a core part of our business.”

Origin is the upstream operator of the two-train 9 million ton per year APLNG project which is fed by coal seam gas from the Surat and Bowen basins in Eastern Australia. ConocoPhillips is the downstream operator.

The deal

Origin has signed an agreement to sell its 77.5% operated interest in the Beetaloo Basin joint venture (JV) to Tamboran (B1) for $60 million, and a royalty payment of 5.5% of revenue on future gas production. However, Origin expects to record a non-cash post-tax loss of $70 million to $90 million.

Tamboran (B1) will also reimburse Origin for any costs incurred for the current Beetaloo workplan. Tamboran (B1) is equally owned by Australia-listed Tamboran Resources and its substantial shareholder, Bryan Sheffield.

Sheffield is the founder of Parsley Energy, a company that was engaged in hydrocarbon exploration in the Permian Basin.

Origin has also executed a gas sale agreement for offtake of up to 36.5 petajoules (34.5 million cubic feet) per year over 10 years, provided that the Beetaloo gas project is sanctioned and materializes.

UK-listed Falcon Oil & Gas, which holds the remaining 22.5% stake in the Beetaloo Basin JV, has a pre-emptive right to acquire Origin’s interest.

Falcon Oil & Gas counts amid its minority shareholders sanctioned Russian oligarch Viktor Vekselberg.

The Beetaloo Basin JV operates across three permit areas, namely EP 76, 98 and 117.


Marc Roussot, Singapore


In Brief

Shell Restarts Prelude Production, Ending Standoff

Shell has restarted production at its floating Prelude facility offshore Western Australia, ending a standoff with Australian unions which lasted more than two months.

The operator said Monday that LNG cargoes have resumed from the Prelude facility. This follows the cancellation of protected industrial action (PIA) after an in-principle enterprise agreement was reached with the Australian Workers’ Union (AWU) and Electrical Trades Union on Aug. 23.

Strike Resolution

The Offshore Alliance, a partnership between AWU and Maritime Union of Australia, said its members have voted 94% in favor of a new Prelude enterprise agreement which “close out the bargaining process after 76 days of industrial struggle.” The new agreement is expected to come into effect in early October.

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

Prelude's restart would help ease global LNG supply tightness as winter approaches which has boosted buyers' stockpiling in Asia and Europe.

Loading Resumes

Shell said it is now focused on moving forward as a business and delivering affordable, reliable energy to its customers through continued safe, stable production. The PIA has forced the operator to postpone a planned maintenance for Prelude originally due in September-November to July 2023.

According to Kpler shiptracker, a Shell-chartered Minerva Chios arrived at Prelude on Sep. 15 and departed on Sep. 17. Another Shell-chartered LNG carrier Kool Orca is scheduled to arrive at Prelude on Sep. 22 before heading to an Asian market.

Shell owns an operated 67.5% stake in Prelude, alongside Inpex, Korea Gas and Taiwan’s CPC, all of which are also buyers of Prelude volumes. Other Prelude buyers are Osaka Gas under a portfolio contract with Shell, while Japan’s Jera and Shizuoka Gas have purchased Prelude volumes from Inpex.
Clara Tan, Singapore

Turkey, Russia Agree Ruble Payment Deal

Turkey will soon start paying for 25% of its pipeline gas imports from Russia in rubles, Russian President Vladimir Putin said.

The details have been approved by the two sides and the payment scheme will start working very soon, he said at a meeting with Turkish President Recep Tayyip Erdogan in Samarkand, Uzbekistan.

Russia is also ready to increase supplies to Turkey, Putin told Erdogan. In the first half of this year, however, Russia’s pipeline gas exports to Turkey fell 11.6% on the year to 12.7 billion cubic meters, according to data from Turkey’s Energy Market Regulatory Authority.

Bloomberg reported ahead of the Putin-Erdogan meeting, citing senior Turkish officials, that Ankara would ask for a 25% discount for Russian gas and an option to pay part of its rising gas bill in Turkish lira.

Russia wants to shift away from the use of the US dollar and the euros in international transactions, after the West imposed tough financial sanctions and froze Russia’s foreign exchange reserves in response to the Feb. 24 invasion of Ukraine.

Moscow has also recently agreed with Beijing to switch payments under the 38 Bcm/yr Power of Siberia gas supply contract to rubles and yuan, on a 50-50 basis.

Earlier this year, Russia demanded that pipeline gas buyers from countries it deems "unfriendly" pay in rubles, although the scheme allows the buyers to make an initial payment in dollars and euros and have the money converted to rubles in Russia.

Russia does not designate Turkey and China as unfriendly.

Staff Reports


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India38.3738.8738.3738.8737.8837.7239.4537.2139.3438.4337.5237.1737.60
Sodegaura, Japan38.7940.4740.4940.6138.6934.4139.9937.3139.8341.0437.8136.7238.94
Zeebrugge, Belgium24.0122.1621.7022.2623.4423.8323.0421.6822.8821.7223.5722.4923.67
Huelva, Spain20.9119.1518.7219.2420.3320.0919.9718.5919.8318.7320.3919.2620.40
Isle of Grain, UK27.7725.8725.4025.9727.2127.5826.9025.3926.6125.4327.3126.2127.42
Everett, US5.944.194.574.285.595.410.015.124.873.776.17----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback18. Apr2. May16. May30. May13. Jun27. Jun11. Jul25. Jul8. Aug22. Aug5. Sep19. Sep10203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia42.0041.820.10-0.18
SW Europe37.7521.583.42-16.17
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.017.757.768.25
NBP, UK (futures)-0.9632.2433.2039.68
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF1.0348.4747.4454.93
Zeebrugge (Belgium)9.7829.9320.1546.09
German NCG-0.4248.6949.1055.16
NBP (UK)3.4228.6525.2337.10
US Markets
US Spot Prices
Sabine Pass, Louisiana-0.207.828.028.08
Corpus Christi, Texas7.377.370.007.75
Cove Point, Maryland0.297.046.757.40
Elba Island, Georgia0.627.827.207.63
Nymex Henry Hub Futures
Near Month-0.017.757.768.25
Second Mth-0.017.807.818.29
Third Mth0.007.977.978.42
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaOct '21Nov '21Dec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '220255075100125Energy Intelligence