September 21, 2022

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Court Overturns Santos' Barossa Drilling Permit

Australia's federal court has backed a challenge led by an indigenous group against a drilling permit for Santos' Barossa gas field, which is intended to supply backfill gas to the company's operated Darwin LNG plant.

Traditional landowners from the Tiwi Islands had asked the court to overturn the drilling approval, which was granted by the National Offshore Petroleum Safety and Environmental Management Authority (Nopsema).

They claimed that Santos did not properly consult the traditional owners about the drilling work for the Barossa-to-Darwin LNG project that was sanctioned last year.

The federal court ruled that Nopsema's approval is legally invalid.

Appeal Planned

Australian independent Santos said it has taken note of the court's decision to set aside Nopsema's acceptance of its environmental plan for drilling and completion work at the Barossa field.

The drilling was to occur at a site in the Timor Sea, approximately 140 kilometers north of the Tiwi Islands, which lie off the coast of Australia's Northern Territory.

"As a result of the decision, the drilling activities will be suspended pending a favorable appeal outcome or the approval of a fresh environment plan. Santos will be seeking to expedite these processes," the company said in a statement.

Describing the decision as a disappointing outcome, Santos said it had followed previous practice in engaging with the Tiwi Land Council, a representative body with statutory authority under the Aboriginal Land Rights (Northern Territory) Act 1976.

It had also engaged with the Northern Land Council, the Native Title representative body for the Tiwi Islands.

"Nopsema had accepted our efforts to consult with Tiwi Islanders in accordance with the regulations when it decided to accept the Environment Plan for those activities," Santos said.

Extending LNG Plant's Life

Santos sanctioned the US$3.6 billion Barossa-to-Darwin LNG project last year. It is intended to extend the life of the 3.7 million ton per year Darwin LNG plant beyond 2040. First gas from the Barossa field is expected in the first half of 2025.

Santos said the Barossa gas project is approximately 46% complete. "The drilling activities are not on the critical path for the project and we have headroom in the project cost contingency," it said.

But Santos warned that uncertainties about project approval are a public policy issue that should be urgently addressed by Australian governments to reduce trade and investment risks.

Santos owns an operated 50% stake in the Barossa project, alongside Japan's Jera (12.5%) and South Korea's SK E&S (37.5%).

SK E&S and Jera are also shareholders in Darwin LNG with respective stakes of 25% and 6.1%.
Clara Tan, Singapore

PNG Eyes Doubling LNG Exports by 2032

Papua New Guinea (PNG) expects to double its LNG exports by 2032 with an eye on venturing into ammonia production in the future.

PNG Petroleum Minister Kerenga Kua told an industry conference in Port Moresby that the country’s LNG exports would increase from 8.5 million tons per year to 14 million-15 million tons/yr following the start-up of greenfield Papua LNG project and development of the onshore P’nyang field.

LNG Expansions

PNG’s ambition to double its LNG production is not new, but this could be the first time a timing guidance has been given on when the development of P’nyang would be completed. Last February, Exxon Mobil, operator of the 4.4 trillion cubic feet field, signed a gas agreement with the PNG government which ended protracted negotiations between the supermajor and the government. But no timeline was provided.

The development of P’nyang, still subject to a final investment decision (FID), is expected to begin after the start-up of TotalEnergies’ two-train, 5.4 million ton/yr Papua project. Kua said he expects Total to sanction Papua LNG in late 2023 with first production around end of 2027 or in early 2028. The French major recently awarded a contract for upstream front-end engineering design work on Papua LNG.

“This will be followed by FID and construction on P’nyang gas project with further plans to deliver 2 million to 3 million tons/yr of LNG by 2032,” Kua reportedly told the conference.

Exxon’s P’nyang field was initially intended to feed a new 2.7 million ton/yr brownfield train at its operated PNG LNG facility and integrate that with Total’s Papua LNG project. But delays in P’nyang talks have hampered those plans.

Australian independent Oil Search, a shareholder of PNG LNG that has been taken over by Santos, previously said P’nyang would likely be used to backfill PNG LNG instead of feeding a new brownfield train. Production at PNG LNG recently hit another record and annualized output has been running at around 8.8 million tons/yr against a 6.9 million ton/yr nameplate capacity. PNG LNG, which opened in 2014, would need new gas supply to maintain plateau production past 2026-27.

Exxon PNG Managing Director Peter Larden said at the same conference that PNG is well placed to expand its LNG capacity. “PNG exports somewhere between 8 and 9 million tons of LNG per year and even if the Papua project comes online it will still represent about 2% of global demand or global supply through the 2030 period,” he told the conference.

An LNG expansion in PNG is one of Exxon’s projects within its global portfolio. The supermajor is targeting to double its LNG portfolio by 2030 and add more supply points, such as the US and Mozambique.

Eye on Ammonia

State-owned firm Kumul Petroleum Holdings is studying the potential of ammonia production as soon as the technology is confirmed. Kumul’s managing director Wapu Sonk told local media that the government is focusing on blue and green energy, which refers to ammonia and hydro, solar and hydrogen, respectively.

Sonk said Kumul would be looking at extracting ammonia from some of the gas fields. “We already have, especially the stranded gas fields which at the moment Kumul Petroleum controls, half of the discovered and stranded gas fields so we will be looking for opportunities to partner with some of the development partners who are developing the technology, especially the Japanese companies to start thinking about ammonia production.”

Japanese utilities Jera and Osaka Gas are existing buyers of PNG LNG project. To meet their net-zero goals by 2050, many Japanese utilities are eyeing carbon-zero fuels such as ammonia and hydrogen in potential production sites such as Australia, Malaysia and the US.

Kumul, already a 16.8% shareholder in PNG LNG, plans to exercise its right to take up to 22.5% equity in Papua LNG.
Clara Tan, Singapore


In Brief

Canadian LNG Export Projects Want More Time

Two Canadian LNG export proposals want more time to weigh their viability.

In the Eastern Canadian Maritimes, Saint John LNG has asked the Canada Energy Regulator (CER) to extend its license to import natural gas from the US and export it as LNG from what is now an import terminal.

Repsol, the primary owner and operator of Saint John — formerly Canaport LNG — is asking that its license for import/export be extended another six years to May 20, 2032. That would give it more time to mull whether the expense of creating liquefaction and export capacity with an eye to the European market would pay off.

"This does not necessarily mean that Repsol is actively considering LNG liquefaction and exports. It is merely keeping all its options open should further developments warrant exports," said RBN analyst Martin King.

On the Pacific Coast, Cedar LNG’s partners have been granted a four-year extension by CER to May 2030. This will allow the Haisla First Nation and Pembina additional time to evaluate the project without the pressure of having to start sooner to meet operational deadlines.
Tom Haywood, Houston


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India36.4436.9336.4436.9435.9635.8037.5135.3037.4036.5035.6035.2635.68
Sodegaura, Japan36.8838.5338.5538.6836.7832.5438.0635.4137.9139.1035.9034.8237.02
Zeebrugge, Belgium31.2229.2928.8129.4030.6231.0330.2028.8030.0428.8330.7529.6330.86
Huelva, Spain35.8033.8833.3933.9835.1634.9034.7733.2834.6333.4235.2233.9935.24
Isle of Grain, UK25.8323.9623.4924.0525.2825.6424.9723.4824.6923.5225.3824.2925.49
Everett, US5.053.313.703.404.714.530.014.243.992.905.28----
Created with Highcharts 9.0.0($/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 Asia42.0039.88-0.12-2.12
SW Europe37.7536.48-2.32-1.27
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.067.787.729.11
NBP, UK (futures)-2.2233.3235.5446.00
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-0.0651.5451.6059.96
Zeebrugge (Belgium)-0.9231.1132.0352.36
German NCG0.9551.2650.3061.52
NBP (UK)-2.0326.7128.7441.14
US Markets
US Spot Prices
Sabine Pass, Louisiana0.068.007.948.65
Corpus Christi, Texas0.057.477.428.26
Cove Point, Maryland0.036.956.92--
Elba Island, Georgia--8.00--8.15
Nymex Henry Hub Futures
Near Month0.067.787.729.11
Second Mth0.057.837.779.17
Third Mth0.067.997.939.31
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaNov '21Jan '22Mar '22May '22Jul '22Sep '220255075100125Energy Intelligence