October 18, 2022

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Philippines' First Gen Eyes First LNG Imports After July

Philippines’ power utility First Gen expects to deliver first gas from its new floating regasification and storage unit (FSRU) after July next year. The planned import terminal is expected to be one of the first import terminals for the Southeast Asian country, amid a rapidly growing LNG import region.

First Gen’s executive vice president and chief commercial officer Jonathan Russell told local media that he expects the firm to consume up to 500,000 tons of LNG in the first year of operations and possibly 1 million tons in the second year, depending on the demand.

First Gen has been slated to deploy the FSRU BW Batangas at the end of the second quarter or early third quarter of 2023. The offshore terminal would meet the requirements of First Gen’s existing and new gas-fired power plants as well as third parties.

“The first delivery of LNG won’t happen until after July,” Russell said. “We’re in discussions with gas or LNG suppliers right now.”

Another aspiring importer AG&P said recently it would commission its planned offshore terminal in the first quarter of 2023, instead of the fourth quarter of this year.

The Big Picture

Faced with declining domestic gas production at its key Malampaya gas field, Philippines was originally slated to start LNG imports in 2022, but these plans have been pushed back to 2023 due to delays with construction and securing LNG volumes.

Meanwhile, competition from Europe for LNG amid tight supplies has driven up spot LNG prices in Asia and created challenges for buyers ahead of new LNG export projects starting up in the mid 2020s.

Philippines is expect to add to what has already been dramatic growth in LNG imports into South East Asia, alongside expected new entrant Vietnam (see graph below).

Created with Highcharts 9.0.0(million tons)SOUTH EAST ASIA LNG IMPORTSThailandSingaporeMalaysiaIndonesiaMyanmar201120122013201420152016201720182019202020212022024681012Source: Kpler

Clara Tan, Singapore

Indonesia Expects IDD to Restart Next Year

Indonesia’s upstream regulator expects Chevron to have exited its long-stalled Indonesia Deepwater Development (IDD) project by the end of the year.

A new operator would submit a revised development plan in the third quarter of 2023, SKK Migas said during a press conference on Monday.

IDD is slated to backfill the long-declining Bontang LNG export plant.

Construction would then start in 2024 with the aim for first gas to be achieved in 2027.

IDD is a strategic project for Indonesia to achieve its extremely ambitious target of producing 1 million barrels of oil per day and 12 billion cubic feet of gas per day by 2030. Indonesia's oil production peaked in the mid-1990s.

Indonesia oil and gas production averaged 610,100 barrels per day and 5.35 MMcf/d over the first nine months of the year, bellow its 703,000 b/d and 5.8 MMcf/d target for 2022.

Created with Highcharts 9.0.0(million tons)BONTANG LNG EXPORTS2008201020122014201620182020202205101520Source: Kpler
Natural Buyer

SKK Migas stopped short from saying who the US major will sell its 62% operated stake to, but Eni has long been seen as the natural buyer.

The Italian company already has a 20% stake in IDD, while China's Sinopec holds the remaining 18% share in the project.

Eni is also one of the few international oil companies combining an interest in investing in Indonesia and experience in deepwater projects.

The company also has a strong footprint in the Kutei Basin where the project is located, meaning existing infrastructure could be used with an opportunity to reduce IDD’s cost estimated at around $7 billion by SKK Migas.

Eni has five operated and two non-operated blocks in the Kutei Basin out of the 13 blocks the company has a stake in, in Indonesia.

The company also operates the Jangkrik Floating Production Unit that feeds the Bontang LNG plant.

Bontang has a nameplate capacity of 22.6 million tons/yr across eight trains, but the facility is massively undersupplied due to depleting reserves.

Bontang exported only 3.52 million tons of LNG last year, according to data from Kpler (see graph above).

Incentives

Indonesia’s improved fiscal terms may have contributed to putting an end to years of stalemate.

For instance, the country is now offering a 50-50 gross split production sharing contract for risky gas projects. However, it is not clear if IDD would benefit from this scheme.

Indonesia is also open to talk about incentives with the new operator, Tutuka Ariadji, the energy ministry’s director of oil and gas, told Energy Intelligence.

Indonesia said last year it was working on an incentive package designed to support the development of IDD.

Chevron opened a data room back in January 2020 with a view to divesting its stake in IDD after having found the project “does not compete in its portfolio.”

IDD’s Phase 2 consists of developing the 3 trillion cubic feet of gas reserves across the Gendalo, Gehem and Gandang deepwater gas fields.

IDD’s Phase 1, known as Bangka, has been producing gas since 2016.

Marc Roussot, Singapore

Spain to Receive First UAE LNG Cargo to Europe in a Decade

Spain is set to receive the first LNG cargo from the United Arab Emirates to Europe in a decade on Oct. 25, Energy Intelligence understands.

Energy Intelligence reported on Oct. 14 that Europe’s price contango has attracted dozens of LNG vessels to the continent’s shores in recent weeks, which are now acting as floating storage, waiting to capture the lucrative time spread upon discharging.

One of these vessels is the 150,000 cubic meter Ob River, which lifted a cargo from the UAE’s Das Island LNG plant on Oct. 13 and has been loitering around the Strait of Gibraltar in the Alboran Sea since Oct. 8, according to ship-tracking data by Kpler, which indicated that it will deliver to Europe.

Although the vessel has not been broadcasting a concrete terminal as its destination, a Spanish cargo arrival schedule obtained by Energy Intelligence showed that it will unload its cargo at the Huelva terminal on Oct. 25.

This will be the first cargo from the Middle Eastern country to Europe since 2012 and only the third on record to land in Europe, Kpler data showed.

The Buyer

The Ob River is chartered by Sefe Marketing & Trading, formerly Gazprom Marketing & Trading, which is understood to have won this cargo through a six-cargo sell tender by Abu Dhabi National Oil Co. (Adnoc) for loading between April and September this year, which closed in November 2021, according to Kpler.

The cargo schedule shows that the buyer of the cargo in Spain is Switzerland-based trading firm DXT Commodities, which has been particularly active on the Spanish LNG market this year, mainly purchasing cargoes from Russia’s Yamal LNG plant into the Iberian country.

Full Tanks

Unloading cargoes in Spain, however, is becoming increasingly difficult due to the saturated storage tanks at Spanish terminals.

This resulted from the subdued industrial demand coupled with the sustained influx of LNG into the country, which in turned incentivized market participants to keep LNG in storage tanks. Moreover, companies could also use LNG in storage for a contango play and wait to regasify at a later date when hub prices are higher.

With terminal tanks at full capacity, Spanish grid operator Enagas announced on Oct. 17 that it is postponing the discharges of cargoes that could take terminal stock levels above the established limit for safe infrastructure operation.
Daniel Stemler, Madrid

Political Questions Over US LNG Exports Return to the Fore

A group of manufacturers that has long opposed unfettered export of US natural gas as LNG is raising concerns about the degree to which Chinese companies have contracted with US developers.

“As an adversary, by contracting for large amounts of US LNG, China can damage both national and economic security,” Paul Cicio, the head of the Industrial Energy Consumers of America wrote in a letter to lawmakers who oversee energy policy in the Senate and House of Representatives.

Cicio’s letter evokes a sentiment that flared last year. Before Russia’s invasion of Ukraine, US lawmakers had begun raising concerns that US LNG exports were raising prices for consumers. Some specifically focused on concerns that higher natural gas prices at home made US manufacturers relatively less competitive.

The concerns came from both conservative and progressive wings of the Democratic party, with Sen. Joe Manchin (D-West Virginia) arguing that US consumers were not insulated from high natural gas prices in a way that had been true prior to the US LNG industry taking off.

Sen. Angus King (I-Maine), who caucuses with the Democrats, pledged to introduce legislation that would revise how the US Department of Energy considers exports to countries with which the US does not have a free trade agreement.

That political momentum towards more restricted exports halted following Russia’s invasion of Ukraine and the increased call on US gas. Attention in Washington shifted to how to help European countries curb their reliance on Russian energy supplies.

But prices for both oil and gas have surged this year, and discussion around restricting energy exports have picked up again.

US consumers relying on natural gas for home heating can expect to pay about 28% more than last year, the US Energy Information Administration projected in its winter fuels outlook released earlier this month, though the range varies dramatically depending on the weather.

The Industrial Energy Consumers of America – whose members also pay more when prices are higher – is trying to turn attention back on China. “The DOE should prohibit long-term contracts to China,” Cicio’s letter reads. “This includes contracts through multinational companies who have contracts with the US LNG terminals such as Shell, Exxon, Chevron and a myriad of trading companies.”
Emily Meredith, Washington


In Brief

European LNG Pricing Retakes Top Spot

Northeast Asian spot LNG prices increased by $2 to $30 per million Btu, according to Energy Intelligence assessments for deliveries four to eight weeks ahead. Spot prices in Southwest
Europe jumped by $8.55 week on week to $32.40/MMBtu.

It was the first week since August that Southwest Europe pricing exceeded Northeast Asia pricing (see graph below).

Growing buying interest for winter cargoes supported spot LNG prices in Asia, while prices into Europe were driven higher by a reduced discount to the Dutch TTF and higher LNG charter rates. In Asia, the hike has been fairly limited compared to recent volatile moves partly due to the absence of any major reopening announcement coming out of China as the Communist Party holds its five-yearly congress

In the Atlantic Basin, Nigeria LNG has declared force majeure on its 22.2 million ton/yr Bonny export plant due to flooding impacting feed gas supplies to the facility. While the duration of the force majeure and its impact on cargo loadings are not yet clear, European buyers are set to be primarily affected, particularly on the Iberian Peninsula.

However, the force majeure’s impact is expected to be limited in Spain as the country is already struggling to receive more cargoes due to the saturated LNG terminal tanks. Spanish grid operator Enagas said this week that it is postponing cargo discharges due to the high LNG storage levels.

Created with Highcharts 9.0.0($/MMBtu)REGIONAL SPOT PRICESNortheast AsiaSouthwest EuropeNov '21Dec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22020406080Energy Intelligence

Marc Roussot, Singapore and Dawn Lee, Beijing and Daniel Stemler, Madrid

Qatar Will Not Divert LNG to Europe

Qatar will not divert gas from Asia to Europe this winter, QatarEnergy chief executive Saad Al Kaabi told reporters on Tuesday during the inauguration of the Gulf state's first solar power plant.

The Al-Kharsaah plant, which was inaugurated at a ceremony attended by Qatar’s Emir Sheikh Tamim bin Hamad Al Thani, will have a total capacity of 800 megawatts.

Following the ceremony, Al Kaabi reiterated Qatar’s commitment to its signed LNG contracts, saying at a press conference that “Qatar does not break the sanctity of its contracts,” and will therefore not divert any additional gas from Asia to Europe amid the unprecedented energy crisis in Europe.

"When we sign with an Asian buyer or European buyers, we stick to that agreement," Kaabi told reporters. "So the volume that will go to Europe is what has been assigned," he said. "But as far as taking from Asian buyers to take to Europe [that] will not happen."

In an exclusive interview with Energy Intelligence last month, Al-Kaabi had said that Qatar won’t be able to alleviate Europe’s gas crisis in the short term due to contractual commitments, but that its LNG exports to Europe should be more significant in five to seven years.

Production from the US’ Golden Pass LNG, where QatarEnergy is a partner with ExxonMobil, is due to come onstream in 2024 and is already “earmarked for Europe."
Created with Highcharts 9.0.0(million tons)QATAR'S LNG EXPORT DIVIDEAsiaEuropeAmericasAfrica2008200920102011201220132014201520162017201820192020202120220102030405060708090Source: Kpler

Yousra Samaha, Dubai


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India25.9726.6325.8226.6625.0924.9427.5523.9827.3825.9324.6124.0724.72
Sodegaura, Japan25.7128.2228.2428.4825.4318.6327.4523.1627.2129.1224.1222.3525.89
Zeebrugge, Belgium-2.29-5.05-5.79-4.86-3.16-2.58-3.69-5.83-3.92-5.74-2.99-4.67-2.83
Huelva, Spain31.6828.6527.8128.8630.6630.1930.1127.6429.8827.8930.7128.6730.73
Isle of Grain, UK3.530.70-0.070.892.693.232.30-0.081.860.012.811.102.97
Everett, US4.161.171.801.373.583.200.012.842.390.424.57----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback16. May30. May13. Jun27. Jun11. Jul25. Jul8. Aug22. Aug5. Sep19. Sep3. Oct17. Oct10203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia30.0030.002.40--
SW Europe32.4032.4020.60--
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.255.756.006.60
NBP, UK (futures)-3.4922.9026.3932.52
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF3.4720.9517.4828.61
Zeebrugge (Belgium)-6.191.938.1117.24
German NCG-3.0317.0620.0931.58
NBP (UK)-2.054.556.5919.32
US Markets
US Spot Prices
Sabine Pass, Louisiana-0.105.906.006.31
Corpus Christi, Texas5.575.570.005.81
Cove Point, Maryland0.165.755.595.05
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month-0.255.756.006.60
Second Mth-0.246.246.486.93
Third Mth-0.226.496.717.11
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaNov '21Dec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '220255075100125Energy Intelligence