October 27, 2022


Europe Ramps up Russian LNG Purchases

Europe may have seen a dramatic fall in its pipeline gas imports from Russia this year, due in large part to supply cuts imposed by Moscow, but European imports of Russian LNG have begun to recover from last year's Yamal LNG maintenance outage, raising questions about the European diversification efforts.

With Gazprom halting flows via the Nord Stream and Yamal-Europe pipelines, and flows via Ukraine and Turkey curtailed too, Russia's pipeline gas exports have fallen from more than 600 million cubic meters per day in recent years, equivalent to about 155 million tons of LNG per year, to just over 70 MMcm/d today, or about 18 million tons of LNG.

In contrast, exports of Russian LNG to Europe rose to 12.9 million tons between January and October from 10.9 million tons in the same period of 2021, according to data analytics firm Kpler (see graph below).

Novatek's Yamal LNG plant in the Russian Arctic accounts for most of those shipments, and it has ramped up output this year, when it is expected to produce 21 million tons/yr, compared with 19.6 million tons/ year in 2021, Novatek CEO Leonid Mikhelson said last week.

Most of the imported LNG is sold under long-term contracts to European buyers such as Spanish utility Naturgy and France's TotalEnergies, which also has a 20% stake in Yamal LNG.

But around 7 million tons/yr is sold on a spot basis, which partly explains the increase in supplies to Europe, where high prices, driven to a large extent by Russia's curtailment of pipeline gas supplies, have attracted spot cargoes.

Created with Highcharts 9.0.0(million tons)RUSSIAN LNG TO EUROPEOct'20Nov'20Dec'20Jan'21Feb'21Mar'21Apr'21May'21Jun'21Jul'21Aug'21Sep'21Oct'21Nov'21Dec'21Jan'22Feb'22Mar'22Apr'22May'22Jun'22Jul'22Aug'22Sep'22Oct' Kpler

Gazprom vs Novatek

Russian LNG certainly looks less toxic than pipeline gas which the EU is keen to gradually phase out. Apart from anything, Novatek is an independent gas producer — albeit Russia’s largest — so that fewer profits from Yamal flow into state coffers than piped gas sold by state energy giant Gazprom.

Others note that LNG is a very different market to piped gas, and cannot be monopolized by Russian LNG players, and thus gives Russia less political leverage.

“I think from Europe’s point of view, it hasn’t been ideal, but it’s been a smart thing to have some flexibility on Russian LNG,” said Russian energy expert Adnan Vatansever, at King’s College London (KCL)

Total has drawn criticism for not divesting its stake in Novatek, which is part owned by Gennady Timchenko, a long-time associate of Russian leader Vladimir Putin.

But the French major’s CEO Patrick Pouyanne defended the decision at this month’s Energy Intelligence Forum, saying it would continue to ship Russian LNG from Russia as long as no sanctions prevented it from doing so because these volumes “contribute to the security of supply for Europe.”

Evolving Market

Reflecting Europe’s evolving and strengthening demand for Russian LNG, Switzerland-based trading firm DXT Commodities purchased at least five spot cargoes of Yamal LNG since June for delivery to Spain, according to a Spanish cargo delivery schedule obtained by Energy Intelligence. Additionally, two other Swiss traders Met and Enet Energy bought one Yamal cargo each, during the same period.

These spot purchases from the Russian plant were likely possible as Yamal LNG was able to produce above its nameplate capacity for months, even during the warm summer months. This in turn allowed the company to offer spot volumes to the market at a time when spot supply availability in the Atlantic Basin was tight.

Meanwhile, on Oct. 3, the first cargo from Gazprom’s new Portovaya LNG plant was delivered to Greece’s Revithoussa LNG terminal, marking a rare occasion of Gazprom selling an LNG cargo to a market which is a traditional buyer of its pipeline gas. By delivering LNG to Greece, Gazprom was likely trying to free up capacity at the Turk Stream pipeline, which supplies the Hellenic Republic and other countries in the region, in order to boost supplies for Central European buyers, such as Hungary or Serbia, a regional gas trader told Energy Intelligence.

What the future holds for flows of Russian LNG to Europe is unclear but will surely be determined both by market dynamics and politics.

“Eventually, when there is sufficient demand destruction, and if … the conflict is ongoing with Ukraine, and if relations between Russia and Europe are not repaired for any reason, you can easily imagine that Russian LNG will have no place in the European market,” says KCL’s Vatansever.

He notes, however, that from the point of view of curtailing Russian revenues, that will make little difference, and meanwhile, a return of Chinese gas demand could divert those spot Russian LNG cargoes away from Europe.

“Once it picks up, it will eat all the gas available in the world. There could be no LNG that is turned around and sent to Europe next year. My worry is how is Europe going to deal with that situation,” says a former EU diplomat.

For more coverage of the Ukraine crisis, visit Ukraine Crisis: Energy Impact
Simon Martelli, London and Daniel Stemler, Madrid

High LNG Prices Spark Hope of Indian Price Freedom

The eye watering price of imported LNG has ignited the hope of Indian domestic producer Reliance Industries that the government may allow complete freedom in setting domestic gas prices.

Reliance Senior Vice President for Exploration and Production Sanjay Roy told analysts that producers have sought complete pricing and marketing freedom to encourage explorers to invest billions in frontier areas. The idea being to meet the government goal of raising the national share of gas in the energy mix to 15% by 2030, up from 6% currently.

"Since costs are market driven, prices need to be similar," Roy said.

Prime Minister Narendra Modi’s government has set up a committee to recommend a “fair price” of domestic gas to end-consumers and suggest a “market-oriented, transparent and reliable pricing regime for India’s long-term vision for ensuring a gas-based economy.”

The committee, which was originally to submit its report by end-September, is still working on it. Roy said that the committee's recommendations will likely come out in the next few weeks.

India is currently running seventh year-to-date among world LNG importers with 16.9 million tons, according to Kpler, down from fourth place (24 million tons) as of the end of last year.

Lopsided Numbers

While Reliance sold offshore KG-D6 gas at $9.90/MMBtu, it sold gas from its coal seam block, which has no price cap, for $23.30/MMBtu in the July-September quarter. Comparatively, spot LNG prices averaged $47/MMBtu for the quarter.

Anil Sharma, an analyst with Mumbai-based Kotak Institutional Equities Research, noted that since the ceiling price inhibited determination of a fair and transparent price, there was a strong case to completely abolish it.

Since Reliance is awaiting gas pricing developments, it is yet to invite bids for auctioning new gas that will come on stream this year, Citigroup said in a note Tuesday.

Offshore Effort

Mumbai-based Reliance, which is currently producing 19 million standard cubic meters a day (MMcm/d) of gas from its KG-D6 block, will start production from the MJ field by December which will help ramp up production to 30 MMcm/d by the fiscal year ending March 2024, accounting for 30% of the country's total output. The new production will benefit from a 26% increase in ceiling price for the gas produced from difficult deepwater acreage to $12.50 per million Btu for the six month period that began Oct 1.

The ceiling prices that are revised in April and October every year are based on the landed price of fuel oil, LNG and substitutes like naphtha. Since no major capacities of LNG will come online before 2026, the markets will remain tight which means gas realizations will stay firm and with the augmentation of KG-D6 production, earnings will go upwards, Roy told analysts late Friday.
Rakesh Sharma, New Delhi

Austria’s OMV Seals Adnoc LNG Supply Deal

Austria’s OMV on Thursday said it had inked a memorandum of understanding (MOU) with Abu Dhabi National Oil Co. (Adnoc) that envisages delivery of an LNG cargo to the Central European country next winter.

The deal, signed during a visit to Abu Dhabi by Austrian Chancellor Karl Nehammer, is a boost for Vienna as it looks to reduce a heavy reliance on Russian pipeline gas supplies in the wake of the conflict in Ukraine.

OMV said the MOU will “explore new partnership in deliveries for LNG.”

Landlocked Austria has no LNG terminal of its own. However, OMV — which is 31.5%-owned by the Austrian government — has taken delivery of LNG cargoes from Qatar at the Gate LNG terminal in the Netherlands.

The company signed a five-year deal to take 1.1 million tons per year of LNG from Qatargas in 2017, with deliveries beginning in 2019.

In a statement, OMV CEO Alfred Stern described the agreement with Adnoc as “another building block in our efforts to strengthen Austria´s energy supply by diversifying gas sources in our portfolio.”

State-owned Adnoc currently has one 5.8 million ton/yr liquefaction facility on Das Island in the Mideast Gulf, but is also building a 9.6 million ton/yr scheme in the emirate of Fujairah, which is likely to start up around 2026.

Ahead of his trip to the United Arab Emirates, Nehammer had said he was looking to shore up supplies for the 2023-24 heating season, with Austria’s gas storage almost full ahead of this winter and its dependence on Russian volumes cut from 80% to 50%.

OMV, which will release its third-quarter results on Friday, already partners Adnoc in an offshore oil concession in Abu Dhabi, as well as in the Ghasha sour gas and condensate field.
Tom Daly, London

TotalEnergies Earnings Buoyed by LNG Prices

TotalEnergies posted solid third-quarter financial results above analyst consensus expectations driven partly by higher LNG pricing and a robust trading performance despite a number of shutdowns.

“In a context marked by an average Brent price of $100 per barrel and an increase in gas prices exacerbated by Russia’s military aggression in Ukraine, TotalEnergies leveraged its integrated model, particularly LNG, to generate results in line with previous quarters,” CEO Patrick Pouyanne said in a statement.

The French major’s profits were hit by a fresh $3.1 billion impairment related to its Russian business, adding to $7.6 billion of write-downs in the previous two quarters of this year.

After all impairments, Total still has $6 billion of capital employed by the group in Russia.

Bumper LNG Profits

Total’s integrated gas, renewables and power unit posted record earnings of $3.6 billion in the third quarter, up 43% from the previous three months and more than double last year's income. That was driven largely by a 50% jump in the average LNG price to $21.5 MMBtu versus the previous three-month period.

LNG sales volumes fell 10% compared to the previous quarter due to shutdowns at the US Freeport LNG terminal, Nigeria LNG (NLNG) and the Ichthys LNG plant in northwest Australia.

Total now expects the Freeport terminal on the Texas Gulf coast, which has been off line since June due to a fire, to come back to 100% capacity in December, CFO Jean-Pierre Sbraire said during an earnings call.

NLNG, which declared force majeure in mid-October, will probably be back on line next year and the planned Ichthys shutdown has been completed and is meant to come back to normal production in the fourth quarter, he said.

Asked by analysts about its stellar LNG results, Sbraire said the French major’s significant access to around 18 million tons of regasification capacity in Europe — roughly 15% of the region’s capacity — was a “huge advantage.”

The arbitrage between the US and Europe was key to the LNG trading performance in addition to having production contracts across the main global LNG hubs, with a strong presence in the US, he noted.

Moreover, at current prices, an average cargo of LNG represents around $100 million in the spot market. “So when you are able to reroute or arbitrage between the different markets it’s a very efficient way to maximize the value from that business.”

Market Interventions Impact

EU plans for a “solidarity” tax on fossil fuel producers’ profits have not yet been finalized, but Total said it expected to face a €1 billion charge for the full year 2022. Funds will be directed toward consumers or investment in renewable power.

Total is in talks with six countries in Europe, including France, Germany, Belgium and Luxembourg over the contribution, which will mainly apply to its refining activities. “There are some discussions regarding when it will be payable but it’s supposed to be a one-off,” Sbraire said.

During the quarter the group paid $600 million in windfall profits' tax to the UK government covering four months from the end of May when the levy was implemented. Unlike the EU solidarity tax, the UK levy is applicable until 2025.


Total expects higher fourth-quarter production of around 2.8 million barrels of oil equivalent due to a reduction in planned maintenance and the re-start of Kashagan oil field output in Kazakhstan. Given the evolution of oil and gas prices in recent months and the lag effect on price formulas, it expects the fourth-quarter LNG selling price to be above $17/MMBtu.

Going forward, Sbraire said the European NBP gas price would be highly dependent on the temperature and consumption patterns in Europe. “We anticipate that winter 2022 should not be a big concern for the EU.” The lack of regasification capacity in Europe to completely compensate the likely fall in Russian piped gas “should be highly supportive to gas prices” in Europe in the medium term.

Downstream, Total’s CFO said that in Total’s view the ban on Russian petroleum products effective in February 2023 would support distillate cracks — margins would “remain at a high level.”

The EU embargo on Russian crude effective from December will be easier to compensate by rerouting crude from other countries.

“But we are very clear that it will contribute to support prices. European refiners will have to pay a premium to attract new crude,” Sbraire said.

Total Q3'22 Earnings Results
($ million)Q3'22Q3'21%Chg.Q2'22
Operating Cash Flow17,8485,640>10016,284
Net Income6,6264,645435,692
Adjusted Income9,8634,769>1009,796
Exploration & Production*4,2172,726554,719
Integrated Gas, Renewables & Power*3,6491,608>1002,555
Refining & Chemicals*1,935602>1002,760
Marketing & Services*4784389466
Liquids Production ('000 b/d)1,4941,517-21,483
Gas Production (MMcf/d)6,3677,070-106,835
Oil and Gas Output ('000 boe/d)2,6692,814-52,738
Refinery Throughput ('000 b/d)1,5991,225311,575
LNG Sales (million tons)10.4105%11.7

Deb Kelly, London

Shell Ramps Up Peruvian LNG Cargo Deliveries to Spain

Peruvian LNG exports to Spain are set to reach their highest level since October 2019 next month, with up to three cargoes expected to be delivered to the Iberian country.

UK major Shell, the sole contractual offtaker from Peru’s 4.45 million ton per year Pampa Melchorita LNG plant, could be delivering at least part of these volumes through term agreements, while others via spot deals.

Shell actively imports and trades cargoes into the Spanish market and Energy Intelligence understands that the major also has a supply agreement in place with Spanish energy firm Cepsa.

However, spot deliveries to Spain are expected to be extremely complicated in the weeks ahead as the country has been struggling to receive additional LNG volumes due to the already saturated LNG terminal tanks.

Created with Highcharts 9.0.0(million tons)PERU LNG EXPORTSSouth KoreaJapanUnited KingdomChinaSpainNetherlandsOthersFrance20182019202020212022012345Source: Kpler

The Cargoes

The 138,000 cubic meter Seapeak Madrid lifted a cargo from the Peruvian export facility on Sep. 20, according to ship-tracking data by Kpler, and is now waiting in the Gulf of Cadiz, south of Spain, to unload its cargo. A Spanish cargo arrival schedule obtained by Energy Intelligence showed that the vessel is nominated to discharge on Nov. 13, although its destination terminal in Spain is not yet known. Kpler data suggested that it will discharge on Nov. 2.

Meanwhile, the 173,400 cubic meter Maran Gas Olympias was loaded at Pampa Melchorita on Oct. 17 and is scheduled to deliver to Spain’s Sagunto terminal on Nov. 6, according to the arrival schedule seen by Energy Intelligence. It is understood that Shell has sold this cargo to Spanish utility Naturgy.

The vessel crossed the Panama Canal yesterday and is now heading northeast in the Caribbean Sea, although Kpler data suggested that it will deliver to the UK on Dec. 1.

The third Peruvian cargo, which is set to arrive in Spain next month is transported by the 174,000 cubic meter SM Albatross, which was loaded on Oct. 24 and on the next day it broadcasted Spain’s Huelva terminal as its destination, with estimated arrival on Nov. 27, Kpler showed.

The three cargoes combined would amount to about 200,000 tons of LNG, which would be the highest monthly import figure from Peru since October 2019, when Spain received 220,000 tons, according to data from Kpler.
Daniel Stemler, Madrid

Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India25.8126.6525.4826.7224.4724.3227.9722.8527.7225.6523.8523.0823.99
Sodegaura, Japan24.7428.2328.2628.6224.2714.5927.1320.9826.7929.5222.4619.9124.96
Zeebrugge, Belgium9.745.624.425.938.439.307.674.447.334.578.666.098.90
Huelva, Spain30.9026.6925.4527.0129.4728.7828.7425.2428.4325.6129.5226.6229.54
Isle of Grain, UK6.342.241.062.545.125.884.581.093.951.215.262.725.50
Everett, US2.51-1.78-0.89-1.451.681.100.010.660.00-2.883.10----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback23. May6. Jun20. Jun4. Jul18. Jul1. Aug15. Aug29. Aug12. Sep26. Sep10. Oct24. Oct10203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia30.0030.520.190.52
SW Europe27.5531.671.284.12
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.425.195.615.36
NBP, UK (futures)+2.1525.1122.9626.05
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-1.9710.8912.8618.41
Zeebrugge (Belgium)------9.44
German NCG1.6212.2110.5919.27
NBP (UK)1.287.566.289.77
US Markets
US Spot Prices
Sabine Pass, Louisiana0.065.305.245.10
Corpus Christi, Texas-0.214.754.964.77
Cove Point, Maryland0.044.474.434.35
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month-0.425.195.615.36
Second Mth-0.245.886.125.84
Third Mth-
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaNov '21Dec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '220255075100125Energy Intelligence