November 7, 2022

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Gazprom Tests LNG Supplies to Kaliningrad

Gazprom has tested LNG supplies to Russia’s exclave region of Kaliningrad, as the company seeks to end reliance on pipeline gas transit via Lithuania.

The test follows a recent launch of Gazprom’s 1.5 million ton per year Portovaya LNG plant in northwestern Russia, which the company sees as a key supply source for Kaliningrad.

The planned test lasted around two weeks and ended on Saturday, Nov. 5, Gazprom said in a statement on Monday.

The test was intended to check the technical conditions of equipment at the Marshal Vasilevskiy floating storage and regasification unit and the gas receiving terminal in the Kaliningrad region, Gazprom said.

During the test, regasified LNG from Marshal Vasilevskiy was sent into the regional gas grid.

Lithuania Transit Suspended

In the meantime, Gazprom suspended transit supplies of pipeline gas to Kaliningrad via Lithuania from Oct. 24 to Nov. 4.

The flows resumed at around 4 MMcm/d on Nov. 5 and returned to the pre-shutdown level of some 6 MMcm/d on Nov. 6 (see graph).

Gazprom seeks to reduce its dependence on Lithuanian transit, a task that gained additional importance amid the war in Ukraine. One of Russia’s fiercest opponents in the EU, Lithuania has called for tougher sanctions against Moscow in response to the invasion of Ukraine.

Lithuania stopped imports of Russian pipeline gas in April, as it rejected Russia’s new payment scheme, involving conversion of euros to rubles, but kept transiting Russian gas to the Kaliningrad region.

Supplies from Portovaya

Gazprom said the source of LNG for Marshal Vasilevskiy in Kaliningrad was the Portovaya LNG facility, where production started in September near the Baltic port of Vyborg in northwestern Russia (see map).

Another supply source for Kaliningrad is a local underground gas storage which Gazprom plans to expand, the company said.

Before the Portovaya launch, Gazprom had sent some LNG volumes to Kaliningrad from Cameroon in the beginning of this year, which was seen by some observers as Russia testing the waters in case of Lithuanian transit cutoffs amid the rising tensions around Ukraine.

Gazprom had a 1.2 million ton per year offtake contract with the Cameroon LNG plant via the UK-based trading unit Gazprom Marketing & Trading (GM&T), but GM&T, with all its LNG portfolio, is now under trusteeship of Germany.

Berlin took over GM&T’s direct parent company Gazprom Germania in April in response to Gazprom’s opaque moves to change Gazprom Germania’s ownership structure, which Berlin said could threaten the security of gas supply. Gazprom Germania was later renamed Sefe (Securing Energy for Europe), while GM&T was renamed Sefe Marketing & Trading.

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

Created with Highcharts 9.0.0(MMcm/d)TRANSIT PIPELINE GAS FLOWS VIA LITHUANIA TO RUSSIA'S KALININGRAD REGIONJan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22024681012NOTE: Entsog data for a large portion of February 2022 was not available. Source: Entsog, Energy Intelligence

Supplying the Exclave

lng220127_Russia_Kaliningrad_map.svg


Staff Reports

Traditionally Bullish China to See Consumption Drop This Year

China is expected to suffer a drop in natural gas consumption this year, the first ever, due to a weak domestic economy, a gas official from China National Petroleum Corp. (CNPC), China’s largest gas supplier, told a gas conference in Shanghai this Monday.

“China’s gas consumption growth could reach the lowest-ever in history, and could even reach reduction this year,” said the CNPC gas official.

China’s average gas consumption growth was 13% from 2005-21, according to CNPC.

Consumption Trending Down

China’s “Zero-Covid-19” policy and economic slowdown have weighed on domestic gas consumption.

The country’s apparent gas consumption from January to September this year was 269.48 Bcm, down 1.4% compared to the same period last year, according to China’s National Development and Reform Commission.

China’s natural gas demand is expected to reach 353 Bcm in 2022, down 1.3% from last year, making it the first year-on-year decline in history, according to Yang Jianhong, chief researcher at Beijing Shichuang Energy consulting. She made that prediction at a Nov. 3 conference hosted by Chongqing Petroleum and Gas Exchange. She also predicted that gas demand will be 171.6 Bcm from November 2022 to March 2023, heating season in China, down a slight 0.3% year on year.

China’s natural gas demand this heating season could reach 187 billion cubic meters, if normal temperatures prevail, according to CNPC’s forecast. Gas demand during the heating season could reach 190 billion cubic meters, if there is an extremely cold winter, CNPC said.

Imports Trending Down

China’s natural gas imports, including pipeline gas imports and LNG imports, were at 7.61 million tons in October, down 18.9% from the same month last year, according to the latest data released by the General Administration of Customs.

This continues the downward trend reported last month but with the decline accelerating.

So far, China imported 88.74 million tons of natural gas in the first ten months, down 10.4% compared to the same period last year. Yet the total gas import cost in the first ten months rose by 39.6% compared to the same period last year, due to high international spot LNG prices, customs data showed.

High international oil and gas prices will continue to have an impact on China’s LNG imports.

CNPC forecasted that the Brent oil price would reach $90-$105 per barrel during the heating season, increasing the cost of long-term LNG imports. As for spot LNG imports, CNPC forecasted the JKM price would reach $32-$39/MMBtu during the heating season, which is much higher than the affordable level for China’s LNG buyers of $14-$15/MMBtu.

Mitigating Factors

"Despite declining year-over-year gas imports, domestic heating supply won’t be significantly impacted," a senior consultant at Standard & Poor’s told Energy Intelligence, noting that gas demand for industrial and power use has been weak due to the economic downturn and high gas prices.

And, although China says it wants to reach peak carbon by 2030, the country has not completely ruled out using coal — the high-carbon energy source — for power generation because of its coal-rich energy mix.

China's Ministry of Ecology and Environment said last month, ahead of the heating season in northern China, that areas without ready-to-go clean heating facilities do not need to remove existing coal-fired heating facilities. And mountainous areas with the same problem can still use coal to heat.
Staff Reports

High Prices Slow India’s Automotive Shift to CNG

High natural gas prices have slowed the conversion of gasoline and diesel-fired private cars over to cleaner compressed natural gas (CNG), executives at Adani Total Gas told analysts during a conference call Friday.

India's conglomerate Adani Group and TotalEnergies hold 37.4% each in Adani Total Gas, which supplies piped natural gas to household, industrial and automobile consumers in one of the world's top LNG importers.

Pressure on CNG Sales

High CNG prices have altered consumer preferences, along with the high cost of retrofitting, which includes the use of trunk space by CNG cylinders.

While CNG prices in New Delhi are up 58% on year at 79 rupees ($1) per kilogram, gasoline prices are down 7% at 97 rupees per liter and diesel prices have contracted 3% to 106.31 rupees per liter on year.

Adding to the pressure on CNG sales, costly retrofitted vehicles make up 75% of all additions to the CNG fleet. Newly-built CNG cars account for the remaining 25%.

Though the exuberance that used to be there for converting private cars to gas has moderated, it is a temporary phenomenon as the government is already working to reduce domestic gas prices, the executives at Adani Total gas said.

Back in 2020, the Indian government announced it was pursuing a fourfold growth in CNG stations over the next five years. At the time, CNG was estimated to represent a fifth of India's total gas demand.

Price Panel

India has constituted a panel to recommend a “fair price” for 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 was constituted as domestic gas prices, which are revised every six months in April and October, have jumped about five-fold in two years to $8.57/MMBtu for the six month period that began Oct. 1.
Rakesh Sharma, New Delhi

Kosmos, BP Unfazed by Typhoon Impact on Tortue Yard

A mid-September typhoon strike on a Chinese ship yard, which was building an FPSO vessel for the Greater Tortue project off West Africa, won’t delay start-up of the project, says Kosmos CEO Andrew Inglis

No damage occurred, but the storm’s effects mean the FPSO will set sail for the BP-Kosmos Energy project off Mauritania and Senegal a month later than planned. First LNG, though, remains on track for late next year.

“Stepping back and looking at the project overall, the operator [BP] is working hard to make good progress to overcome challenges from Covid, supply constraints, and now Typhoon Muifa,” Inglis said.

“We expect first gas nine months from FPSO sail away and first LNG and at around year-end, 2023,” Inglis reported during Kosmos’ third-quarter presentation on Monday.

Inglis said Tortue Phase 1 was 85% complete and that significant interest for the 2.5 million tons/yr it will produce was being expressed by an assortment of majors, traders, and other parties.

Of these potential customers, European interest has been especially acute given the Ukraine conflict and the low carbon intensity of Tortue’s gas vis-a-vis competing US and Qatari LNG.

So far, the leaders of two EU countries — Germany and Poland — have visited Senegal since May, and Kosmos’ CEO says both Senegal and Mauritania are using gas to boost their international profiles.

“In light of the rapidly evolving global LNG markets the governments are rightly considering the importance of their gas resource and the opportunity to build new government-to-government relationships,” Inglis noted.

In the meantime, Inglis said the partners continue to advance plans for Tortue Phase 2 and had also signed a production-sharing contract (PSC) for the BirAllah/Orca discovery off Mauritania in October.

The new PSC provides up to 30 months to submit a development plan covering these discoveries, says Kosmos.
Jeffrey Cavanaugh, New Orleans


In Brief

Northeast Asia LNG Imports Up in September

Imports of LNG to Northeast Asia rose for the third consecutive month in September, according to customs data, as demand picked up slightly due to stockpiling ahead of winter, supported by lower spot prices.

Northeast Asia is the world’s top LNG-importing region and consists of Japan, China, South Korea and Taiwan.

Total imports for the region rose by almost 5% on the month to reach 17.2 million tons in September, a slight, 2% year on year fall from 17.6 million tons in September 2021.

Northeast Asia LNG Imports
('000 tons )Sep'22Aug'22Sep'21Y-o-Y %Chg.
China5,8974,7206,750-12.65%
Japan5,3256,2745,410-1.58
South Korea 4,2993,8253,72215.51
Taiwan 1,7291,6471,746-1.00
Total17,24916,46717,629-2.15%

Market volatility caused by the Ukraine war and the potential for supply disruption have caused an uptick in buying interest as countries ensure their inventories are ready for colder winter temperatures. Increased imports were also likely supported by Chinese demand recovery following Covid-19 related lockdowns.

China overtook Japan as the world's top LNG importer in September after Japan had maintained the spot for the first eight months of the year, according to customs data.

China was the world's largest LNG importer for all of last year.
Yousra Samaha, Dubai

Oz Labour Government Cancels CCS Grants

Australia’s Labour government has cut over A$250 million (US$160 million) in funding for carbon capture and storage (CCS) projects in its budget for 2023.

A loss of funding for many of the CCS projects will have a direct impact on costs for related LNG projects.

Santos’ US$165 million Moomba CCS project is among those impacted by the decision. The project was sanctioned last year and was selected to receive a A$15 million grant.

The South East Australia (SEA) CCS hub project and the Burrup Hub gas project have also seen their respective A$40 million grants cancelled.

The SEA CCS hub project is managed by Woodside and Exxon Mobil. It is located in the Gippsland Basin in the Bass Strait.

The project, which entered a preliminary front-end engineering and design study last year, could capture up to 2 million tons/yr of carbon dioxide and inject it into the depleted Bream gas field offshore Victoria.

In turn, the Burrup Hub gas project is managed by Woodside, BP and Japan Australia LNG. A feasibility study has been launched last year for injecting CO2 into offshore reservoirs in the Northern Carnarvon Basin.

The grants were approved by the previous Scott Morrison Liberal-National government that lost the election to Labour in May.

Labour campaigned on a platform limiting public funding for CCS, and stronger support to more mature technologies such as renewables.
Marc Roussot, Singapore


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India21.8122.6421.4922.7120.4920.3523.9518.8923.7121.6519.8819.1120.01
Sodegaura, Japan20.7824.2324.2524.6220.3110.7123.1417.0522.8025.5018.5215.9920.99
Zeebrugge, Belgium12.578.427.218.7411.2512.1210.487.2310.147.3611.488.8911.72
Huelva, Spain27.7023.5322.3123.8426.2825.6025.5722.0925.2522.4626.3323.4626.35
Isle of Grain, UK8.454.333.144.637.227.996.683.176.053.297.374.817.60
Everett, US1.20-3.07-2.19-2.750.37-0.200.01-0.65-1.30-4.171.78----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback6. Jun20. Jun4. Jul18. Jul1. Aug15. Aug29. Aug12. Sep26. Sep10. Oct24. Oct7. Nov10203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia30.0026.49-0.10-3.51
SW Europe27.5528.47-1.710.92
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.546.946.406.36
NBP, UK (futures)-1.7730.4432.2134.23
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-1.3116.0117.328.35
Zeebrugge (Belgium)----10.48--
German NCG-1.7616.3818.1410.71
NBP (UK)-1.719.6711.387.52
US Markets
US Spot Prices
Sabine Pass, Louisiana0.834.834.005.04
Corpus Christi, Texas-0.303.503.804.65
Cove Point, Maryland2.483.180.703.05
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month0.546.946.406.36
Second Mth0.497.246.756.61
Third Mth0.416.946.536.38
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaDec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '220255075100125Energy Intelligence