November 8, 2022

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Adnoc Reaches Out to Potential LNG Partners

Abu Dhabi National Oil Co. (Adnoc) has reached out to potential partners for an equity position in its planned new LNG export terminal to be built in the emirate of Fujairah.

The new facility, which will make the United Arab Emirates the Mideast Gulf's second-largest exporter of the super-cooled fuel, is set to come online by around 2026.

“It is an extremely aggressive timeline,” said one source at an international oil company (IOC) interested in joining the project, adding that Adnoc had reached out to potentially interested parties.

Adnoc declined to comment.

The project is moving ahead at a time when world energy markets are in upheaval and global demand for the super-chilled fuel is on the rise.

European Interest

Interest in gas supplies from Abu Dhabi has come from countries including Germany and Austria in recent months as European states and companies adjust to the fallout from Russia's Ukraine invasion on energy markets.

The Fujairah scheme also benefits from an advantageous position on the Gulf of Oman, outside the Iran-dominated Strait of Hormuz, and has potential to be among the world's lowest-carbon LNG export facilities — a future hedge against the energy transition.

“The project is a good idea and the timing is good; and they [Adnoc] have gas to monetize,” the source said.

Adnoc has existing liquefaction capacity of 5.8 million tons per year located on Das Island about 160 kilometers off the coast of Abu Dhabi. The facility is operated by Adnoc LNG, established in 1973 as Adgas and 70% owned by Adnoc, with Mitsui & Co. holding 15%, BP 10% and TotalEnergies 5%.

Created with Highcharts 9.0.0(million tons)UAE LNG EXPORTSJapanIndiaChinaPakistanSouth KoreaTaiwanKuwaitThailandOthers2018201920202021202201234567Source: Kpler

Final Investment Decision

The Abu Dhabi state giant is understood to be talking to new and existing partners about coming on board the Fujairah development.

“They want to move quickly on the final investment decision. So they need to pick a partner,” the source said, adding that this was expected to happen before key project decisions such as EPC awards have been made.

Adnoc in July launched the bidding process for the main engineering, procurement and construction (EPC) work on the $2 billion-plus LNG facility. The contract is due to be awarded in 2023 after the completion of front-end engineering and design (Feed) work, which is being carried out by McDermott International.

The 9.6 million ton/yr Fujairah expansion would lift Adnoc's overall LNG capacity to around 15.4 million tons/yr, and place the UAE ahead of neighboring Oman, which has around 11 million tons/yr of liquefaction capacity, to take the No. 2 LNG producer spot in the region.

It will still remain well below Qatar's liquefaction capacity of about 77 million tons/yr, which is in the process of being expanded to 126 million tons/yr in two phases by 2027.

Mideast Gulf LNG Landscape

ef220621_Gulf_Oman_Qatar-UAE-Fujairah.svg


Oliver Klaus, Dubai

Israeli, German Firms Explore LNG Cooperation

Israeli NewMed Energy and Germany’s Uniper have signed a provisional deal to explore LNG supply from Israel to Europe and the development of blue and green hydrogen.

The East Mediterranean is becoming increasingly important to Europe as it attempts to wean itself off Russian piped gas.

Under the non-binding memorandum of understanding both firms have agreed to cooperate on short and long-term LNG supply to Europe as well as future development of blue and green hydrogen.

“This collaboration with NewMed Energy fits our strategy of diversifying our gas supply sources and paving the way to a decarbonized world,” said Niek den Hollander, Chief Commercial Officer of Uniper in a joint statement Tuesday.

An Israeli industry source had previously told Energy Intelligence that European gas companies had started visiting Israel in the wake of the MOU signed between the European Commission, Egypt and Israel over LNG supply last June.

The main export option outlined was the existing pipeline infrastructure from Israel to Egypt with a connection to Egypt’s liquefaction facilities without outlining if either the Shell-operated Idku plant or the Eni-operated Damietta terminal were first choice. Uniper is seeking gas supply from the 22 trillion cubic foot Leviathan gas reservoir under a planned phase 1B expansion “as well as liquefaction of the gas at one of the existing facilities in Egypt or at a new-build independent floating liquefaction facility in Israel.”

US Chevron, partner with Delek — the ultimate owner of NewMed Energy — on the Israeli Leviathan and 11 Tcf Tamar fields and the 4 Tcf Cypriot Aphrodite field, has yet to announce a final investment decision for both Aphrodite and a second phase of Leviathan. Export options include a pipeline running from the fields to one of the Egyptian liquefaction plants or a floating LNG vessel. Chevron is already talking with Asian contractors over a potential vessel but insists all options remain on the table.

Separately, London-listed Energean, another explorer in Israel’s upstream, confirmed this week a commercial 13.3 billion cubic meter gas discovery at its Zeus-1 exploration well in offshore Block 12 while the rig has now moved to drill the Hercules hydrocarbons structure in Block 23 as part of the firm’s 2022 drilling program. Energean has also confirmed contingent resources of 11.75 Bcm in its Athena gas discovery, also in Block 12.
Tom Pepper, London

Santos Updates Strategy, Sets Long-Term Guidance

Australian oil, gas and LNG producer Santos says it plans to become an "energy transition company" by maintaining and growing its gas and liquids production while using carbon capture and storage (CCS) to expand its sales of clean fuels.

Santos has set equity production guidance of 100 million-140 million barrels of oil equivalent per year for 2025-45, with large projects such as Pikka, Barossa, Dorado and Papua LNG expected to contribute to output in the coming years.

In the shorter term, the company is projecting gas and liquids production of 91 million-98 million boe in 2023 — down from 103 million-106 million boe this year.

The dip in 2023 is largely due to the depletion of the Bayu-Undan gas field in the Timor Sea and the Reindeer gas field offshore West Australia, as well as the planned sale of part of its stake in PNG LNG to Papua New Guinea's Kumul Petroleum.

Sell-Downs

Santos said its longer-term production guidance assumes further sell-downs of its equity stakes in some assets.

"If you take all the current equity positions and all the opportunities Santos has today, you end up above that [100 million-140 million boe] range," CEO Kevin Gallagher said during an investor briefing.

“Undoubtedly, over that period [2025-45] there will be a level of portfolio optimization that will occur, that will help us stay within that [range]," Gallagher added.

Gallagher suggested that the company's Narrabri gas project could be a sell-down candidate. Santos has held 100% of the equity in Narrabri since its sole partner Energy Australia sold back its 20% stake earlier this year.

However, Gallagher emphasized that there is "no specific sell-down target or sell-down activity" at this time.

Decarbonization

CCS will play a major role in the development of the company's clean fuel offerings — including carbon-neutral LNG, hydrogen and ammonia — and will also become a new source of revenue generation.

Santos is targeting 160 million tons of CO2 storage capacity (net to the company's interest) by the end of the decade.

It is currently working on three CCS hubs with an estimated combined gross storage capacity of more than 32 million tons per year. These make use of depleted gas fields such as Bayu Undan and Reindeer.

Gallagher said these projects are attracting growing interest from potential investors, customers, shipping companies, banks and infrastructure players.

"We have got majors talking to us about how they can get into some of our carbon capture and storage opportunities, into our hubs, because we have got some pretty significant opportunities," he said.

Santos is also talking to companies that want to send CO2 captured from their industrial processes back to Australia.

"There is a real opportunity for this in Korea," Gallagher said.
Marc Roussot, Singapore


In Brief

Spot LNG Prices Fall to Five-Month Lows

Spot LNG prices into Northeast Asia dropped $2 to $24 per million Btu, according to Energy Intelligence assessments for deliveries four to eight weeks ahead. Spot prices in Southwest Europe dropped by $3.75 week on week to $20.10/MMBtu.

Asian LNG prices fell to their lowest level since June amid continued tepid demand, as inventories remain comfortable and mild weather outlook persists into the winter season.

Chinese LNG demand remains capped, with a surge in Covid-19 cases in Guangzhou prompting fears that the city could be next in implementing a Shanghai-style lockdown.

Meanwhile, congested LNG terminal tanks in Southwest Europe continued to weigh on European spot LNG prices leading not only in increased waiting times, but also to unloading cancellations.

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

Marc Roussot, Singapore and Daniel Stemler, Madrid

GE, Shell Sign LNG Decarbonization Pact

GE Gas Power and Shell will develop potential low-carbon solutions aiming to reduce the carbon intensity of Shell’s LNG supply projects globally, the companies announced in a statement earlier this week.

The companies signed a development agreement whereby GE will accelerate the development of 100% hydrogen as a low-carbon fuel for gas turbines. “With global LNG demand projected to almost double by 2040, decarbonization is crucial in helping the company meet the world’s growing energy needs,” the statement said.

The agreement will look into hydrogen solutions using Shell’s Blue Hydrogen Process as a technology to deliver low-carbon intensity fuel for GE’s B and E class gas turbines used in LNG and power generation applications.

GE’s B&E gas turbines have the capacity to operate on 100% hydrogen with the use of water in diffusion combustors. As part of the development agreement GE will target gas turbine technology with the capability to operate on 100% hydrogen without the use of water while maintaining nitrogen oxide emissions.

This agreement is also in line with Shell’s efforts to reach net-zero emissions by 2050.
Yousra Samaha, Dubai

Cove Point Stake on Block?

Dominion Energy might sell its 50% stake in the Cove Point LNG export terminal in Maryland, Bloomberg reported Monday citing sources with “knowledge of the matter.”

The move would make sense in light of the utility giant having sold thousands of miles of pipelines and nearly 1 trillion cubic feet of storage capacity to Berkshire Hathaway in a July 2020 deal announced at the same time Dominion and partner Duke Energy scrapped the $8 billion Atlantic Coast project.

Dominion President and CEO Thomas F. Farrell II said at the time that the $9.7 billion sale was part of a “strategic plan that includes reaching net-zero carbon and methane emissions target by 2050.”

However, Dominion retained a 50% stake in Cove Point. Berkshire Hathaway Energy now owns 25% and Brookfield Asset Management 25%.

The sources said the company is in early talks about possibly divesting its Cove Point interests and is working with advisers to solicit interest from potential buyers.

Cove Point is a relatively small operation, with the capacity to liquefy and export some 5.25 million tons of LNG per year.
Tom Haywood, Houston


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India19.3420.1719.0220.2318.0317.8821.4616.4321.2219.1817.4216.6617.55
Sodegaura, Japan18.3221.7521.7822.1317.868.3120.6714.6220.3323.0116.0813.5618.53
Zeebrugge, Belgium14.8310.669.4410.9713.5114.3812.739.4612.399.6013.7311.1313.98
Huelva, Spain19.3415.2614.0715.5717.9617.2917.2613.8416.9514.2118.0015.2018.03
Isle of Grain, UK9.975.844.646.138.739.518.194.677.564.798.886.329.11
Everett, US1.30-2.97-2.09-2.650.48-0.100.01-0.54-1.20-4.061.89----
Created with Highcharts 9.0.0($/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 Asia30.0024.00-2.49-6.00
SW Europe27.5520.10-8.48-7.45
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.816.146.945.71
NBP, UK (futures)+1.8932.7530.8632.27
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF11.0627.1716.106.20
Zeebrugge (Belgium)--10.92--4.76
German NCG8.7325.0216.296.55
NBP (UK)1.3811.199.815.08
US Markets
US Spot Prices
Sabine Pass, Louisiana-0.903.934.834.49
Corpus Christi, Texas0.143.643.503.70
Cove Point, Maryland-0.103.083.182.99
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month-0.816.146.945.71
Second Mth-0.726.527.246.08
Third Mth-0.676.276.945.90
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaDec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '220255075100125Energy Intelligence