November 9, 2022

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Japanese Firms Form Joint Venture for Vietnam LNG-to-Power Scheme

Japanese firms Tokyo Gas and Marubeni have established a joint venture with state firm Petrovietnam Power and local machinery firm Colavi for a planned LNG-to-power project in Cam Pha district in Quang Ninh province in northern Vietnam (see map).

The new firm, Quang Ninh LNG Power, would conduct an economic and technical feasibility study, select an engineering, procurement and construction contractor, and formulate an LNG procurement plan. The target is to start commercial operation of the onshore import terminal and a 1.5 gigawatt LNG-fired power plant in the second half of 2027 after reaching a final investment decision. Details of individual shareholdings were not disclosed.

The establishment of the joint-venture firm came shortly after the firms received an investor registration certificate from the Vietnamese government in July. The partners first signed a memorandum of understanding in 2020 when Japan’s former Prime Minister Yoshihide Suga met his Vietnamese counterpart Nguyen Xuan Phuc in Vietnam.

Marubeni said Vietnam's rapid economic growth and rising power demand would signal strong demand for large-scale power plants with high efficiency. The Japanese trading house said it is getting involved in LNG-to-power projects as part of its green strategy, which would contribute to transitioning to a low-carbon society.

The Quang Ninh project represents one of many proposed LNG-to-power projects in Vietnam, which wants to reduce its reliance on coal to meet its net-zero commitments by 2050 and is facing falling domestic gas output. However, many projects are facing delays due to a lack of progress in talks between project developers and state utility EVN for the country’s first power purchase agreement for an LNG-fired power facility.

High prices have heightened energy security concerns for the Vietnamese government, leading to delays in finalizing the country's new power development plan (PDP-8) for 2030 with a vision for 2045.

Vietnam was originally slated to debut LNG imports this year. State Petrovietnam Gas said recently its 1 million ton per year Thi Vai terminal would start up in the first half of 2023, instead of the fourth quarter this year.

Quang Ninh LNG Power

lng221109_vietnam.svg


Clara Tan, Singapore

Russia Plans Bigger Tax Hike for LNG Producers

Russia may approve a bigger increase in profit tax for LNG producers than initially planned, as the country wants gas exporters to share their windfall revenues from high prices.

The State Duma committee on budget and taxes on Wednesday introduced amendments to a bill on extra taxes ahead of the second hearing scheduled for Thursday. The amendments raise the profit tax rate for LNG producers to 34% instead of 32% which was approved in the first reading of the bill on Oct. 18.

The higher tax will be set for the period of 2023-25.

An increase to 32% would have brought an extra 200 billion rubles ($3.3 billion) a year to the country’s budget, according to previous estimates, but Moscow decided it could take more.

The current rate of the profit tax is 20%, of which 3% is paid to the federal budget and 17% to the regional budgets. Under the amended bill, producers will pay 17% to the federal budget and 17% to the regional budgets.

The amended bill stipulates that the higher tax will apply to producers who have exported at least one LNG cargo before Dec. 31, 2022. That formalizes the exemption for Novatek’s new Arctic LNG 2 project which is scheduled to start in late 2023 and which the company boss Leonid Mikhelson said last month would not be subject to the tax hike.

Novatek’s operational Yamal LNG plant will face only a partial increase in profit tax, according to Mikhelson, because it will keep paying a reduced rate of 13.5% to the regional budget, approved from the start of the project. Its payments to the federal budget are however expected to increase to 17% from 3%, in accordance with the amended bill.

Russia’s only other large LNG plant, Gazprom-controlled Sakhalin-2 now pays the normal rate of 20% in profit tax.
Staff Reports

Kosmos Begins Talks With Possible Buyers of Tortue Volumes

US independent Kosmos Energy will use a diversion clause in its contract with BP — pay the penalties — and market a portion of the Greater Tortue LNG volumes itself.

Kosmos has begun negotiations to sell up to 75% of the annual volumes available to it through its working interest in Phase 1 of Greater Tortue offshore Senegal and Mauritania.

The potential buyers include traders, international oil companies (IOC) and end-users, a company source told Energy Intelligence.

The idea behind the negotiations is to allow Kosmos to take advantage of higher forward gas prices, primarily in Europe.

Earlier this week, Kosmos reported the limited impact of a typhoon on a Chinese shipyard that is building an FPSO vessel for the project.

Kosmos Clause

Cargoes from the 2.5 million ton/yr Greater Tortue project, which is scheduled to produce first LNG at the end of 2023, are set to be lifted by the project operator, UK major BP, on an f.o.b. basis under a term offtake contract. The contract is indexed to a slope of the Brent crude oil benchmark.

However, the Kosmos gas sales agreement with BP for the first phase of the project includes a deliver-or-pay clause, which allows the US producer to divert cargoes to other buyers by paying an agreed non-delivery penalty to BP.

The clause was explained by Kosmos CEO Andrew Inglis at the company’s second quarter results call back in August.

“The penalties [are] typically in the range of 20% to 30% of the contractual price, the price that's linked to the Brent slope. So, if you take those inputs and you look at an average gas price, let's say, for 2024 and 2025 of around $20 and an oil price of, let's say, $100 per barrel, the opportunity could be around $200 million of additional revenue net to Kosmos in total over those two years,” Inglis said.

Significant Interest

Kosmos has started discussions with prospective buyers as it looks to utilize such contractual rights and capitalize on the attractive gas price outlook, the company said in its third quarter results statement on Nov. 7.

“We are seeing significant interest in the opportunity,” the statement said.
Daniel Stemler, Madrid


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India19.3420.1719.0220.2318.0317.8821.4616.4321.2219.1817.4216.6617.55
Sodegaura, Japan18.3221.7521.7822.1317.868.3120.6714.6220.3323.0116.0813.5618.53
Zeebrugge, Belgium14.8310.669.4410.9713.5114.3812.739.4612.399.6013.7311.1313.98
Huelva, Spain19.3415.2614.0715.5717.9617.2917.2613.8416.9514.2118.0015.2018.03
Isle of Grain, UK9.975.844.646.138.739.518.194.677.564.798.886.329.11
Everett, US1.30-2.97-2.09-2.650.48-0.100.01-0.54-1.20-4.061.89----
Created with Highcharts 9.0.0($/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 Asia24.0023.59-0.41-0.41
SW Europe20.1019.64-0.46-0.46
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.275.876.146.27
NBP, UK (futures)-1.4931.2632.7535.25
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF1.7628.7526.9912.47
Zeebrugge (Belgium)-0.5010.4910.9914.43
German NCG1.1726.3525.1813.03
NBP (UK)-0.4610.7311.1914.94
US Markets
US Spot Prices
Sabine Pass, Louisiana-0.503.433.934.54
Corpus Christi, Texas----3.643.51
Cove Point, Maryland-0.992.093.083.08
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month-0.275.876.146.27
Second Mth-0.306.236.526.59
Third Mth-0.305.976.276.37
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaDec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '220255075100125Energy Intelligence