November 14, 2022

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Mozambique Celebrates Shipment of First LNG Cargo

Mozambique is celebrating its first-ever shipment of LNG after a ship chartered by BP loaded a 36,000 ton cargo from the Eni-led Coral South floating LNG (FLNG) project over the weekend.

The cargo was lifted by the 173,400 cubic meters British Sponsor, which had been waiting around the facility since mid-October as the plant suffered a minor outage, preventing it from loading to its maiden cargo earlier. The vessel was heading north in the Indian Ocean, according to ship-tracking data by Kpler, and on Nov. 13 it broadcasted the Suez Canal as its next destination, which indicates that it will deliver its cargo to Europe.

Meanwhile, the second cargo loading from Coral South could be just around the corner, as BP's 173,400 cubic meters British Contributor is expected to berth at the Mozambican plant on Dec. 1, according to Kpler.

This is a key moment for the southern African country, whose giant deepwater gas reserves in the northeastern region of Cabo Delgado have attracted billions of dollars in investment commitments from heavyweights such as Eni, TotalEnergies, ExxonMobil and China National Petroleum Corp. But the flagship Mozambique LNG project, operated by Total, has remained under force majeure since April last year due a violent insurgency in Cabo Delgado that has left more than 3,000 dead and almost 1 million homeless over the past five years.

Coral South, which came on stream more or less according to schedule despite some minor technical hiccups in recent months — and at the budgeted cost of around $7 billion — is the largest FLNG project in Africa with a capacity of 3.4 million tons per year. The multi-purpose FLNG vessel, which was built by Samsung in South Korea, arrived in Mozambican waters at the end of last year and began producing gas in June. Production will come from six wells drilled.

All of the LNG from the project is committed to BP under a 20-plus year contract. There are no destination restrictions, so BP could take the LNG to Europe, which is looking to step up imports of to replace gas that was coming from Russia.

BP said the new source of supply from Mozambique further boosts its credentials as a long-term LNG supplier, as it aims to boost its annual trading volumes to 30 million tons a year by 2030.

During its lifetime, Coral South will take up around 5 trillion cubic feet of gas in total from the Coral reservoir, which is part of the Area 4 concession in the Rovuma basin operated by Eni with a 25% stake alongside Exxon with 25%. CNPC holds 20%, and Mozambique’s state oil company ENH, Korea Gas and Portugal’s Galp each have 10%.

Area 4 has proven reserves of around 85 Tcf, which means there is scope for additional FLNG projects. Both Eni and Exxon say the partners and the government are discussing another FLNG scheme, with a similar capacity as Coral South, they say could be done more quickly and at a lower cost.

At the same time, the Area concessionaires are pursuing a final investment decision on the $23 billion, 15.12 million tons/yr Rovuma LNG project, which remains on hold due to concerns over cost and security.

Paul Sampson, London and Daniel Stemler, Madrid

Gail Wants Sefe to Deliver Missed LNG Cargoes

Gail India Ltd. has declined to accept the penalty offered by the LNG trading arm of Germany’s Securing Energy for Europe (Sefe) for not delivering contracted LNG cargoes, arguing that the offer was “very low” and is instead demanding delivery of the missed cargoes, people familiar with the matter said.

India’s state-owned gas pipeline utility has been struggling as Sefe Marketing & Trading (Sefe M&T) had not delivered 17 cargoes since the outbreak of Russia’s war on Ukraine, forcing the New Delhi-based company to buy costlier LNG on the spot market to meet its contractual obligation to consumers.

Sefe M&T offered to pay Gail 20% of the contractual price as a penalty for non-delivery. But Gail is demanding that Sefe buy gas from spot market and make up for the lost volumes.

Gail had originally signed a 20-year LNG supply deal with Gazprom’s wholly owned subsidiary Gazprom Marketing and Trading Singapore, a unit of Gazprom Germania, in 2012. But Gazprom was locked out of the majority of its global LNG trading assets after the German takeover of its largest European subsidiary Gazprom Germania in the aftermath of Russia’s invasion of Ukraine. Gazprom Germania was renamed Sefe.

Headed to Arbitration?

During an analyst conference call earlier this month, a Gail executive said the company was trying to make up for supplies to the downstream customers by reducing its own internal gas consumption, procure additional volumes through spot market and cut supplies to end users.

High near-term LNG prices and supply disruptions from Sefe M&T pose a challenge to utilization at Gail’s own petrochemical plant in Pata in the northern state of Uttar Pradesh and will also lower its gas trading volumes, Nitin Tiwari, an analyst with the Mumbai-based Yes Securities, said in a note.

The contract with Sefe M&T accounts for 18% of Gail’s total LNG portfolio of 14 million tons per year.

Both companies are in pre-arbitration talks while diplomats have been called in to resolve the issue, Bloomberg reported last week, quoting unnamed sources. Sefe M&T could not be reached for comment.

In 2018, Gail renegotiated the contract with Gazprom; it was initially sealed at linkage to the Japanese Crude Cocktail index with a 13.7% ratio but is not indexed at a 13.2% ratio to the Brent crude price. At current oil prices of $95/MMBtu, Sefe would need to supply LNG to Gail at around $12.50/MMBtu, which is roughly half of the spot price.

Destination Europe

Following the German takeover of its parent company, Sefe M&T has directed its cargoes toward Europe, leaving behind buyers in Asia, which was, in previous years, the company's principal market.

Since June, Sefe M&T has delivered all of its cargoes from Cameroon's 2.4 million ton/yr floating LNG plant, where the company is the sole contractual offtaker, to Europe, while in previous years Cameroonian LNG volumes were primarily destined for Asia.

The company also delivered a cargo to the French Dunkirk terminal, which it obtained through a tender from UAE's Adnoc. Another spot cargo by Safe M&T, of Algerian origin, is expected to be unloaded at France's Fos Cavaou terminal at the end of this month by the 150,000 cubic meters Clean Energy, according to data from Kpler.
Rakesh Sharma, New Delhi and Daniel Stemler, Madrid

Berlin Completes Takeover Of Troubled Sefe

Germany has transferred gas company Secure Energy for Europe (Sefe), formerly owned by Russia’s Gazprom, into federal ownership, the economy ministry said Monday.

Sefe has an LNG trading portfolio operated by its Sefe Marketing & Trading unit, although it cannot offtake volumes under contracts in Russia due to Moscow’s sanctions in response to Berlin taking over Sefe in April.

The transfer of Sefe into federal ownership completes the takeover, which Berlin justifies by concerns over the security of gas supply. Sefe controls dozens of trading and distribution companies in Europe, including Wingas, which has some 20% of market share in Germany and whose insolvency could lead to interrupted supplies to its consumers, according to the ministry.

Berlin in April put Sefe, which was called Gazprom Germania at the time, under the trusteeship of the federal network agency, following Gazprom’s non-transparent sale of the company to new unknown buyers and an alleged attempt to liquidate the company.

To transfer the ownership, Berlin has now set up a holding company, Securing Energy for Europe Holding GmbH (Seehg), which replaces the previous owner as the sole new shareholder.

Seehg will gradually inject fresh share capital of €225.595 million ($233 million) into Sefe. To secure Sefe's liquidity, it had provided a €11.8 billion loan through state-owned bank KfW in the spring and will now increase the loan to €13.8 billion, the ministry said. A significant part of the loan will be converted into equity.

Separately, Poland will also take over Gazprom’s 48% stake in Europol Gaz, the owner of the Polish section of the Yamal-Europe gas pipeline from Russia to Germany, Reuters reported Monday, citing Polish Development Minister Waldemar Buda.

Gazprom stopped gas supplies via Yamal-Europe in May, after Moscow imposed blocking sanctions on Europol Gaz as well as on Sefe and around 30 of its subsidiaries.

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


In Brief

Taiwan's CPC Confirms Plans for Seventh LNG Terminal

State-owned CPC Corp. Taiwan (CPC) has confirmed plans to construct a seventh LNG terminal in Kaohsiung City.

CPC officials previously said the Kaohsiung Rim LNG receiving terminal plan was “under evaluation.”

The confirmation was contained Monday in a report presented by CPC Chairman Lee Shun-chin on the firm's 2023 budget to the economic affairs committee of Taiwan`s parliament.

In addition, Lee said CPC plans to purchase 26.3 million cubic meters of LNG in 2023.

Local news media has previously reported that the estimated NT$90 billion (US$2.9 billion) project would entail construction of four storage tanks and will aim to begin supplying Taipower`s Dalin power plant with LNG in 2030, assuming approval of its environmental impact assessment by 2024.

Dennis Engbarth, Taipei City


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India19.0119.8418.6919.9017.7017.5521.1316.1120.8918.8517.0916.3317.23
Sodegaura, Japan17.9921.4221.4421.8017.537.9920.3314.2920.0022.6815.7513.2318.20
Zeebrugge, Belgium13.839.678.469.9912.5113.3811.738.4811.408.6112.7410.1412.98
Huelva, Spain19.9015.8114.6216.1218.5217.8517.8214.4017.5114.7618.5615.7518.59
Isle of Grain, UK10.526.395.186.689.2910.068.745.228.115.349.446.879.67
Everett, US1.04-3.22-2.34-2.900.22-0.350.01-0.80-1.45-4.311.63----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback13. Jun27. Jun11. Jul25. Jul8. Aug22. Aug5. Sep19. Sep3. Oct17. Oct31. Oct14. Nov10203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia24.0023.67-0.43-0.33
SW Europe20.1020.66-0.080.56
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.055.935.886.94
NBP, UK (futures)+5.2332.0826.8631.44
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF12.4933.3020.8116.51
Zeebrugge (Belgium)----12.10--
German NCG9.4331.3521.9215.89
NBP (UK)0.0011.7611.769.99
US Markets
US Spot Prices
Sabine Pass, Louisiana--6.15--4.83
Corpus Christi, Texas--5.19--3.50
Cove Point, Maryland--6.31--3.18
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month0.055.935.886.94
Second Mth0.046.306.267.24
Third Mth0.036.056.026.94
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaDec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '220255075100125Energy Intelligence