November 23, 2022


Russia's LNG Production Up 10.4% in October

Russia’s LNG production increased in October, contributed to by the launch of Gazprom’s Portovaya LNG facility, the country’s first capacity addition since May 2021.

The country produced 2.8 million tons of LNG last month, up 10.4% from September and 1.2% from October 2021, the federal state statistics service said Wednesday.

Gazprom produced first LNG at Portovaya in September and officially started commercial operations of the 1.5 million ton per year plant in northwestern Russia in early October.

The long-delayed plant, initially scheduled for 2018, had been built before the EU technology sanctions in response to Russia’s invasion of Ukraine banned the supply of key liquefaction equipment to Russia. But withdrawal of Western technology firms from Russia, including Germany’s Linde, might have slowed the commissioning stage.

Russia’s previous capacity addition was the 900,000 ton/yr Train 4 of Novatek’s Yamal LNG project launched in May 2021, which also contributed to Russia’s overall production growth this year. The next addition is expected in late 2023 when Novatek plans to launch the first 6.6 million ton/yr train of the Arctic LNG 2 project, which unlike other Russian projects in earlier stages of development looks safe despite the sanctions.

Gas Production Down on Year

Although the technology sanctions complicate Russia’s long-term LNG expansion plans, the country’s current LNG exports are not affected by Moscow’s standoff with the West over Ukraine.

Unlike pipeline gas exports, Russia’s LNG exports show a strong growth this year, including to gas-hungry Europe and China, which reduces high-priced spot imports but buys more cargoes under oil-linked contracts in Russia.

Russia’s 10-month LNG production, almost entirely exported, increased 10.6% on the year to 26.9 million tons, according to the state statistics service.

In contrast, production of natural gas, excluding associated gas, fell 13% on the year to 474 billion cubic meters in January-October, pulled down by a sharp drop in pipeline gas exports to Europe.

In September, natural gas production totaled 45.7 Bcm, down 20.3% on the year but up 17% from September due to the beginning of the heating season in Russia.
Staff Reports

Market Players Dismiss Proposed EU Gas Price Cap

Participants in the European gas market have dismissed the European Commission's price cap proposal as a politically driven and largely symbolic measure that is unlikely to have much impact on gas prices in practice.

The commission is simply "trying to show that it is doing something" one trader said of the proposal to cap the price of the front-month Dutch TTF gas futures contract — a widely used reference price — at €275/MWh ($83/MMBtu).

Politicians across Europe have been under pressure to take action as a sharp fall in pipeline gas imports from Russia drove gas and electricity prices to sky-high levels this year, inflicting financial pain on vulnerable businesses and consumers.

But market players said that by setting the proposed cap at such a high level — and attaching other conditions — it was unlikely to be activated.

Furthermore, they added, the commission understands that a low price cap would discourage imports of gas into Europe and exacerbate the region's supply problems.

"They know that if they cap [prices] at €150 or whatever, there is a supply risk in Europe," a gas trader at a European major told Energy Intelligence. "We really need LNG to flow here, otherwise we will destroy European industrial activity even more."

Key Conditions

The proposed cap would only be triggered if the price of the TTF front-month contract remained above €275/MWh for two weeks and also exceeded an international LNG reference price by at least €58 for 10 consecutive days.

Several market participants said it was highly unlikely that both of those conditions would be satisfied.

"In practice this is quite unimaginable," said a gas trader at a major Central European energy company.

Indeed, the two conditions were not fulfilled at the height of the surge in European gas prices in August of this year, when the front-month TTF contract peaked at around €350/MWh but only exceeded €275/MWh for half a dozen days.

Gas prices have fallen considerably from their summer highs as Europe did a good job of filling up its gas storage facilities ahead of the winter heating season, although prices remain well above historical levels.

The front-month TTF contract traded in a range of about €122/MWh to €134/MWh on Wednesday after settling at €119.64/MWh on Tuesday.

Unintended Consequences

The Association of European Energy Exchanges and the European Federation of Energy Traders warned that the price cap proposal could have harmful unintended and irreversible consequences for European industry and consumers.

And the Central European trader noted that the European Commission's price cap proposal is quite far removed from earlier discussions about measures that would specifically target imports of Russian gas.

EU energy ministers were set to consider the price cap proposal at a meeting on Thursday, but the issue has divided the 27-nation block so far and an agreement may remain elusive.

In addition to the price cap, the energy ministers were also set to discuss proposals to facilitate joint gas purchases and cross-border exchanges of gas by EU member states and to accelerate permitting for renewable energy projects.

An EU diplomat said there were concerns among some member states about the extent of their obligations to help each other out with gas supplies — an energy security issue that the block was supposed to have addressed some years ago.

Those concerns include whether a member state with an LNG terminal has an obligation to supply LNG to a landlocked member state without a terminal and whether it is obliged to transfer gas from storage to a member state that needs gas.

Daniel Stemler, Madrid and Tom Pepper, Brussels

Sempra, Conoco Finalize Port Arthur Partnership

Sempra's greenfield, fully permitted Port Arthur LNG export project in Texas is barreling down the runway toward a final investment decision, executing an agreement with major ConocoPhillips.

Sempra Infrastructure, the unit that handles its LNG export business, has executed a 20-year sale and purchase agreement (SPA) with ConocoPhillips for 5 million tons per year of LNG from the 13.5 million ton per year Phase 1 of the proposed Port Arthur LNG project under development in Jefferson County.

Phase 1 is expected to include two natural gas liquefaction trains and LNG storage tanks.

Under the SPA, ConocoPhillips will acquire 30% of the equity in Phase 1 and a natural gas supply management agreement under which ConocoPhillips will manage the feedgas supply requirements for Phase 1.

The announcement follows finalization of an engineering, procurement and construction (EPC) contract with veteran LNG contractor Bechtel Energy for Phase 1. Sempra Infrastructure expects to make FID for Phase 1 in the first quarter of 2023.

Jeff Martin, chairman and CEO of Sempra, cited "a broad strategic relationship with ConocoPhillips, which has a growing global footprint across the LNG value chain."

"Our participation in the Port Arthur LNG project will further enhance our portfolio as we continue to respond to global demand for reliable supply of natural gas," said Ryan Lance, chairman and CEOof ConocoPhillips.

Sempra also noted that a "similarly sized" Phase 2 is "also competitively positioned and under active marketing and development."

Michael Sultan, Washington

Pakistan, Bangladesh Line Up Supplies as Winter Gas Crisis Looms

Pakistan and Bangladesh are struggling to arrange LNG cargoes to ease a gas shortage amid depleting domestic gas reserves and unaffordable international spot LNG prices.

The two countries have long expected to take part in massive South Asian LNG import growth, but are falling short in 2022.

Together, Pakistan and Bangladesh are on track to import the lowest amount of LNG since 2018 (see graph).


Pakistan has arranged an additional cargo for each of the December and January months compared with last year, Petroleum Minister Musadik Malik recently told reporters.

In December last year, Pakistan sourced 10 cargoes, it sourced nine in January 2022, according to the Oil and Gas Regulatory Authority’s website.

Consumers will still face crippling shortages with the government promising only eight hours of gas supplies to household consumers — three hours for cooking breakfast, two hours for lunch and three hours for dinner, the Petroleum Division of Ministry of Energy informed the National Assembly earlier in November.

Pakistan has lined up an additional 20,000 tons of liquified petroleum gas supplies to reach out to consumers that face gas supply issues, Malik said.

Pakistan is facing severe gas shortages due in part to 10% annual depletion of domestic gas reservoirs. The country's capacity to buy spot cargoes has also been limited due to high LNG prices. Sharp depletion in its foreign exchange reserves has triggered concerns of a default in payments.

Created with Highcharts 9.0.0(million tons)SOUTH ASIAN LNG IMPORTSBangladeshPakistan20182019202020212022051015Source: Kpler

A Costly Winter

Gas load shedding is making winters terrible for consumers in Pakistan.

Television news channels showed people forced to order costlier food from hotels in Pakistan’s financial capital Karachi.

Spot LNG prices in Northeast Asia, which had peaked at $65 per million Btu in early September, crashed to $22.50/Btu by mid-November, jumped this week by $4.50 to $27/MMBtu, according to Energy Intelligence assessments for deliveries four to eight weeks ahead.

The prices are more than double of what Pakistan pays for its term supplies from its biggest supplier Qatar.

Net foreign exchange reserves with the State Bank of Pakistan for the week ended Nov. 11 were just $8 billion, half of what they averaged for the full month of November last year — barely enough to cover about six weeks of LNG imports.


Like Pakistan, Bangladesh has promised that it will source five cargoes under term supplies in December compared with four it got in each of October and November.

Bangladesh’s gas supply averaged 2.6 billion cubic feet a day on Nov. 21-22, including LNG supply of 381 million cubic feet per day. The supply had averaged 2.96 Bcf/d on Nov. 21-22 last year, including LNG supply of 579 MMcf/d.

Local television channels showed drivers lining up outside filling stations for over four hours to get gas for their vehicles while people struggled to cook food at home due to low gas pressure.

The government has cut supplies to power plants to just 815 MMcf/d against the total requirement of 2.3 Bcf/d.

The textile industry, fed up with chronic gas shortages, has proposed to pay higher tariffs for consuming costlier LNG, the Financial Express newspaper reported on Nov. 20.
Rakesh Sharma, New Delhi

Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India21.9022.7321.5722.7920.5920.4424.0219.0023.7821.7419.9819.2220.11
Sodegaura, Japan20.8824.3124.3324.6920.4210.8923.2217.1922.8925.5718.6416.1321.09
Zeebrugge, Belgium30.9326.6125.3426.9429.5630.4628.7425.3928.4025.5229.7927.1030.04
Huelva, Spain27.3123.1821.9623.4925.9125.2325.2021.7524.8922.1225.9623.1125.98
Isle of Grain, UK13.159.027.819.3211.9212.6911.377.8610.757.9812.079.5012.30
Everett, US4.710.441.320.763.893.310.012.872.21-0.665.30----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback20. Jun4. Jul18. Jul1. Aug15. Aug29. Aug12. Sep26. Sep10. Oct24. Oct7. Nov21. Nov10203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia27.0026.56-0.44-0.44
SW Europe26.8028.081.281.28
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.537.316.786.20
NBP, UK (futures)+3.2635.8632.6032.06
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF1.1037.9536.8631.07
Zeebrugge (Belgium)--------
German NCG2.4135.5333.1228.85
NBP (UK)1.2814.3813.109.75
US Markets
US Spot Prices
Sabine Pass, Louisiana0.236.446.215.75
Corpus Christi, Texas0.706.105.405.23
Cove Point, Maryland0.056.015.967.11
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month0.537.316.786.20
Second Mth0.307.717.416.61
Third Mth0.327.497.176.35
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaJan '22Mar '22May '22Jul '22Sep '22Nov '220255075100125Energy Intelligence