November 28, 2022

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Chinese Giants in Talks on Qatar LNG Stakes

Chinese heavyweights Sinopec and PetroChina are in talks with QatarEnergy for separate equity stakes in the giant North Field East (NFE) LNG development, according to multiple industry sources.

Partners for Phase 1 of the expansion, NFE, had been announced in the summer, followed by a series of announcements for the next phase development known as North Field South (NFS).

Sources told Energy Intelligence that Sinopec is in talks for a 5% stake of NFE, which would leave 70% in QatarEnergy's hands.

Sinopec last week signed a 27-year LNG supply deal with QatarEnergy, but no mention was made at the time whether the Chinese firm would also take an equity position.

Energy Intelligence understands that Chinese state firm PetroChina also is in talks with Qatar, making it possible that both Sinopec and PetroChina could be competing for the remaining 5% NFE stake.

Both are already buyers of Qatari LNG.

Major Asian gas buyers have been understood to be in talks with Qatar over buying a stake in NFE for more than a year.

Thus far, QatarEnergy CEO Saad al-Kaabi has handed out stakes totaling 25% of each project to a series of Western majors — the limit of what he would offer Western majors.

But al-Kaabi has said that he would be willing to award another 5% of each project to large Asian buyers if their commercial offers were competitive.

An announcement for the equity stakes could be made as soon as Tuesday, when QatarEnergy has planned a signing ceremony in Doha.

However, market sources indicated that ceremony could also be held to announce a further long-term sales contract with buyers in Europe.

QatarEnergy wasn't immediately available to comment.

Long-Term Supply Deal

Last week, QatarEnergy entered a 27-year LNG supply deal with Sinopec under which Qatar will supply China with 4 million tons per year of LNG from the NFE expansion.

The agreement with Sinopec marked the first supply deal announced for NFE after the announcements of the equity partnerships earlier this year.

Under the sale and purchase agreement (SPA), the volumes will be delivered to Sinopec’s receiving terminals in China.

The deal marks the longest gas supply agreement in the industry’s history, also matching the duration of Qatar’s equity partnerships for the North Field expansion.

Qatar has been in ongoing talks with European and Asian customers to sign long-term supply deals as governments scramble to arrange secure energy supplies amidst a global energy crunch.

German Chancellor Olaf Scholz recently confirmed German firms were in ongoing talks to secure long-term Qatari supply. Market sources suggested RWE could be in the frame for a supply contract to be announced Tuesday.

Joining Western Partners

If either — or both — of the Chinese giants join Qatar’s LNG expansion, they would join a partner line up comprised entirely of Western majors thus far.

The 32 million tons per year NFE project was awarded to TotalEnergies (6.25%), Exxon Mobil (6.25%), Shell (6.25%), Eni (3.125%) and ConocoPhillips (3.125%).

The 16-million-ton/yr NFS project was awarded to TotalEnergies (9.375%), Shell (9.375%) and ConocoPhillips (6.25%), suggesting that 5% on this project is also still up for grabs.

NFE and NFS are expected to start to come online in 2026 and 2027, respectively.

Clara Tan, Singapore and Yousra Samaha, Dubai and Oliver Klaus, Dubai and Rafiq Latta, Nicosia

Shenzhen Energy Signs LNG Deal With BP

China’s local government-run Shenzhen Energy signed an LNG deal with supermajor BP last week.

Sources told Energy Intelligence that BP will supply 500,000 tons per year of LNG for 15 years to Shenzhen, starting from 2026, on a d.e.s. basis.

China’s southern city of Shenzhen, strategically located amid several emerging LNG buyers, wants to become an international gas trading hub.

Terminal Routes

Shenzhen Energy, in Guangdong province, has a 30% stake in PipeChina’s 4 million ton per year Shenzhen Diefu import terminal. Shenzhen Energy will use Diefu terminal to import LNG under the deal, said sources.

“Shenzhen Energy has no intention to build a new terminal now,” said a Shenzhen-based domestic LNG trader.

Sources said Shenzhen Energy will also use PipeChina’s 2 million ton per year Yuedong terminal in southeastern China’s Jieyang, Guangdong province, as PipeChina provides third-party access to their terminals.

“Shenzhen Energy has applied [for] long-term window slots with Yuedong terminal,” said another Shenzhen-based source.

BP and Shenzhen Energy are both investors in CNOOC’s 6.8 million ton Guangdong Dapeng LNG importing terminal in Shenzhen. BP has a 30% stake and Shenzhen Energy has 4% stake.

But sources said as a small investor, Shenzhen Energy doesn't have a right to use Dapeng’s window slots independently.

Other Deals

BP has had a series of LNG-related deals in China including taking a stake this year in an LNG terminal in eastern China's Jiangsu province, and several mid-sized deals last year.

Last year, BP signed a 10-year pipeline gas agreement with Shenzhen Gas, under which BP will provide a wholly-owned subsidiary of Shenzhen Gas with up to 300,000 tons of pipeline gas per year starting in 2023, at a price linked to international LNG prices.

Shenzhen Gas is a city gas distributor, and Shenzhen Energy’s major business is power plants.
Staff Reports

Yet Another Term for Equatorial Guinea's President

The president of Equatorial Guinea, Teodoro Obiang Nguema, consolidated his status as the world’s longest-standing ruler by capturing around 95% of the vote in elections that also saw his ruling party win all the seats contested in the senate and lower house of parliament.

Obiang’s re-election, assuming the 80 year-old supremo stays alive, will see him extend his 43 years in power by another seven years.

In theory, the stability is the preferred outcome for western oil companies operating in the West African country, including ExxonMobil, Marathon Oil and Houston-based independent Kosmos Energy. But it will do nothing to arrest the steady decline in its oil output, which has fallen from over 350,000 barrels per day in 2005 to below 120,000 b/d at present.

The country is also running short on gas, and looking for new sources of supply to feed the 3.7 million ton per year EGLNG plant, operated by Marathon, which has been in operation since 2007. The plant hasn't yet matched a 2014 peak of 3.98 million tons of exports, according to Kpler.

What Obiang does guarantee is political stability, albeit under a repressive system that has enriched the ruling elite but failed to lift most of the population out of poverty.

“He has been the godfather of Equatorial Guinea's oil industry and transformed what had been one of the poorest and most isolated economies in Africa,” Antony Goldman, head of UK-consultancy Promedia, says. “But his government has struggled to manage the downturn of recent years and the decline in oil and gas reserves."

Declining Production

Goldman says infighting among rival factions has clouded the future of the ageing Zafiro oil and gas field, which is operated by ExxonMobil and came into production in 1996, reaching a plateau of around 280,000 b/d in 2004 before plummeting below 20,000 b/d last year. Plans by Exxon to sell its interest to the company Trident Energy, backed by US private equity group Warburg Pincus, fell through after the government failed to give its blessing to the deal.

On the gas front, Equatorial Guinea has had to contend with falling output from the Marathon-led shallow water Alba development which, like Zafiro, peaked some time ago. Until last year, Alba accounted for all of the feedstock for the EGLNG plant, though the start-up in March last year of the Alen gas field, operated by Chevron, provides a much-needed alternative.

Most of the offtake from EGLNG goes to Shell under a long-term offtake deal, dating back to 2007, that has proven extremely profitable for the European major as it is indexed to Henry Hub prices. The contract expires at the end of next year, however.

Not a Monarchy?

The election results were announced over the weekend by Obiang’s son and most likely successor, Vice President Teodoro Nguema Obiang, better known as “Teodorin.”

Despite being convicted by a French court in 2020 for embezzlement, he is the only obvious candidate, analysts say.

Asked several years ago if he was grooming his son to take over, President Obiang told the Jeune Afrique magazine: "Equatorial Guinea isn't a monarchy... but if he's got talent, there's nothing I can do."
Paul Sampson, London


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India21.9722.6821.7422.7320.9220.7723.7419.6223.5521.8720.3919.7720.51
Sodegaura, Japan21.4224.2724.2924.5821.0613.2223.3818.4223.1125.3119.5817.5221.60
Zeebrugge, Belgium46.2142.4541.3642.7345.0345.8144.2941.4243.9941.5145.2342.9245.45
Huelva, Spain46.8043.1542.0943.4245.5744.9844.9241.9244.6542.2345.6243.1445.63
Isle of Grain, UK32.7129.0828.0329.3331.6332.3131.1228.0930.5828.1831.7629.5431.96
Everett, US3.840.341.070.603.172.710.012.311.78-0.544.32----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback27. Jun11. Jul25. Jul8. Aug22. Aug5. Sep19. Sep3. Oct17. Oct31. Oct14. Nov28. Nov10203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia27.0026.22-0.07-0.78
SW Europe26.8047.5615.3620.76
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.316.717.026.78
NBP, UK (futures)+0.3435.2334.8932.54
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF0.0338.1838.1534.30
Zeebrugge (Belgium)--30.37----
German NCG-0.7034.9935.6932.03
NBP (UK)15.3633.8718.5113.49
US Markets
US Spot Prices
Sabine Pass, Louisiana--5.99--6.25
Corpus Christi, Texas--5.55--6.10
Cove Point, Maryland------6.55
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month-0.316.717.026.78
Second Mth-0.137.207.337.22
Third Mth-0.127.027.146.96
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaDec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Dec…0255075100125Energy Intelligence