November 29, 2022

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Germany to Start Receiving Qatari LNG in 2026

QatarEnergy has signed two long-term sale and purchase agreements with ConocoPhillips to supply LNG to Germany for the first time.

Under the agreement, ConocoPhillips will supply about 2 million tons per year of LNG for at least 15 years to the German LNG receiving terminal at Brunsbuettel from 2026.

The Brunsbuettel terminal is located near Hamburg on the Elbe River and has a regasification capacity of 8 billion cubic meters per year.

It is one of as many as six floating regasification facilities being developed by Germany that are expected to be brought on line by the end of next year.

The deal is the first long-term LNG supply agreement for Germany, which is seeking to cut its dependence on Russian gas after Moscow's invasion of Ukraine.

The gas will come from Qatar's two-phase LNG expansion, which will increase its total liquefaction capacity to about 126 million tons/yr from 2027.

First Step on Long Journey

"The agreement between QatarEnergy and US group ConocoPhilips is an important first step on a long journey," said Timm Kehler, head of German industry association Zukunft Gas.

However, Kehler pointed out that the deal is just one of many that will be required, given that the limited volumes involved represent only about 6% of Germany's historical gas imports from Russia.

While Germany has been moving quickly to find alternatives for Russian gas, there were questions about its willingness to commit to long-term supply contracts, given its plans to transition away from fossil fuels in the longer term.

German Economy Minister Robert Habeck said on Tuesday that he was happy with the 15-year term of the contract and would have also accepted a longer duration.

But he also noted that Germany will start reducing its gas consumption from the 2030s as part of efforts to reduce its greenhouse gas emissions.

Europe's Largest Gas Market

The LNG shipped to Germany will be sourced from the North Field East (NFE) and North Field South (NFS) expansion projects in Qatar, according to a statement issued by QatarEnergy.

"Germany is the largest gas market in Europe ... and we are committed to contribute to the energy security of Germany and Europe at large," said Qatar's Energy Minister Saad al-Kaabi, who is also CEO of QatarEnergy.

Qatar awarded stakes in the 32 million ton/yr NFE expansion project earlier this year to TotalEnergies (6.25%), Exxon Mobil (6.25%), Shell (6.25%), Eni (3.125%) and ConocoPhillips (3.125%).

Stakes in the 16 million ton/yr NFS project, went to Total (9.375%), Shell (9.375%) and ConocoPhillips (6.25%).

ConocoPhillips CEO Ryan Lance said the agreements announced on Tuesday "will provide an attractive LNG offtake solution for our new joint ventures with QatarEnergy and position the joint ventures as reliable sources of LNG supply into Europe."

In an interview with Energy Intelligence earlier this year, al-Kaabi indicated that up to half of Qatar's new LNG production from NFE and NFS could head west.

At the time he indicated that 10-15 year deals "are probably what are most acceptable to both sides," but added that "it's not just about duration, it's about price."

Qatar is certainly not averse to signing longer deals and recently inked a record 27-year contract with Sinopec to supply China with 4 million tons/yr of LNG.

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

Oliver Klaus, Dubai

Russia Sees Big Prospects for LNG Supplies to China

Russia sees big prospects for LNG exports to China, although its expansion plans are complicated by EU technology sanctions imposed earlier this year in response to the invasion of Ukraine.

LNG supplies from Russia to China can in future be comparable in size with pipeline gas exports, Igor Sechin, CEO of Russian state-run Rosneft, told the Russia-China Energy Business Forum in Moscow on Tuesday.

Russia’s pipeline gas exports to China will exceed 100 billion cubic meters per year (roughly 72 million tons) in the foreseeable future, he said, adding that the country has gas reserves to supply even more.

Sechin said China’s gas demand will almost double to 660 Bcm/yr by 2040 from 380 Bcm/yr currently.

Russia seeks to diversify energy exports to Asia to mitigate the loss of the European market, as the EU seeks to phase out Russian pipeline gas imports by 2027 because of Russia’s aggression in Ukraine.

Rosneft’s Ambitions

A key oil exporter to China, Rosneft has big gas ambitions, although it now has no operational LNG export projects and is not allowed to export pipeline gas, which is exclusively handled by state-run gas giant Gazprom.

Rosneft might see Russia’s accelerated drive to diversify exports as an opportunity to renew its efforts to gain access to pipeline gas exports.

Rosneft has more than 2 Tcm of gas reserves in East Siberia and Russia’s Far East that could potentially be supplied via pipeline to China, Sechin said.

LNG Exports Grow

Russia’s LNG exports to China grew this year, although Beijing’s overall LNG imports fell on high spot prices.

Oil-linked long-term contracts that China has with the Novatek-controlled Yamal LNG plant in the Russian Arctic look more attractive to Beijing amid high LNG spot prices. But Beijing is also understood to be taking more spot cargoes from the Gazprom-controlled Sakhalin-2 plant located close to key Asian markets.

In the first 10 months of this year, Russia’s LNG exports to China increased 32%, Deputy Prime Minister Alexander Novak told the same forum.

Based on Chinese customs data, Energy Intelligence calculates that Russia exported some 5.05 million tons of LNG to China in January-October, up 33% on the year (see graph). In contrast, China’s overall LNG imports dropped 22% on the year to 50.5 million tons in the first 10 months of 2022.

Created with Highcharts 9.0.0('000 tons)($/MMBtu)CHINA'S LNG IMPORTS FROM RUSSIAVolumePriceNortheast Asia LNG Spot PriceJan'21Feb'21Mar'21Apr'21May'21Jun'21Jul'21Aug'21Sep'21Oct'21Nov'21Dec'21Jan'22Feb'22Mar'22Apr'22May'22Jun'22Jul'22Aug'22Sep'22Oct'2202505007501000$0$15$30$45$60Source: China's General Administration of Customs, Energy Intelligence

Exports to China will get a boost when Novatek launches the 19.8 million ton/yr Arctic LNG 2 plant — the first of three trains is scheduled for late 2023 — where Chinese investors have a combined 20% equity-offtake stake.

Russia also counts on Chinese partners’ participation in Gazprom’s Ust-Luga project designed to produce 13 million tons/yr, Novak said without elaborating. Gazprom is developing Ust-Luga with compatriot RusGazDobycha and hasn’t so far expressed interest in attracting foreign equity partners.

Gazprom Export CEO Elena Burmistrova said at the Russia-China forum that LNG from Ust-Luga can be an important source of energy for China. Ust-Luga, which also includes a 45 Bcm/yr gas processing facility, is scheduled for 2024-25, although the withdrawal of key engineering partner, Germany’s Linde, because of the war in Ukraine, complicates the task.

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

Petronas Sanctions Kasawari Carbon Capture Project

Petronas has sanctioned its Kasawari carbon capture and storage (CCS) project, further positioning itself as a CCS leader in Southeast Asia.

The Kasawari CCS project is one of the largest carbon capture projects in the world and is scheduled for start-up in 2025, along with Phase 2 of the Kasawari gas field.

It will have the capacity to capture 3.3 million-3.7 million tons of CO2 per year on average and store it in the nearby M1 field.

That is broadly similar to the capacity of Chevron's Gorgon CCS project in Australia, which has suffered many setbacks.

The Kasawari CCS facility is expected to have a 20-year life span.

Located in Block SK316 offshore the Malaysian state of Sarawak, the Kasawari field is estimated to hold about 5 trillion cubic feet of natural gas with 30%-40% of CO2.

Gas from Kasawari will supply Malaysia LNG's Train 9 liquefaction facility at Bintulu.

Squaring the Circle

CCS is a strategic tool for Petronas to reconcile its upstream production and decarbonization targets.

Petronas is aiming to produce 2 million barrels of oil equivalent per day by 2030, up from around 1.8 million boe/d at present.

This will partly be achieved by monetizing high CO2 gas fields such as Kasawari, but also Bujang, Inas, Guling, Sepat and Tujoh, located offshore Peninsular Malaysia.

Simultaneously, Petronas is aiming to keep emissions from its operations (Scope 1 and 2) below 49.5 million tons of CO2 equivalent by 2024 and achieve net-zero emissions by mid-century.

CCS Hub

The Kasawari CCS project will also strengthen Malaysia's position as a prospective regional CCS hub.

Petronas aims to generate new revenue by offering CCS as a service to clients in hard-to-abate sectors from countries that do not possess the right geological conditions to store CO2 underground themselves.

This includes Singapore, Japan, South Korea, and Taiwan.

"This project is expected to become the catalyst in achieving end-to-end CCS capability development within Petronas and the first step in unlocking Malaysia's potential as a regional CCS solutions hub," said Petronas Carigali CEO Hasliza Othman.

Malaysia has 13.3 billion tons of potential carbon dioxide storage capacity at its major oil and gas fields, according to the Global CCS Institute.

Conducive Framework

But Petronas needs a conducive regulatory and legal framework for its CCS strategy to succeed.

A positive signal came a few months ago when the government of Prime Minister Ismail Sabri announced plans to pass tax incentives for CCS in its 2023 budget.

The incentives herald a "massive breakthrough and will be a major booster for growth of CCUS project deployment in the country," Sohini Chatterjee, Rystad Energy's senior CCS analyst told Energy Intelligence at the time.

However, it remains to be seen if the measures will in fact be implemented as recent elections brought a new prime minister to power.

Competition

Still, with Kasawari, both Petronas and Malaysia are a step ahead of competitors like Indonesia and Thailand which also hope to become regional CCS hubs.

Neither of them have offered similar incentives yet and CCS projects operated by their respective state-owned companies, namely Pertamina and PTT Exploration and Production, are also much smaller.

Pertamina started its Jatibarang CCS project in October with an injection rate of 70 tons of CO2 per day, as a trial. CO2 is being injected at Jatibarang as part of a combined enhanced oil recovery and CO2 storage project.

When the project was being modeled in 2011, a full-scale injection rate of 1,500 to 3,000 tons per day was anticipated — equivalent to 468,000 to 936,000 tons/yr.

PTTEP, meanwhile, said in June that was expecting its 500,000 ton/yr Arthit CCS project to start operations in 2026.

Created with Highcharts 9.0.0(million tons CO2e)PETRONAS' GREENHOUSE GAS EMISSIONSInternationalMalaysia2016201720182019202020210204060Source: Petronas
Malaysia's Tax Incentives for CCS
CCS In-House Activity
Investment tax allowance of 100% for 10 years to set off against 100% of statutory income
Full import duty and sales tax exemption on equipment for CCS technology Jan. 1, 2023 until Dec. 31, 2027
Tax deduction for allowable pre-commencement expenses within five years prior to the date of commencement of operation
CCS as a Service
100% investment tax allowance for 10 years to set off against 100% statutory income; or 70% Income tax exemption on statutory income for 10 years
Full import duty and sales tax exemption on equipment for CCS technology from Jan. 1, 2023 until Dec. 31, 2027
Tax deduction on fees incurred for use of CCS services for YA 2023 to YA 2027
Southeast Asia's Major CCS Projects
ProjectCountryOperatorFID TargetStart-UpCapacity (million tons/yr)
KasawariMalaysiaPetronasSanctioned20253.3-3.7
Lang LebahMalaysiaPTTEP20232026--
ArthitThailandPTTEP--20260.5
Sakakemang/Kali Berau DalamIndonesiaRepsol--20272.0
TangguhIndonesiaBP--20263.4
SukowatiIndonesiaPertamina--20281.5
Asia Pacific CCS Hub SingaporeShell--End- decade5.0-15.0
Asean CCS HubSingaporeExxon Mobil------

Marc Roussot, Singapore

BP Delivers First Gas From Trinidad Cassia C Project

BP said Tuesday that it has safely delivered first gas from its Cassia C compression platform off Trinidad and Tobago as it seeks to bolster the dual-island nation’s flagging production.

At its peak, the Cassia C platform is expected to produce 200 million-300 million cubic feet per day of natural gas, which will be used to meet BP’s supply commitments in Trinidad and to supply feedstock for the nation’s LNG and petrochemical sectors. It is BP's first offshore compression facility in the region.

“First gas from Cassia C is an important milestone for BP in Trinidad and Tobago,” said David Campbell, the president for BP Trinidad and Tobago (BPTT). “This first offshore compression facility will allow us to unlock new resources and bring much-needed gas to market.”

Cassia C, which is now BPTT’s largest offshore facility, is designed to access low-pressure natural gas from the Greater Cassia Area. It is connected to the existing Cassia hub, which lies about 35 miles off Trinidad’s southeastern coast.

Trinidad's gas production has steadily declined over the past decade, from an average of 4.1 billion cubic feet per day in 2012 to a preliminary estimate of 2.7 Bcf/d in 2022, according to figures from the nation’s energy ministry.

The Atlantic LNG export facility has also underproduced over the years. BP has an ownership interest in each of Atlantic LNG’s four trains, as does Shell.

Created with Highcharts 9.0.0(million tons)TRINIDAD LNG EXPORTS2012201320142015201620172018201920202021202205101520Source: Kpler

BP plans to grow its gas production in Trinidad and Tobago, where it is the already the largest producer and the biggest supplier to the domestic market. In September, BPTT renewed its existing contract to supply gas to National Gas Co. (NGC) of Trinidad and Tobago. The terms of the contract were not clear, and were subject to confidentiality agreements, according to NGC.

Later that month, BPTT received approval to move forward with its Cypre project, where drilling is set to begin in 2023, with first gas targeted for 2025. Cypre could deliver average production of 250 MMcf-300 MMcf/d. It is also developing the Mento project with partner EOG Resources.
Caroline Evans, Houston


In Brief

Japanese Energy Firms More Than Double LNG Deliveries to Europe

Japanese energy companies have taken advantage of elevated European spot LNG prices, subdued domestic demand and have ramped up cargo deliveries to Europe this year.

Top Japanese conglomerates Mitsui, Mitsubishi, Marubeni and Sumitomo, as well as major Japanese utilities Jera and Tokyo Gas have diverted a large chunk of their contracted LNG volumes from the US to Europe, rather than delivering them home, in order to capture attractive spot prices in Europe.

These six companies together have delivered a total of 61 LNG cargoes to Europe so far this year, according to calculations by Energy Intelligence, based on data by commodity analytics firm Kpler.

In comparison, last year, they only unloaded 25 cargoes at European terminals and only six in 2019, before the Covid-19 pandemic.

Most of these cargoes were discharged at Northwest European terminals, such as France’s Dunkerque or the Netherlands Gate facilities. Although, Sumitomo for instance delivered both of its cargoes to Spain via its North American affiliate Pacific Summit Energy, a Spanish cargo arrival schedule obtained by Energy Intelligence showed.

Created with Highcharts 9.0.0(# of cargoes)JAPANESE CARGOES TO EUROPE20212022JeraMarubeniMitsubishiMitsuiSumitomoTokyo Gas0102030Source: Kpler

Following Russia’s invasion of Ukraine, spot LNG prices rocketed in Europe and were, during long periods, at a premium over Asian spot prices, which in turn incentivized deliveries of flexible volumes to Europe.

“For the last few months, Europe has been premium market, so it makes financial sense to deliver here instead of Asia,” an LNG trader at a Japanese trading firm told Energy Intelligence.

Additionally, Japanese demand is understood to have been rather muted this year, which in turn also encouraged LNG deliveries to Europe by the major Japanese companies.
Daniel Stemler, Madrid

Woodside Sets Output, Capex Guidance

Australian oil, gas and LNG producer Woodside Energy has set annual production guidance of 180 million-190 million barrels of oil equivalent for 2023.

For comparison, the company expects to produce 153 million-157 million boe this year.

The increase is largely explained by the acquisition of BHP's Petroleum assets, which closed in June of this year.

The 2023 guidance is based on the start-up of the Sangomar oil project, offshore Senegal, and Mad Dog Phase 2, in the US Gulf of Mexico.

It also factors in a four-week turnaround planned at Australia's Pluto LNG plant in the second quarter of 2023.

Woodside has also set capital spending guidance of US$6 billion-US$6.5 billion for 2023, up from US$3.8 billion-US$4.2 billion for 2022.

Approximately, half of the sum will be invested in the development of the Scarborough-to-Pluto Train 2 LNG project in Australia.

The remaining funds will be allocated to Sangomar (20%) for which Woodside announced the completion of the construction phase for the floating production storage and offloading (FPSO) platform.

The remaining 30% will be equally split between Gulf of Mexico and Caribbean assets, on the one hand, and Australia, Corporate and New Energy, on the other.

Woodside expects approximately 20%-25% of the LNG it produces in 2023 to be sold at prices linked to gas hub indices.
Marc Roussot, Singapore


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India23.7324.4523.5024.4922.6822.5325.5221.3725.3223.6422.1521.5222.26
Sodegaura, Japan23.1726.0426.0626.3522.8114.9425.1420.1624.8727.0821.3219.2523.35
Zeebrugge, Belgium51.3547.5346.4247.8150.1450.9449.3946.4849.0946.5850.3548.0050.57
Huelva, Spain26.0722.6421.6522.8924.9124.3624.3021.4724.0421.7724.9622.6324.98
Isle of Grain, UK36.9633.2932.2333.5435.8736.5635.3532.2934.8032.3836.0133.7536.21
Everett, US4.631.121.851.383.953.500.013.102.570.245.11----
Created with Highcharts 9.0.0($/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 Asia28.0028.001.78--
SW Europe26.8026.80-20.38--
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.047.247.206.78
NBP, UK (futures)+3.7138.5434.8332.80
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF1.2139.3738.1536.64
Zeebrugge (Belgium)1.0731.4630.39--
German NCG1.9836.9935.0133.31
NBP (UK)4.6638.1433.4813.18
US Markets
US Spot Prices
Sabine Pass, Louisiana0.026.015.996.21
Corpus Christi, Texas0.205.755.555.40
Cove Point, Maryland6.176.170.005.96
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month0.047.247.206.78
Second Mth0.077.087.027.41
Third Mth0.066.366.307.17
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaDec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Dec…0255075100125Energy Intelligence