December 14, 2022

WWW.ENERGYINTEL.COM

Rosatom to Produce Liquefaction Equipment for Novatek

An engineering subsidiary of Russia’s state nuclear corporation Rosatom will produce key liquefaction equipment for Novatek’s large-scale LNG projects, the subsidiary said Wednesday, in the Kremlin's latest move to escape dependence on foreign technology in its LNG export sector.

The subsidiary, Atomenergomash, and Novatek plan to cooperate in the development of a domestic mixed refrigerant liquefaction technology, including the production of cryogenic heat exchangers, key equipment for the process.

The companies will, by the end of this year, sign a contract to prepare technical documentation for the manufacturing of large-scale cryogenic heat exchangers, Atomenergomash said.

Import Replacement

The cooperation is part of the Kremlin’s import replacement policy spurred by international sanctions against the country. But that policy hasn’t produced a breakthrough in the LNG sector. Russia still lacks a working domestic liquefaction technology for large LNG trains.

Access to Western technology was closed by the EU technology sanctions imposed in April this year in response to Russia’s war in Ukraine. The sanctions prohibit the export of key liquefaction equipment for Russian LNG projects.

The sanctions, as well as the withdrawal of Western investors and technology partners from Russia, put the country’s long-term LNG expansion ambitions at risk. Novatek, Russia’s Kremlin-backed LNG export champion, however, believes Moscow can still increase LNG exports to up to 140 million tons per year by 2035, from around 30 million tons/yr currently, using domestic equipment.

Novatek has its own Arctic Cascade liquefaction technology, now used at the medium-sized 900,000 ton per year Train 4 of the Yamal LNG project. The company now seeks to scale up the process for the larger 2.5 million ton/yr trains of the proposed Obsky LNG project.

Rosatom Cooperation

Novatek and Rosatom are not new to each other. The duo in October agreed to cooperate in decarbonization of LNG, including through wind power generation projects in the Arctic. Rosatom will develop engineering solutions for the hydrogen/ammonia and carbon capture and storage plans of Novatek as well.

Rosatom was also appointed by the Kremlin as the infrastructure operator of the Northern Sea Route (NSR) in the Arctic. The company expands the country’s nuclear icebreaker fleet in close discussion with Novatek, which seeks wider icebreaker support to perform year-round NSR shipments of LNG from its projects in the region.

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

Qatar, Hungary Governments Set Path for LNG Supply Deal

Hungary has reached a political agreement with major LNG exporter Qatar, which allows the start of intercompany negotiations over a potential LNG supply deal from the Gulf state to the Central European country, Hungarian foreign minister Peter Szijjarto said in a Facebook video on Wednesday from Doha.

Szijjarto said that following the political agreement, state LNG exporter QatarEnergy and Hungarian state-run utility MVM can begin negotiations, as Hungary hopes to be able to count on the increasing Qatari LNG exports for its supply security.

Hungary has been looking into the possibility of importing Qatari LNG for a number of years and the two countries had even signed a declaration of intent on energy matters back in 2013; however, a firm agreement has yet to emerge.

Supply Via Croatia

The minister noted that the European Union must invest in infrastructure at south and southeast European LNG terminals in order for Hungary to receive more gas supplies.

In this context, he highlighted the need for the capacity expansion of Croatia’s Krk LNG terminal, where MVM’s local subsidiary is already the largest capacity holder.

The Croatian government announced in August that it plans to boost the capacity of the Krk floating storage and regasification unit to 6.1 billion cubic meters per year (Bcm/yr) from the current 2.9 Bcm/yr.

“If Croatia will expand the capacity of its own LNG terminal, as it promised, then there is a real chance for Qatari gas to have a role in the Hungarian supply mix, within a three-year timeframe,” the Hungarian foreign minister said.

MVM already has a six-year LNG supply agreement with major Shell for delivery to the Krk terminal, which runs until October 2027.

North Field Volumes

Based on the three-year timeframe, volumes for the possible future supply contract with MVM would most certainly come from Qatar’s 48 million ton/yr North Field mega expansion, which is expected to produce first LNG in 2026 from its first phase, dubbed North Field East.

In line with QatarEnergy’s recent supply agreements from its expansion project, MVM will most likely have to commit to a longer-term agreement — compared to its deal with Shell — of at least 10-12 years, in order to get the contract over the line.

The Qatari LNG behemoth's supply agreement with US major ConocoPhillips for delivery to Germany is for 15 years and will be supplied from the second expansion phase, North Field South, while its record-breaking deal with China’s Sinopec is for 27 years and will be supplied with volumes from the North Field East.
Daniel Stemler, Madrid

Ferc Hits Freeport LNG With Hefty Data Request

Freeport LNG’s management still hopes to restart the Texas Coast plant at year-end despite a hefty request for information this week from federal regulators.

The request, sent on Dec. 12 by the US Federal Energy Regulatory Commission (Ferc), asks Freeport to provide data following a Nov. 30 site visit by the agency as well as the US Pipeline and Hazardous Materials Safety Administration. The 64 items requested include proof that the spill containment system has been cleared of debris, plans for an emergency drill prior to start up, and a pre-start up safety review. Fifteen of the items requested have not been made public.

Ferc said it would not authorize restart until after it has reviewed Freeport LNG’s responses to the request for information, causing market watchers to worry that the request could further delay start up of the facility, which was shuttered in June after an explosion. Freeport has repeatedly delayed restarting the plant, confining 15 million tons per year (2.1 Bcf/d) of US gas to the domestic market.

“A critical fundamental piece of the demand equation is the lack of Freeport volumes and the restart timeline,” Rystad Energy analyst Ade Allen said in a note on Wednesday. “The recently announced checklist of restart requirements from regulatory agencies has added to speculation that the timeline could potentially shift again.”

As of Dec. 14, Refinitiv data still showed zero feedgas entering Freeport LNG.

Freeport LNG spokesperson Heather Browne said the privately held LNG operator was in the process of reviewing the request and was developing a response.

“We continue to work towards the safe, initial restart of our liquefaction facility which is targeted for around year-end, provided we obtain the necessary regulatory approvals required for the restart of our facility,” Browne said. “We continue to work collaboratively with regulatory agencies.”

Freeport LNG has previously said it plans to ramp to 2 Bcf/d by mid-January.
Caroline Evans, Houston

Erdogan Sees Turkmen Gas Flowing to Europe

Turkish President Recep Tayyip Erdogan has floated the future possibility of Turkmenistan supplying gas to Europe via Azerbaijan and Turkey.

Turkey is ready to cooperate with Turkmenistan and Azerbaijan on this, Erdogan was quoted as saying at a trilateral summit in the Turkmen capital of Ashkhabad on Wednesday.

Among other things, the summit yielded a memorandum of understanding on energy cooperation between state-owned Turkmengaz and the energy ministries of Turkey and Azerbaijan.

Ankara is preparing a blueprint for the creation of a gas hub that could bolster Turkey's role a gas transit country, and it views Turkmenistan as one of the hub's potential sellers.

The idea of creating a regional gas hub in Turkey was first proposed by Russian President Vladimir Putin in October.

Moscow has been seeking ways to keep selling its gas into Europe, despite the EU's plans to gradually phase out pipeline gas imports from Russia.

It appears to be betting that Europe would be willing to buy Russian gas indirectly from the Turkey hub rather than directly from Russian gas giant Gazprom.

It's unclear however whether the EU would be willing to buy more gas via this southern route if it would need to make large investments in new infrastructure to receive it.

Turkey wants the proposed hub to source gas from various countries, not only from Russia, to improve liquidity.

Potential sellers include Azerbaijan, Turkmenistan and Iran, as well as LNG suppliers, according to Turkey, which would also also like to contribute its own gas from the Black Sea.

Erdogan's remarks could revive Turkmenistan's plans to build a gas pipeline across the Caspian Sea, although those plans have long been opposed by its Caspian neighbors Russia and Iran.

It's unclear at this stage whether Moscow might drop its past opposition to westward flows of Turkmen gas, if they were to be repackaged as part of the project to create a gas hub in Turkey.

Turkmenistan's gas reserves are among the largest in the world, although estimates of their size are hampered by a lack of publicly available geological data.

The US Energy Information Administration estimated Turkmen gas reserves at 8 trillion cubic meters several years ago, but BP has estimated them more recently at 19.5 Tcm.
Staff Reports


In Brief

Israel Launches Fourth Offshore Bid Round

Israel has launched its fourth offshore bid licensing round as the former and likely future Israeli Prime Minister Benjamin Netanyahu is still trying to form a coalition government before Dec. 21. The move follows an historic maritime border agreement between Lebanon and Israel in late October, which could help attract more foreign investors to Israel’s upstream.

Israel is a key player in the effort to export Eastern Mediterranean gas by pipeline or as LNG.

Up to 20 offshore exploration blocks are on offer covering 5,888 sq km over four zones. These include three blocks in Zone E, six blocks in Zone G, five blocks in Zone H and six blocks in Zone I. Bids and work programs will be accepted for entire zones while licenses within the zones will be granted for specific blocks under the Israeli Petroleum Law, the Israeli energy ministry said in a statement.

Most areas offered have existing 2D and 3D seismic data from previous operators with some exploration prospects. New licensees will have three-to-five years to drill an exploration well, which could be extended to seven years from the date of an award.

In early October, London and Tel Aviv-listed Energean announced the 7 Bcm -15 Bcm Hermes gas discovery in its Block 31 offshore Israel while preliminary estimates suggest the Zeus gas discovery in Block 12 could hold 13.3 Bcm.

Israel's 4th Offshore Bid Round

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Tom Pepper, London


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India28.9029.3828.8929.3828.4228.2729.9427.7729.8428.9528.0727.7428.15
Sodegaura, Japan29.3630.9831.0031.1229.2625.0730.5127.9130.3631.5328.4027.3229.49
Zeebrugge, Belgium44.0541.9441.3842.0743.3943.8442.9341.4042.7741.4443.5442.3043.65
Huelva, Spain31.8529.9229.4330.0331.2130.9430.8229.3230.6729.4631.2630.0331.27
Isle of Grain, UK40.2238.1537.6038.2639.6140.0139.2737.6238.9637.6639.7138.5039.82
Everett, US6.144.344.734.445.785.590.015.305.043.916.38----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback11. Jul25. Jul8. Aug22. Aug5. Sep19. Sep3. Oct17. Oct31. Oct14. Nov28. Nov12. Dec10203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia32.0032.300.300.30
SW Europe34.1532.52-1.63-1.63
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.516.436.945.72
NBP, UK (futures)-2.0440.3742.4146.53
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-1.7241.6343.3646.33
Zeebrugge (Belgium)------34.64
German NCG-1.8936.6038.5041.02
NBP (UK)-1.8641.1342.9947.40
US Markets
US Spot Prices
Sabine Pass, Louisiana-0.596.587.174.51
Corpus Christi, Texas----0.004.25
Cove Point, Maryland-3.727.9711.694.32
Elba Island, Georgia----6.35--
Nymex Henry Hub Futures
Near Month-0.516.436.945.72
Second Mth-0.516.226.735.62
Third Mth-0.455.626.075.19
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaJan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '220255075100125Energy Intelligence