December 15, 2022


Ministry Says Russia Must Intensify LNG Efforts

Russia can move on with its LNG projects despite sanctions and must intensify its efforts, First Deputy Energy Minister Pavel Sorokin said Thursday.

“As of today, we see the possibility to move on with our LNG projects, so the plans for the development of this segment remain intact,” Sorokin told the Gas of Russia conference organized by the Russian Gas Society in Moscow.

Russia should intensify the LNG development because it will give more flexibility to its gas export diversification plans and spur the development of domestic equipment, he said. If equipment manufacturers have firm orders for 10-15 years ahead, this will give a major boost to Russia’s import replacement plans, according to Sorokin.

Russia has to rely on domestic gear because access to Western technology was closed by EU sanctions imposed in April in response to Russia’s invasion of Ukraine.

Gas export diversification has also become an increasingly important task for Russia, because its pipeline gas exports to Europe, traditionally its key export market, are draining amid the war.

Expansion Ambitions

Russia has planned to export between 80 million tons and 140 million tons per year by 2035, up from around 30 million tons/yr currently. It might review the target when completing an updated energy strategy next year, but its officials have largely been optimistic about the country’s ambitions.

Russian leader Vladimir Putin said at an online meeting of the Council for Strategic Development and National Projects that new Arctic projects alone will increase Russia’s LNG production by 70 million tons/yr by 2030.

The country’s LNG export champion Novatek, however, is now the only company with firm LNG project plans in the Arctic, and it seeks to increase its production in the region to up to 70 million tons/yr by 2030 from the 21 million tons it expects to produce at the flagship Yamal LNG plant this year.

Moscow might want state giant Gazprom to also monetize some of its vast reserves in the Arctic through LNG projects, but the company hasn’t yet proposed any liquefaction scheme in the region.

Created with Highcharts 9.0.0RUSSIAN LNG CUSTOMERS IN 2022(million tons)Japan (21%)Japan (21%)South Korea (6%)South Korea (6%)China (18%)China (18%)France (16%)France (16%)Taiwan (3%)Taiwan (3%)Spain (11%)Spain (11%)Netherlands (5%)Netherlands (5%)Belgium (11%)Belgium (11%)Others (9%)Others (9%)Source: Kpler

Novatek Gets Arctic Field

Privately owned Novatek keeps expanding its resource base in the Arctic for long-term LNG expansion plans.

On Thursday it won an upstream license for the Yeniseisky block on Taimyr Peninsula, harboring 40.3 billion cubic meters in D2 gas resources, as well as 5.3 million tons in oil and 3.5 million tons in gas condensate resources.

The block is located close to Novatek’s blocks in the Yenisey Gulf, which are understood to be a potential resource base for the company’s longer-term LNG plans.

Novatek’s current focus is LNG expansion on the Yamal and Gydan peninsulas, where it has recently discovered a gas field as part of the proposed Arctic LNG 1 project.

Arctic LNG 2 Might Lack Tankers

Novatek’s most immediate LNG project is the 19.8 million ton/yr Arctic LNG 2 plant, scheduled to launch its first of three trains in late 2023.

The project might however face difficulties with evacuation of LNG from the first train, as the Russian yard Zvezda will likely delay the production of ice-class Arc7 LNG tankers, the first of which has been scheduled for March 2023 but will likely be ready at least one year later, business daily Kommersant reported Thursday, citing sources.

Zvezda was supposed to commission a total of five Arc7 tankers for Arctic LNG 2 in 2023, which would be roughly in line with Novatek’s plans to have one tanker for each 1 million tons/yr of capacity of the first 6.6 million ton/yr train. But tanker construction is understood to be delayed by sanctions, which complicate the delivery of some parts and equipment.

A source close to the project also told Energy Intelligence in September that tanker construction for Arctic LNG 2 was expected to be delayed, and that Novatek would be forced to use part of the Yamal LNG tanker fleet to ship LNG from the first Arctic LNG 2 train in 2024.

Novatek ordered a total of 15 Arc7 tankers at Zvezda and six Arc7 tankers in South Korea for Arctic LNG 2.

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

Australia Passes Controversial Gas Price Cap

A controversial temporary cap on Australia’s domestic wholesale gas prices has been passed by the nation's parliament.

The measure is part of the Labor government's energy price relief plan designed to rein in soaring energy costs in the country’s populous East Coast states.

East Coast LNG producers Shell (Queensland Curtis LNG), ConocoPhillips (Australia Pacific LNG), and Santos (Gladstone LNG), have strongly voiced their discontent since the measure was announced late last week.

Analysts have also shared their skepticism. Credit Suisse Australia head of research Saul Kavonic said via Twitter that “literally no-one knows how the policy will work in practice, including the government, who have been unable to answer basic questions."

“This is a recipe for mistakes to be made,” he said.

But Prime Minister Anthony Albanese justified the government's action by saying that “extraordinary times call for extraordinary measures.”

Energy Price Relief Plan

The cap has been set as planned at A$12 per gigajoule (US$8.20 per million Btu). It will only apply to new domestic wholesale contracts, whether long-term or spot.

The plan also includes ceilings for the price of coal used for electricity generation to A$125 per ton.

It also establishes an energy bill relief fund with up to A$1.5 billion to help households and businesses pay their electricity bills.

The package is also designed to deliver A$10 billion of private and public sector investment in clean, dispatchable storage and power generation.


Shell has put on pause an expression of interest from customers for 50 petajoules (47 billion cubic feet) of gas for delivery in 2023-24 while it assesses the impact of the measures on its gas marketing plans.

“This was not an option we wanted to take, however, given the proposed changes to the gas market, we could not continue running a process which may not have complied with new laws being passed imminently,” Shell said in a statement.

Resources Minister Madeleine King told broadcaster ABC such a response was “not unreasonable in the circumstances.”

However, a different tune came from Minister for Industry Ed Husic, for whom “Shell is basically holding the rest of the country to ransom and saying that they will not supply an Australian resource because they have been prevented from making war-time profits.”


Santos CEO Kevin Gallagher lambasted the price cap, saying it is a “Soviet-style policy” that is a form of nationalization.

For Gallagher, Australia is now comparable to Argentina, Venezuela or Nigeria as companies will need fiscal stability agreements with the government before new gas supply projects can be sanctioned in order to secure capital.

Gallagher also said the federal government will have to decide between rationing gas and breaking LNG export contracts this winter or next, because the price cap will damage Australia’s access to the capital inflows the industry needs to develop new supplies.


ConocoPhillips Australia President Dan Clark called the cap a “heavy-handed regulation rushed through with next to no consultation.”

It will have an adverse impact on investor confidence as well as Australia’s reputation as a stable, free-market economy with regulatory certainty, he said.

“The government has missed the mark with this policy. It is unlikely to lower gas and energy bills for households and manufacturers."

“This is anti-business behavior that significantly increases the risks of investing in Australia,” he also said.

Marc Roussot, Singapore

China Ramps Up Domestic Gas Production as Winter Hits

So far this year, China has been ramping up its domestic gas production to help make up for the continued decline in gas imports, all of this amid rising gas consumption.

“We do expect a positive growth of gas consumption in 2023," a representative of energy consultancy FGE told Energy Intelligence.

FGE said China’s incremental gas consumption can be largely met by growing domestic gas output, rising piped gas imports and the start up of new-term LNG contracts.

Consumption Boosters

China is already experiencing some degree of stress on natural gas supplies due to the winter heating season.

Northern cities in China started heating in November. However, many residents, especially in Hebei province, have complained about low indoor temperatures and gas purchase limits.

Then there is the continuing effect of China coal-to-gas switching policy. China has been promoting coal-to-gas projects on a large scale in the Beijing-Tianjin-Hebei region and surrounding cities since 2017. The aggressive coal-to-gas policy has led to a rapid rise in natural gas consumption.

There are also signs that cities are getting ready for higher consumption.

Wuhan city, Hubei Province, recently issued a document noting that by 2025, 30 new natural gas fueling stations of various types will be built.

At the same time, Wuhan will complete the construction of the Baihushan LNG storage project and launch the Hannan LNG storage project. So by 2025, the city’s natural gas reserve capacity will be increased to 210 million cubic meters.

Domestic Gas Production Up

China produced 18.9 billion cubic meters of natural gas in November, an increase of 8.6% from last year, with daily production of 630 MMcm, the latest data from China’s National Bureau of Statistics showed.

In the first 11 months of this year, China’s natural gas production reached 197.4 Bcm, up 6.4% compared to the same period last year.

Natural Gas Imports Down

Meanwhile, the country imported 99 million tons of natural gas year-to-date as of November, down 9.7% from last year.

High international spot gas prices this year have brought down imports.

In the first 11 months of this year, the cost of gas imports rose by 32.8%, which has made city gas companies less willing to purchase gas from upstream companies than in previous years.

A local source who worked in a city gas company told Energy Intelligence that city gas companies generally predict the amount of natural gas to be used during the heating season in advance, so that they can sign contracts with upstream gas supply companies. But if demand exceeds expectations, then the price of gas outside the contract will be expensive, potentially more than several times the contracted price.

“While China's shift away from zero-Covid policy could provide a boost to China’s faltering economic outlook, our view is that it should not be regarded as a silver bullet that will revive China’s LNG demand expansion to the levels seen in the past few years," FGE said.

Created with Highcharts 9.0.0(million tons)CHINA'S FIRST ANNUAL DECLINE IN LNG IMPORTS20152016201720182019202020212022020406080100Source: Kpler

Staff Reports

In Brief

Russia Sets Sakhalin-2 Stake Value

The Russian government has assessed the value of Shell’s stake in the Sakhalin-2 upstream and LNG project at 94.8 billion rubles ($1.4 billion) ahead of the soon-expected sale to a new owner, according to a ruling published late on Wednesday.

Moscow is preparing in January to sell the 27.5% minus one share stake in the new Sakhalin-2 project operator Sakhalin Energy, which Shell refused to take following the Kremlin’s forced operatorship change in August.

Russian privately owned LNG developer Novatek is the key candidate for the stake. Its boss Leonid Mikhelson in October said the company will decide on the purchase of the Sakhalin-2 stake in December.

Shell made it clear soon after Russia invaded Ukraine in February that it would exit its joint ventures in Russia, including Sakhalin-2.

However, Japanese shareholders of Sakhalin-2 — Mitsui and Mitsubishi — agreed to take 12.5% and 10% stakes in the Russia-registered Sakhalin Energy, respectively, the same stakes that they owned in the previous operator, Bermuda-based Sakhalin Energy Investment Co.

State-run gas giant Gazprom holds the controlling 50% plus one share stake in the project.

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

Created with Highcharts 9.0.0(million tons)SAKHALIN-2 LNG CUSTOMERSJapanSouth KoreaTaiwanChinaIndonesiaSingapore20182019202020212022024681012Source: Kpler

Staff Reports

Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India28.6829.1628.6729.1628.2028.0529.7227.5529.6228.7327.8527.5227.93
Sodegaura, Japan29.1430.7630.7730.9029.0424.8630.2927.6930.1431.3128.1827.1029.27
Zeebrugge, Belgium45.5443.4142.8543.5444.8845.3344.4142.8744.2442.9145.0243.7745.13
Huelva, Spain33.3331.4030.8931.5132.6932.4232.3030.7932.1530.9332.7531.5032.76
Isle of Grain, UK41.7139.6239.0739.7341.0941.4940.7539.0940.4439.1341.2039.9841.31
Everett, US6.674.865.254.966.316.120.015.835.574.436.91----
Created with Highcharts 9.0.0($/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 Asia32.0032.08-0.220.08
SW Europe34.1534.011.49-0.14
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.546.976.435.96
NBP, UK (futures)+1.5241.8940.3743.44
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF0.7842.1941.4142.58
Zeebrugge (Belgium)--------
German NCG0.4137.2236.8038.90
NBP (UK)1.4942.6241.1342.87
US Markets
US Spot Prices
Sabine Pass, Louisiana0.146.726.584.76
Corpus Christi, Texas----0.00--
Cove Point, Maryland1.079.047.974.95
Elba Island, Georgia--6.72----
Nymex Henry Hub Futures
Near Month0.546.976.435.96
Second Mth0.376.596.225.82
Third Mth0.205.825.625.36
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaJan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '220255075100125Energy Intelligence