December 16, 2022

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Germany Nears First LNG Imports As FSRUs Arrive

Germany, the largest economy to enter the LNG market in many years, has begun importing LNG.

Germany’s Wilhelmshaven and Lubmin floating LNG import projects are one step closer to starting commercial operations after their respective floating storage and regasification units (FSRUs) arrived at project locations in the last couple of days.

Wilhelmshaven accesses Germany's North Sea Coast. Lubmin accesses Germany's Baltic Sea Coast.

Wilhelmshaven FSRU

The 5 billion cubic meter per year Wilhelmshaven project, developed by German utility Uniper, has received its FSRU, following the arrival of the Hoegh Esperanza on Dec. 15.

The vessel was reloaded with a cargo at Spain’s Sagunto terminal on Dec. 1, and those volumes are expected to flow into the German gas grid in the coming days.

Following the regasification and unloading of its cargo, the Hoegh Esperanza will function purely as an FSRU in the northern German port during the next 10 years.

The project is set to receive its first regular LNG cargo in early January, Peter Abdo, Uniper’s chief commercial officer of LNG and global origination, said in a statement on Dec. 15.

Uniper, together with other German utilities RWE and EnBW, is expected to supply the terminal, after the companies signed a memorandum of understanding with Germany’s federal economy ministry to supply LNG to the future FSRUs in both Wilhelmshaven and Brunsbuttel.

Uniper, RWE, EnBW and its subsidiary VNG said they are committed to fully utilize the terminals from the beginning of 2023 until Mar. 31, 2024.

Lubmin FSRU

In parallel with the Wilhelmshaven FSRU project, another one of Germany’s five floating terminals, the Lubmin floating LNG development, is also nearing commercial start up, after the Neptune FSRU arrived offshore Lubmin on Friday.

The Neptune FSRU is controlled by French major TotalEnergies, who will be the supplier of the 4.5 Bcm/yr terminal, developed by private firm Deutsche Regas.

A Deutsche ReGas spokesperson told Energy Intelligence earlier this month that “all the necessary components are now in place in the region and all the infrastructural prerequisites are in place for the LNG terminal to be technically completed in the short term and commissioned before the end of December.”

However, local media reported that the project’s start up is set to be delayed due to issues with its permits, although this could not be confirmed.

First Cargo

Despite the potential permitting issues, the Lubmin FSRU could receive its first cargo as soon as next week.

The 140,500 cubic meter Seapeak Hispania, laden with a cargo from Egypt’s Idku export facility, is expected to arrive at the Lubmin FSRU on Dec. 21, according to ship-tracking data from commodity analytics firm Kpler.

The vessel is under long-term charter to major Shell, one of the contractual offtakers of the Egyptian plant. Shell is likely delivering the cargo through its term supply agreement with the French major.
Daniel Stemler, Madrid

France 'Holds Key' to Unlock EU Gas Cap Agreement

France may hold the key to unlocking an agreement on capping wholesale gas prices at next Monday’s EU Council meeting, diplomats told Energy Intelligence on Friday.

France initially backed a price cap but has recently voiced concerns over the impact it could have on financial markets.

“France holds the key. If they are opposed to the cap, there will not be a qualified majority,” one European diplomat opposed to capping prices told Energy Intelligence.

One diplomat in favor of a cap agreed that France has a central role to play in reaching an agreement.

"France certainly has a role to play in providing the good and acceptable key, but Germany has to turn the key in the door to make it work,” the pro-cap diplomat said.

France’s current position on capping prices is unclear, diplomats say.

ICE Warning

Intercontinental Exchange (ICE), host of TTF trading, this week warned it could move the gas-trading hub outside of the EU if a price cap is imposed.

“If agreed, the market correction mechanism will be imposed on customers and the market infrastructure with no time for resilient testing and thorough risk management. As a consequence it is the responsibility of ICE as the market operator to consider all options if this mechanism is agreed, up to and including whether an effective market in the Netherlands is still viable,” ICE said.

The announcement comes hot on the heels of ICE warning that a cap could drive prices higher and risk financial stability.

Basic Framework

EU energy ministers head into the Dec. 19 meeting with a basic framework in place. But one major issue remains open for debate — the price level for triggering a cap.

Czech Energy Minister Jozef Sikela, chair of Tuesday’s unsuccessful council meeting, confirmed after a “lengthy day of talks” that several elements on capping prices has been agreed.

Under the latest draft proposal, ministers have broadly agreed that a cap will not apply to over-the-counter trading, and that the cap may apply to other regional hubs other than the Dutch Title Transfer Facility gas futures contracts. Ministers have also agreed that an assessment of the positive and negative impacts of the "market correction mechanism" — the formal name for the price cap — should be concluded by the end of February 2023.

'Hard Negotiation'

Progress has been made on how to deactivate the market correction mechanism, however the pro- and anti-cap sides are still “miles apart” on how to activate the cap, the anti-cap diplomat told Energy Intelligence.

“We have booked a hotel for Monday; it will be a long and hard negotiation,” the diplomat added.

Sikela is confident that the price level will be agreed next week, but the price ranges discussed on Tuesday suggest a lot of work is required to get an agreement.

Following Tuesday’s meeting the Czech minister said the sides started the day discussing a price cap range of €100-€275 ($106-$291) per megawatt hour.

Discussion then moved to a price range of €150-€250/MWh. It then narrowed to €200-€220/MWh.

The last range discussed was €160-€220/MWh but it was later agreed to leave the price blank ahead of Monday’s meeting.

While the price level is the only issue open for debate on Monday, Sikela confirmed on Tuesday that he could not guarantee that the agreed framework won't be reopened by countries — possibly to leverage against proposed price levels for triggering the cap.

“I cannot ensure that anyone will not try to reopen, but I do not plan to reopen agreed issues,” Sikela said this week.

Diplomats are unsure what will happen if ministers fail to reach an agreement on Monday.

If no deal emerges on Monday, the price cap issue could land on Sweden, which will hold the council presidency from January until the end of June 2023.

For more coverage of the Ukraine crisis, visit Ukraine Crisis: Energy Impact
Eric Thorp, London

Sempra: US Permitting Can Aid Decarbonized Gas Value Chain

“The enemy is not fossil fuels. The enemy is emissions."

Messages of these sorts have increasingly become a rallying cry among oil and gas executives in recent months, as the industry makes its pitch to society at large that fossil fuels are not anathema to climate goals — provided companies make good on robust decarbonization targets.

The latest to join the chorus is Jim Diemer, director of strategic analytics for LNG giant Sempra Infrastructure.

Diemer, quoted above, told the Western States and Tribal Nations West Coast LNG Export Forum this week the world's goal should be to stop emissions, "not to stop fossil fuels." To that end, he argued greater benefits could come from advancing a decarbonized natural gas value chain than, say, purchasing offsets tied to forestry work in South America.

Sempra hopes to be a leader in gas value chain decarbonization through efforts such as feeding certified responsibly sourced gas (RSG) into its US LNG export projects, integrating carbon capture and storage (CCS) into those LNG developments and investing in infrastructure that can be repurposed to handle ammonia and hydrogen.

But to move these ambitions from concept to implementation in the US, permitting reform is essential, Diemer argued.

"Part of what is holding back capital is permitting reform," he said, just days before Congress fell short yet again in advancing proposed permitting legislation.

As part of his pitch for streamlined and accelerated permitting, Diemer noted that hydrogen's lower energy density — it runs about one-third that of natural gas — means roughly three times the hydrogen-ready pipeline capacity will be required if that market takes off in a substantial way and displaces natural gas.

“We’ll see how that plays out,” he said, “that’s why permitting reform is so important.”

Polarized US politics have made permitting reform a highly fraught legislative target despite interests on both sides of the aisle benefitting from improved permitting practices.

Such reforms are crucial to advance the grid infrastructure required to roll out renewable electricity in a materially faster way, but climate advocates are loath to concede helping oil and natural gas infrastructure approvals in the process.

On the other side, many politicians that would favor expedited fossil fuel approvals have fought against existing permitting reform proposals because they do not view the reforms as going far enough to cut red tape and environmental assessment requirements.
Michael Sultan, Washington


In Brief

Jones Act Restrictions Avoid Getting Worse

Legislation pushed by Senator Joe Manchin (D-West Virginia) aimed at reforming the permitting process for major energy projects was once again left behind by the US Senate.

Language in the bill appears to tighten presidential authority to facilitate shipment between US ports, skewering any hopes of more easily transporting LNG to the US northeast ahead of winter.

The century-old Jones Act requires vessels traveling between US ports to be US built, owned and crewed, adding significantly to costs for transport. There are no Jones Act LNG vessels. That essentially leaves the US Northeast relying on imports for anything that cannot be piped from producing areas of the country unless the US president issues emergency waivers.

Northeast utilities have been warning for months about potential winter impacts from the restrictions, but US lawmakers tightened those controls rather than eased them in the defense spending bill.
Emily Meredith, Washington


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India28.3828.8628.3828.8527.9227.7729.4027.3029.3028.4427.5827.2627.65
Sodegaura, Japan28.8830.4630.4730.5928.7824.7230.0027.4729.8630.9927.9426.9029.00
Zeebrugge, Belgium36.3934.4233.8934.5335.7836.2035.3433.9035.1933.9535.9134.7536.02
Huelva, Spain25.0823.2822.8123.3824.4824.2424.1222.7023.9822.8524.5423.3824.55
Isle of Grain, UK33.4731.5131.0031.6232.8933.2732.5731.0232.2831.0632.9931.8633.09
Everett, US10.428.639.008.7210.079.880.019.589.338.2010.66----
Created with Highcharts 9.0.0($/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 Asia32.0031.75-0.33-0.25
SW Europe34.1525.74-7.43-8.41
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.376.606.976.25
NBP, UK (futures)-5.9335.1341.0642.13
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-5.1236.9242.0443.50
Zeebrugge (Belgium)--------
German NCG-4.9632.3937.3438.81
NBP (UK)-7.4334.3541.7842.63
US Markets
US Spot Prices
Sabine Pass, Louisiana-0.136.596.725.00
Corpus Christi, Texas----0.00--
Cove Point, Maryland7.0716.119.045.26
Elba Island, Georgia----6.42--
Nymex Henry Hub Futures
Near Month-0.376.606.976.25
Second Mth-0.296.306.596.08
Third Mth-0.225.605.825.57
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaJan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '220255075100125Energy Intelligence