December 20, 2022

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Woodside Secures More Third-Party Gas Supplies to Backfill LNG Plants

Woodside Energy and its North West Shelf (NWS) joint-venture have secured additional gas supplies from local independent Western Gas which would be processed at Woodside-operated LNG infrastructure in Western Australia.

Woodside and NWS have signed separate nonbinding agreements with Western Gas for undertaking joint technical studies and negotiating full term agreements for processing 2 million-3 million tons/yr of gas from the latter's offshore Equus field from 2027 for 10 to 20 years.

High LNG prices worldwide are encouraging the development of various gas resources such as these Australian backfills.

Backfilling NWS and Pluto Train 1

It is proposed that Equus gas would be produced on a floating production storage and offloading facility and transported through an approximately 200 km pipeline to the Pluto LNG Train 1 facility with a capacity of 4.3 million tons/yr.

Prior to capacity being available in Pluto Train 1, the Equus gas would be transported via the newly opened 3.2 kilometer long pipeline — called Pluto-Karratha Gas Plant (KGP) Interconnector — for processing and export at the NWS project which is facing depleting gas reserves. The Pluto-KGP interconnector is designed to take advantage of available capacity at NWS and accelerate developments of offshore Pluto gas reserves and third-party resources.

First LNG for the gas processing opportunity is targeted in 2027, with a target aggregate production of 2 million-3 million tons/yr of LNG and 50-75 TJ/d of domestic gas.

The NWS project earlier signed another gas processing agreement with Mitsui E&P and Beach Energy to process gas for an aggregate 7.5 million tons of LNG over five years from the second half of 2023 to end of 2028. Mitsui and Beach are developing the Waitsia Stage 2 project in the onshore Perth Basin.

By leveraging existing infrastructure, Woodside said it would enable Western Gas to access a competitive option to supply Asian LNG markets while providing additional domestic gas security for Western Australia.

“This is an important step in maximizing utilization of our existing infrastructure to deliver domestic gas and LNG to local and global customers and value for our shareholders and community,” said Woodside Energy CEO Meg O’Neill.

Woodside owns an operated 90% stake in Pluto Train 1 and 33.33% operated share of NWS. The other NWS shareholders are BP, Chevron, Japan Australia LNG and Shell.

The two plants have yet to exceed their mild 2018 peak in LNG exports (see graph).

Created with Highcharts 9.0.0(million tons)NWS, PLUTO LNG EXPORTSNWSPluto2014201520162017201820192020202120220510152025Source: Kpler

Leveraging Existing Infrastructure

Western Gas, the sole owner of the 2 trillion cubic feet Equus gas field, has been seeking a range of development options including processing Equus gas at existing or new facilities. It was also considering a 2 million ton/yr floating LNG development. The nearby LNG facilities are Chevron’s Wheatstone facility and Woodside’s Pluto and NWS projects.

Western Gas' executive director Andrew Leibovitch said the NWS term sheet and Pluto heads of agreement are significant steps in commercializing the Equus resources and provide a route to market at a time of global energy market disruption. It expects to take a final investment decision in 2024.

Western Gas said the initial term for Equus gas to be exported via NWS LNG will be from mid 2027 to end-2030 with the opportunity to extend beyond 2030. The total supply non-binding agreement is for between 10-20 years from 2027, it said.

“The LNG industry on the North West Shelf is maturing, with declining reserves and production leading to spare capacity at existing LNG facilities," Leibovitch said. "This requires the development of new gas supplies to meet domestic needs and to backfill existing LNG plants to extend their operating lives.”
Clara Tan, Singapore

NextDecade Signs Up Portugal's Galp For Rio Grande LNG Volumes

Portuguese energy company Galp has signed a 20-year contract with US LNG developer NextDecade to buy 1 million tons per year of LNG from the future Rio Grande LNG export project in Brownsville, Texas.

Deliveries through this contract are set to begin in 2027, with volumes indexed to the US Henry Hub plus a fixed liquefaction fee and lifted on an f.o.b. basis, according to a statement by Galp on Dec. 20.

NextDecade is expected to take a final investment decision (FID) on the first three liquefaction trains of the five-train 27 million ton per year Rio Grande project in the first quarter of next year, with commercial operations set to to start in 2026.

The 20-year deal marks the longest LNG supply agreement by a European buyer this year and indicates a shift in the strategy of European companies toward securing longer-term supply on the back of the ongoing energy crisis on the continent.

The Portuguese firm already inked a supply deal with another US LNG developer, Venture Global, for volumes from the 10 million ton/yr Calcasieu Pass project, also for 1 million tons/yr of LNG, which is expected to start next year. Besides that, Galp has long-term supply agreements with Nigeria LNG.

More Than Halfway to FID

NextDecade has already signed supply contracts for Rio Grande volumes with French utility Engie and US major Exxon Mobil earlier this year.

Its deal with Engie for 1.75 million tons/yr will run for 15 years and came after the partly state-owned utility pulled out from a previous deal with NextDecade in 2020 due to environmental concerns raised by the French government over LNG produced from shale gas.

Nonetheless, the ongoing energy crisis in Europe, coupled with efforts by US exporters to reduce emissions, pushed Engie back to the negotiating table in May.

Meanwhile, NextDecade's supply agreement with Exxon Mobil LNG Asia Pacific (EMLAP) is for 1 million tons/yr and for a 20-year duration.

In total, the US developer now has seven offtake agreements with Shell, EMLAP, Engie, Galp and Chinese companies Guangdong Energy, ENN and China Gas. The offtake agreements add up to about 9.3 million tons, or about 57.4% of the 16.2 million ton per year capacity of the first three trains.

Created with Highcharts 9.0.0(million tons)PORTUGAL LNG IMPORTS2013201420152016201720182019202020212022012345Source: Kpler

Daniel Stemler, Madrid

Freeport Reported to Be Taking in Slug of Gas

Idled Freeport LNG was set to receive 25 million cubic feet of gas Tuesday, but it wasn’t clear why.

This would be the first gas taken in by the 15 million ton per year LNG export plant since August, when it took in 22 MMcf to refuel a power plant that then sold the power into the grid during a heat wave. Observers suspect this gas will serve the same function especially given the polar incursion that will plunge temperatures across Texas from the 20s to the single digits Thursday night and early Friday.

Freeport has not commented on the Refinitiv data or how the gas will be used. Nonetheless, it will soon become clear. If this is the beginning of recommissioning supply then a trickle of gas will continue.

The LNG export terminal has been shut since a Jun. 8 explosion and fire, which sidelined 2.1 billion cubic feet of demand. Freeport has said it expects operations to resume by the end of the year, but most analysts think the restart could be delayed until early next year even if the terminal is physically ready.

Why? Because it first needs to satisfy federal regulators, including the US Federal Energy Regulatory Commission and the US Pipeline and Hazardous Materials Safety Administration, that needed repairs have been done properly and plant personnel are up to the task. The accident has been pinned to lax oversight and overworked workers.

But there are signs that a restart could be soon. Tankers are reportedly en route to the terminal, but it wouldn’t be the first false alarm. Two carriers have been moored offshore Freeport since November.

When Freeport does reopen it will be a bearish event for world LNG markets, but a bullish event for the US gas market, which has lost $1.644 in the past three sessions. January US gas futures ended Tuesday down 52.5¢ at $5.326 even as the arctic blast is nearing a peak mainly due to large players closing out positions ahead of the Christmas break.
Tom Haywood, Houston


In Brief

Spot LNG Prices Diverge

Spot prices in Northeast Asia increased $4 to $36 per million Btu, according to Energy Intelligence assessments for deliveries four to eight weeks ahead.

Spot prices in Southwest Europe meanwhile dropped by $3.05 to $31.10/MMBtu in line with falling prices on the benchmark TTF hub.

Global LNG prices have diverged this week as the expectation of colder weather across Northeast Asia has supported prices in the region. However, strong inventories at Asian LNG plants continue to suppress significant buying interest.

In China, the easing of Covid-19 restrictions had raised hope for a pick-up in demand. But workers returning early to their hometowns ahead of Lunar New Year holidays at the end of January have capped the upside on industrial demand for gas.

Supply uncertainties caused by a volume reduction of piped gas via the Central Asia pipeline to China may still cause an uptick in spot demand.

South Korea could also see reduced LNG demand with the start-up of a new nuclear power plant. The new System Marginal Price cap on wholesale electricity introduced by the government earlier this month is expected to reduce spot demand.

Meanwhile, Germany’s Wilhelmshaven and Lubmin floating LNG import projects have received their respective floating storage and regasification units last week as they are expect to get their first cargoes shortly.

Created with Highcharts 9.0.0($/MMBtu)REGIONAL SPOT PRICESNortheast AsiaSouthwest EuropeJan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22020406080Energy Intelligence

Yousra Samaha, Dubai and Daniel Stemler, Madrid


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India32.6033.0832.5933.0832.1331.9733.6431.4833.5432.6631.7831.4531.85
Sodegaura, Japan33.0734.6834.6934.8232.9628.8134.2131.6234.0735.2332.1131.0433.19
Zeebrugge, Belgium42.0640.0239.4840.1441.4341.8640.9839.5040.8239.5441.5640.3741.67
Huelva, Spain30.4328.5728.0928.6829.8129.5629.4427.9829.3028.1329.8728.6829.88
Isle of Grain, UK27.2125.3224.8325.4226.6527.0126.3424.8426.0624.8826.7525.6526.85
Everett, US5.293.553.923.644.954.770.014.484.233.145.52----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback18. Jul1. Aug15. Aug29. Aug12. Sep26. Sep10. Oct24. Oct7. Nov21. Nov5. Dec19. Dec10203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia32.0036.004.134.00
SW Europe34.1531.109.82-3.05
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.535.335.856.94
NBP, UK (futures)-0.9131.9132.8241.48
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-0.4832.6133.0943.13
Zeebrugge (Belgium)--------
German NCG-0.8629.0729.9338.70
NBP (UK)-1.8228.0729.9042.05
US Markets
US Spot Prices
Sabine Pass, Louisiana-0.675.245.917.17
Corpus Christi, Texas4.644.640.00--
Cove Point, Maryland-0.747.538.2711.69
Elba Island, Georgia----5.656.35
Nymex Henry Hub Futures
Near Month-0.535.335.856.94
Second Mth-0.495.225.716.73
Third Mth-0.434.825.256.07
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaJan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '220255075100125Energy Intelligence