December 21, 2022


Electrification Eyed to Extend Hammerfest LNG Viability

Norway's Equinor plans to convert its Hammerfest LNG (HLNG) facility to electric drive and extend plateau production in a dual effort to align operations with continental Europe's emissions reduction goals while extending the lifespan of Europe's only LNG export plant.

The $1.3 billion (NOK 13.2 billion) upgrade, dubbed Snohvit Future, is expected to extend operations at the nameplate 4.2 million ton per year facility by 10 years, Equinor said, pushing its lifespan toward 2050.

Specifically, Equinor and its partners Petoro, TotalEnergies, Neptune Energy and Wintershall are funding the conversion of HLNG from gas turbines to electric drive and necessary grid upgrades around Melkoya, while also adding onshore gas compression to extend plateau production of the plant. Both upgrades are expected to be fully operational by 2028.

“Snohvit Future will strengthen Norway’s position as a reliable and long-term supplier of LNG to Europe," Geir Tungesvik, Equinor’s executive vice president for projects, drilling and procurement, said in a statement marking the investment decision.

Tungesvik added that electrification will drive operational greenhouse gas emissions at the plant to "close to zero." That achievement could help preserve Hammerfest's role as a key gas supply source to continental Europe, even as countries aim to reduce gas dependency longer term to meet Paris climate agreement-aligned emissions targets.

Electrification Plan

Equinor says electrification of HLNG is expected to reduce the project's annual CO2 emissions by around 850,000 tons — the equivalent of removing around 450,000 internal combustion engine vehicles from the road.

"This is one of the largest individual emissions reduction measures for decarbonization of oil and gas production in Norway. The project is a key contributor to the energy transition,” Grete Haaland, Equinor's senior vice president for exploration and production north, said in a statement. The company says the plant is currently responsible for 2% of Norway’s annual emissions.

On an emissions intensity basis, the switch to electric drive is expected to cut Hammerfest's CO2 footprint from LNG production from 3.8 grams of CO2 equivalent per megajoule to 0.6g CO2e/MJ.

Cutting emissions at HLNG is not a new idea; Equinor noted that the plans meet government requirements laid out in 2002 approving the development of the Snohvit license.

But the decision to green light the investment comes amid a broader industry push toward electric-drive LNG systems to address the higher CO2 intensity of LNG versus pipeline gas. Such initiatives have particularly gained traction among Atlantic basin projects.

Steady Operations

The investment to extend HLNG's plateau production comes just months after the plant resumed LNG exports following a lengthy outage after a fire shut the plant down in September 2020.

Since its June restart, the plant has exported about 370,000 tons of LNG per month, exceeding its pre-incident average of around 340,000 tons in 2020, according to Kpler data. Annual output, however, is yet to revisit past highs.

Earlier this month, Equinor brought on a new gas field to feed HLNG.

Created with Highcharts 9.0.0(million tons)HAMMERFEST LNG EXPORTSEuropeAmericasAsiaAfrica2013201420152016201720182019202020212022012345Source: Kpler

Michael Sultan, Washington

European Gas Prices Fall Below €100/MWh

The front-month Dutch TTF gas-futures contract closed below €100 per megawatt hour ($31.14 per million Btu) for the first time in more than a month on Wednesday amid mild weather, strong LNG imports and robust gas storage levels.

The front-month TTF contract — a benchmark for the broader European gas market — was trading around €98/MWh at the end of Wednesday's session, according to Intercontinental Exchange (ICE) data.

It has now fallen for four consecutive sessions since closing at €134.77/MWh on Dec. 15. The previous close below €100/MWh was on Nov. 11, ICE data shows.

Mild and windy weather this week has weighed on gas prices, by dampening demand for gas and boosting output of renewable electricity.

"The outlook is for very soft gas demand this week due to warm and windy weather and the return of some nuclear power generation in France," an LNG analyst at a trading firm told Energy Intelligence.

"Additionally, industrial gas demand will fall further in the coming days due to the Christmas holiday," the analyst added.

Robust Storage Levels

European gas demand, particularly from the residential sector, rose sharply last week as much of the continent experienced below-average temperatures.

That led to withdrawals of gas from storage to meet the uptick in demand, but storage levels remained about 10 Bcm above the five-year average for the time of year.

"Gas storage will be nice and comfortable going into January," the analyst said.

EU gas stocks stood at 933.6 terawatt hours (95.6 billion cubic meters), or 83% of capacity as of Dec. 19, Gas Infrastructure Europe (GIE) estimates.

Healthy storage levels have helped to pull prices lower this week and could continue to do so next month as there is a growing likelihood of a mild January across Europe, trading firm Energi Danmark said on Wednesday.

Storage capacity in Germany, the EU's largest gas consumer, stood at 87% of capacity on Dec. 19, according to GIE.

"Gas is mainly being taken out of storage. The total storage level in Germany is 87.30%. The storage level at the Rehden facility [Germany’s largest storage site] is 90.81%," German networks regulator BNetzA said on Wednesday.

LNG Imports at High Levels

Germany's calls on storage should decrease in the coming weeks as the country’s first LNG import terminals are expected to start receiving cargoes.

The Seapeak Hispania LNG carrier, with a cargo from Egypt's Idku export facility, is expected to arrive at the floating storage and regasification unit at Lubmin in the coming days, according to ship-tracking data from commodity analytics firm Kpler.

The Maria Energy LNG tanker with a cargo from Venture Global's Calcasieu Pass export facility is also expected to arrive at the Uniper-led FSRU project in Wilhelmshaven on Jan. 2, according to Kpler.

While gas demand has dipped since Europe's cold spell ended, strong supply has helped to deflate prices.

LNG imports into Europe have been running at near-record levels, helping to alleviate withdrawals from storage.

Europe, including the UK, has imported 8.35 million tons of LNG so far this month, according to Kpler data. November imports amounted to 10.31 million tons, just shy of the record 10.37 million tons imported in April of this year.

Current prices are a far cry from the levels seen in August when the front-month Dutch TTF contract briefly peaked above €300/MWh amid concerns that a big drop in pipeline gas imports from Russia would leave Europe short of gas this winter.

Prices did briefly tick higher and then back down again on Tuesday in response to news of an explosion in Russia that killed three people during planned maintenance work on the Bratstvo (Brotherhood) gas pipeline.

Russian gas giant Gazprom said part of the pipeline was damaged but that export volumes to several European countries via Ukraine would be maintained at recent levels of just over 40 MMcm/d. Ukraine confirmed that volumes had remained stable.

Eric Thorp, London

Sempra Granted OK to Export US Gas Via Mexican LNG Terminals

Sempra has received US government approval to ship domestic natural gas to two Pacific-facing Mexican LNG facilities for re-export to international markets.

Permits issued this week by the US Department of Energy (DOE) allow California-based Sempra to export 200 billion cubic feet annually, or 0.55 Bcf/d, more than sufficient gas for its proposed 2 million ton per year Vista Pacifico terminal in Sinaloa on Mexico's Pacific coast. Sempra expects a final investment decision (FID) on that project in 2024.

DOE also increased the amount of LNG that can be exported from Sempra’s Energia Costa Azul (ECA) facility, under construction near Ensenada, from 475 Bcf/year to 636 Bcf/year, or 1.74 Bcf/d. The total amount approved covers the 3.25 million ton/yr ECA Phase 1, and 9 million tons from the proposed 12 million ton/yr ECA Phase 2. Approval of the remaining 3 million tons at Phase 2 is still pending with US regulators.

Sempra took FID on the first phase of that project in 2020 and expects to begin exports in 2024.

The permits pave the way for Sempra to ship gas sourced from the Western US — most likely the Permian Basin — via future pipelines to the two Mexican terminals for liquefaction and export to countries with which the US does not have a Free Trade Agreement (FTA).

Two-Coast Strategy

With these approvals in hand, Sempra — which already operates the Cameron LNG terminal on the US Gulf Coast and is building the Port Arthur LNG terminal nearby — can dramatically expand its reach into a fast-changing global LNG market with a two-coast North American strategy.

Sempra's Cameron LNG export capacity is at about 14 million tons/yr, but the company has a portfolio of likely projects that could boost the company's total LNG export capacity to as much as 65 million tons/yr.

Political Pressure

The DOE orders came amid political pressure on the Biden administration to quickly issue permits for LNG exports given the sharp growth in demand from Europe in the wake of Russia’s invasion of Ukraine.

Cargoes from the two Mexican terminals would likely go to Asia, which Sempra executives say will be the primary long-term market for North American LNG.

“Together, these orders bring DOE’s cumulative total of approved non-FTA exports of LNG from the lower 48 states to 47.06 Bcf/d of natural gas,” DOE said in its order. “This cumulative total includes 6.32 Bcf/d of US-sourced gas authorized for re-export in the form of LNG from Mexico and Canada to non-FTA countries.”

'Public Interest'

DOE said it “acknowledges” that such approvals “raise public interest considerations that are not present for domestic exports of LNG.”

"In the case of re-exports, the US economy does not receive a significant portion of the benefits DOE has recognized for LNG exported directly from the US, particularly with respect to the jobs and infrastructure investment associated with construction and operation of liquefaction facilities,” the agency said.
Mark Davidson, Washington

In Brief

More Gas Discovered Offshore Cyprus

Eni and TotalEnergies have confirmed another gas discovery at the Zeus prospect in Block 6 offshore Cyprus.

This follows the Calypso and Cronos discoveries made on the same block in 2018 and August of this year respectively.

The Zeus-1 discovery well encountered 105 meters of net gas pay in carbonate reservoirs "that reinforces the promising outlook for the area and its development”, Total said.

Located 162 km off the coast and 5 km west of Cronos, the Zeus well was drilled by the Tungsten Explorer drillship. Total said new data from the well would assist fast-track development options for the discovered resources in the area.

Eni operates Block 6, with both companies sharing the permit in a 50-50 joint venture.

Cyprus has seen several large gas discoveries in recent years, just as the European Union eyes the East Mediterranean region as a future source of gas that could offset the loss of supplies from Russia since that country's invasion of Ukraine.

ExxonMobil and its partner QatarEnergies have yet to confirm the scale of their Glaucus gas discovery in Block 10, which is now believed to be smaller than previous estimates of 5-8 Tcf.

Nicosia is also waiting for Chevron to outline development and export options for the 4 Tcf Aphrodite gas discovery which was made in 2011.

Tom Pepper, London

Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India32.9333.4132.9233.4132.4532.3033.9731.8133.8732.9932.1131.7732.17
Sodegaura, Japan33.3935.0135.0235.1533.2929.1334.5431.9534.3935.5632.4331.3633.51
Zeebrugge, Belgium21.8820.0619.5920.1621.3121.7020.9219.5820.7719.6321.4420.3821.54
Huelva, Spain28.4026.5626.0826.6627.7827.5427.4125.9727.2726.1227.8426.6627.85
Isle of Grain, UK25.2323.3722.8923.4724.6925.0424.3822.8924.1022.9324.7823.7024.88
Everett, US4.923.193.563.284.584.400.014.113.872.785.15----
Created with Highcharts 9.0.0($/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 Asia36.0036.330.330.33
SW Europe31.1029.06-2.04-2.04
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.015.335.336.43
NBP, UK (futures)-2.4929.2431.7339.27
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-3.1429.4132.5541.34
Zeebrugge (Belgium)--20.84----
German NCG-3.2925.8429.1336.86
NBP (UK)-1.8126.1127.9240.00
US Markets
US Spot Prices
Sabine Pass, Louisiana0.786.025.246.58
Corpus Christi, Texas----4.64--
Cove Point, Maryland-1.376.167.537.97
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month0.015.335.336.43
Second Mth0.
Third Mth0.004.824.825.62
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaJan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '220255075100125Energy Intelligence