December 23, 2022

WWW.ENERGYINTEL.COM

TotalEnergies Plots French Regas Capacity Marketing Plans

TotalEnergies is gearing up to market capacity on a new floating storage and regasification unit (FSRU) in France ahead of start-up in September 2023, as the country's LNG import needs remain elevated in the wake of the Russia-Ukraine crisis.

The French major is seeking out initial interest for up to 2.5 billion cubic meters per year of regasification capacity — equivalent to about 1.8 million tons of LNG — for a five-year term at its FSRU planned for Le Havre, in the Normandy region of northern France.

"The war in Ukraine has exposed the need for the European Union and France to diversify their gas procurement in line with the European Commission’s REPowerEU plan," Total said in an announcement, referring to the Commission's efforts to rapidly phase out Russian gas supplies following Russia's late February invasion of Ukraine.

Total's speedy mobilization of the Le Havre FSRU and related marketing comes as France has significantly raised its LNG imports post-invasion.

Kpler data shows that France's four existing LNG import terminals — Montoir, Fos Cavaou, Fos Tonkin and Dunkerque — have received 24.2 million tons of LNG so far this year, against a combined nameplate capacity of 25.6 million tons. That compares to a previous annual record of 16.3 million tons in 2019.

Created with Highcharts 9.0.0(million tons)WARTIME FRENCH LNG IMPORTS SKYROCKETMontoirFos CavaouFos TonkinDunkerque201320142015201620172018201920202021202202468101214161820222426Source: Kpler

Total is working within emergency measures advanced by France's parliament earlier this year to accelerate the FSRU's operations.

European Capacity

Total plans to formally launch its FSRU marketing campaign in January, starting with a non-binding call for interest taking place between Jan. 16 and Jan. 27. A binding open season will then follow in March.

The French LNG import capacity expansion comes right on the heels of similar efforts across the continent, also in response to the Russia-Ukraine crisis.

A new LNG import terminal at Eemshaven in the Netherlands started feeding gas into the country's grid back in September. And earlier this month, Germany's first FSRUs arrived at the ports of Wilhelmshaven and Lubmin.

Looking ahead, Europe can expect an FSRU at Germany's Brunsbuttel to go into operation in early 2023 followed by an import terminal in Greece in late 2023, among other gas infrastructure enhancements.
Michael Sultan, Washington

Freeport LNG Restart Slips Into 2023

The planned restart of Freeport LNG has slid into 2023, as volatile gas markets eagerly watch for the return of the US export facility.

"Given the time needed for the regulatory agencies to review the company's responses and to seek any necessary clarification, Freeport LNG now does not anticipate commencing the initial restart of its liquefaction facility until the second half of January 2023," the company said in a statement Friday.

Last month, Freeport predicted a mid-December restart that would allow operations to ramp up in January to take 2 billion cubic feet per day of feedgas — enough to support the plant's 15 million ton per year liquefaction capacity.

The three-train Texas-based export facility suffered an explosion back in June. That incident sent US gas market prices spiraling downward as domestic markets suddenly had to absorb 2 billion cubic feet per day of displaced supplies. Overseas LNG pricing, on the other hand, soared as Freeport buyers — particularly in Europe — were left scrambling for alternative supplies.

Atlantic basin LNG prices are off those mid-2022 highs driven by Europe's furious attempts to fill storage while minimizing Russian gas supplies, but LNG buyers will nonetheless welcome Freeport's mid-winter return next month as wider global LNG demand rises amid cold seasonal weather.

On the US side, the removal of 2 Bcf/d of supplies during the peak winter demand season is less welcome with Henry Hub cash prices already beginning to climb rapidly on both winter and Freeport return factors.

Trickle of Feedgas

Freeport says the reconstruction work to begin operations is "substantially complete" as of Dec. 23, while the company is submitting responses to address outstanding questions coming out of the US Federal Energy Regulatory Commission's Dec. 12 data request.

In the meantime, the Freeport facility has started taking in about 25 million cubic feet per day of gas over the past four days, Refinitiv data shows.

The company has not elaborated as to whether this gas is in preparation of next month's restart or for other purposes. In late July and early August, Freeport took in about 21.7 MMcf/d of gas to generate power in support of the Texas grid during a particularly intense heat wave. Texas is currently facing intense weather again — this time in the form of a winter storm.

As a reference, when the 10 million ton/yr Calcasieu Pass LNG plant in Louisiana was starting up in 2021, it began taking 29.9 MMcf/d in late November but didn't clear the 1 Bcf/d feedgas mark until late April of the following year.

"The company continues to have close, collaborative engagement with the regulatory agencies, and that engagement will continue as Freeport LNG works towards the safe restart of its facility," Freeport LNG said Friday.
Michael Sultan, Washington

Asia Takes EU's Wholesale Gas Price Cap in Stride

Asian players don't see the EU's adoption of a cap on wholesale gas prices having much of an impact on the LNG market any time soon, and some question whether it will make much of a difference in the longer term too.

Since Russia's invasion of Ukraine in February, Asia has lost its role as the world's premium LNG market and has become the new swing market.

As a result of this, Asia's de-facto LNG price reference, the Japan Korean Marker (JKM), has been tracking prices at the Dutch Title Transfer Facility (TTF) — Europe's main gas hub — and has become susceptible to its big price swings.

The EU price cap will be triggered when the price of the front-month Dutch TTF gas futures contract exceeds €180 per megawatt hour ($56 per million Btu) for three days and also exceeds an international LNG reference price by €35 for the same three days.

The "reference price" will reflect an average of daily assessments from price reporting agencies S&P Platts and Argus for different regions of the world.

The LNG Northeast Asia marker has been defined as the average of S&P Platts' Japan Korea Marker delivered and Argus' Northeast Asia delivered.

More Supply for Asia?

Industry sources said the EU set its trigger price of $56/MMBtu high enough to avoid any near-term disruptions of trade flows, given that the European and Asian price references have recently been trading around the $30/MMBtu level.

But if prices were to spike again because of factors such as a cold winter, a hot dry summer, or the return of Chinese buyers, the EU price cap "might result in some LNG suppliers redirecting cargoes to Asia," said Wood Mackenzie's Valery Chow.

"This would benefit Asian buyers and, ironically, add upward pressure on European spot prices," said Chow, who is head of Asia gas and LNG research at Woodmac.

Some sources think a cap on Europe's wholesale gas prices could also act as a cap on the JKM, but this would depend greatly on the strength of Asian demand.

Woodmac does not expect JKM prices to exceed TTF prices in 2023. Even at current prices of around $30/MMbtu, there's plenty of evidence of demand destruction in price-sensitive markets across South Asia and China, Chow said.

Traders said additional supplies flowing to Asia as a result of the EU cap would put downward pressure on prices. "It feels bearish. More supply redirected to Asia will moderate prices here," said a Singapore-based trader.

Currently most Asian buyers are buying spot cargoes at prices linked to the JKM, rather than the TTF.

Pundits also expressed doubts as to whether the EU price cap would be effective in an extremely tight spot market.

"Europe still has few alternatives to importing LNG to manage their energy systems," said Felix Booth, head of LNG at energy and shipping analytics firm Vortexa.

Booth thinks that with only 30% of the global LNG market, Europe lacks a sufficient market share to control global LNG prices in a tight situation.

"As seen in 2022, few buyers can afford $60+/MMBtu LNG cargoes, so the upside is limited to Asian buyers with spot needs for peak heating and power demand," he says.

Chinese Demand a Wild Card

Chinese LNG imports have fallen by 20% this year versus 2021, reflecting a subdued economy, strict Covid-19 restrictions and greater use of coal and pipeline gas imports.

As China has moved to relax Covid-19 restrictions, market sources are watching closely for signs of recovery in demand for LNG.

Chinese sources said they will continue to resell cargoes if domestic demand remains weak and the government in Beijing gives them the go-ahead.

After a sudden easing of Covid-19 precautions earlier this month, there are growing expectations that China will soon allow people to enter the country from abroad without going into quarantine, although implementation could take up to six months.

There are also concerns that a surge in infections across China could hurt commercial activity and dampen demand for gas.

But even if China's gas demand strengthens, it may not immediately translate into higher LNG imports, Chow points out, noting that China can call on other more competitive substitutes such as domestic coal and pipeline gas imports.

For more coverage of the Ukraine crisis, visit Ukraine Crisis: Energy Impact
Clara Tan, Singapore and Dawn Lee, Beijing and Rakesh Sharma, New Delhi

Indonesia Extends BP’s Tangguh Contract

Indonesia has extended the production sharing contract (PSC) for the field that feeds gas to the Tangguh LNG project by 20 years, operator BP said Friday.

The overarching PSC for the Tangguh field, which consists of PSCs for the Berau, Muturi and Wiriagar Blocks, will now run until 2055 after an extension agreement was signed in Jakarta. It accounts for around 20% of Indonesia’s gas output.

The approval of the extension comes as BP — whose Tangguh LNG partners include China National Offshore Oil Corp. (CNOOC) and a number of Japanese firms — prepares to start up a delayed third train at the 7.6 million ton per year project in 2023.

This will raise liquefaction capacity at Tangguh LNG, which began operations in 2009, by 50% to 11.4 million tons/yr.

In a statement, BP’s executive vice president, gas and low-carbon energy, Anja-Isabel Dotzenrath, said the extension would enable the partners to deliver “much-needed natural gas safely and reliably from Tangguh to Indonesia and other markets.”

It will also allow BP to expedite exploration activities in Indonesia, according to Kathy Wu, the UK major’s regional president, Asia-Pacific gas and low-carbon energy.

Capturing Potential

Next year, the Tangguh LNG partners are also planning to take a final investment decision on the so-called Tangguh UCC project, which will extend the gas feed to the third liquefaction train.

The $3 billion UCC scheme consists of development of the Ubadari field and a carbon capture, utilization and storage (CCUS) project in the Vorwata reservoir. It is slated to come on stream in 2026-27.

A joint statement issued by the partners on Friday said the CCUS project, once implemented, would remove up to 90% of the reservoir-associated carbon dioxide — or nearly half of Tangguh LNG’s emissions.

This would make Tangguh one of the lowest greenhouse gas-intensity LNG plants in the world, said the statement, which was published by Japanese shareholder Mitsubishi.
Tom Daly, London


In Brief

Notice to Subscribers

There will be no issue of LNG Intelligence published on December 26, 2022. The next issue will be dated December 27, 2022

Santos Extends PNG LNG Stake Sale Period with Kumul

Santos has agreed to extend the time available for a sale of a 5% stake in the Papua New Guinea (PNG) LNG project to Kumul Petroleum.

Kumul has requested an extension — by four months to end-April next year — of the time for which its offer would remain valid. Santos agreed to deal exclusively with the local state firm during this period.

Kumul submitted a binding bid to Santos in September to acquire a 5% stake in PNG LNG for $1.4 billion for which Santos agreed to deal exclusively with Kumul until Dec. 31. If the transaction comes to fruition, Santos’ stake would fall to 37.5% while Kumul’s interest would increase to 21.8%.

Kumul's offer is conditional on the firm obtaining waivers of certain pre-emptive rights by other participants of PNG LNG under the project operating agreement to allow the transaction to proceed.

As the sole LNG-producing project in Papua New Guinea, PNG LNG is operated and owned 33.2% by Exxon Mobil while other participants are Japan's JX Nippon (4.7%) and Mineral Resources Development, which owns 2.8% on behalf of PNG landowners.

Santos decided to farm down its interest in PNG LNG after its acquisition of fellow independent Oil Search which increased its overall stake in the project to 42.5%.
Clara Tan, Singapore


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India33.1933.6733.1833.6732.7132.5634.2332.0634.1333.2432.3632.0332.43
Sodegaura, Japan33.6535.2735.2835.4133.5429.3834.8032.2034.6535.8232.6931.6233.77
Zeebrugge, Belgium14.3612.6212.1812.7113.8214.1913.4412.1613.3012.2113.9412.9314.04
Huelva, Spain20.9719.2118.7619.3120.3920.1520.0318.6519.9018.7920.4419.3220.45
Isle of Grain, UK17.8016.0215.5616.1117.2817.6216.9815.5616.7215.6017.3816.3417.47
Everett, US22.5720.6421.0320.7422.1921.980.0121.6821.3920.1822.83----
Created with Highcharts 9.0.0($/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 Asia36.0036.590.440.59
SW Europe31.1021.63-4.70-9.47
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.085.085.006.60
NBP, UK (futures)-3.2324.1027.3334.74
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-2.0225.8127.8337.01
Zeebrugge (Belgium)--------
German NCG-1.5623.2024.7632.32
NBP (UK)-4.7018.6723.3733.97
US Markets
US Spot Prices
Sabine Pass, Louisiana-0.996.147.136.59
Corpus Christi, Texas-0.396.256.64--
Cove Point, Maryland-3.4128.1731.5816.11
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month0.085.085.006.60
Second Mth0.054.984.936.30
Third Mth-0.014.424.435.60
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaJan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '220255075100125Energy Intelligence