December 27, 2022


Japan Signs New Long-Term LNG Deals After Hiatus

Japan's Inpex and Jera have signed deals for LNG supplies with the US and Oman, marking a renewed appetite by the world's top LNG market for long-term contracts.

Inpex has signed its first US LNG offtake agreement with US producer Venture Global, while Jera signed a term sheet with Oman LNG on Tuesday during a visit by Japan's trade and industry minister Yasutoshi Nishimura in Oman.

The deals signal a return of Japanese buyers to the long-term market at a time when LNG spot price volatility and new LNG demand from Europe are driving buyers to seek supply security from term supplies. Japanese buyers used to shun long-term LNG commitments due to demand uncertainties from the country's nuclear policy and its net-zero pledge by 2050.

Strengthening Japan-Oman LNG Trade

As Japan's largest LNG buyer, Jera has signed a term sheet with Oman LNG for purchase of up to 12 cargoes each year — around 800,000 tons per year — from 2025 over 10 years. Jera said it would be buying the cargoes on a f.o.b. basis — with no destination restrictions — which would enhance its ability to respond to uncertainties in the domestic LNG supply and demand. A spokesman declined to say whether the term sheet is binding or nonbinding.

Japanese trading houses Mitsui and Itochu are also understood to be holding talks with Oman LNG, which operates a three-train, 10.4 million ton/yr facility, for long-term supplies. Mitsui and Itochu own 2.77% and 0.92% stakes in Oman LNG, respectively. Itochu has an existing 700,000 ton/yr contract with Oman LNG, which is due to expire in 2025.

The Omani LNG producer is currently in the advanced stage of running a long-term supply tender to seek new buyers, as existing offtake contracts are due to expire in the mid 2020s. It is likely that Jera, Mitsui and Itochu have been shortlisted or selected from the tender.

Oman's location outside the Strait of Hormuz makes it less vulnerable to regional conflicts and thus favored by buyers.

Other Japanese players are also likely keen buyers. Japanese trader Mitsubishi is also a 2.77% shareholder of Oman LNG, while gas utility Osaka Gas is an existing offtaker.
Created with Highcharts 9.0.0(million tons)JAPAN'S LNG IMPORTSAustraliaMalaysiaRussian FederationUnited StatesPapua New GuineaBruneiQatarIndonesiaOmanOthers2017201820192020202120220102030405060708090Source: Kpler

Inpex's First US LNG Offtake Agreement

Inpex has signed a sales and purchase agreement with US LNG exporter Venture Global for long-term LNG supplies from the CP2 LNG project at Cameron Parish in Louisiana.

Inpex’s Singapore-based subsidiary, Inpex Energy Trading Singapore, would be offtaking 1 million tons/yr of LNG over 20 years. Inpex said it plans to deliver the LNG to its Naoetsu terminal in Japan and its customers in other countries.

This represents the first US LNG offtake agreement for Inpex, the operator of the Ichthys LNG project at Darwin in Australia. Inpex CEO Takayuki Ueda told Energy Intelligence earlier that it was looking to diversify its LNG supply portfolio beyond Australia by sourcing supplies from other projects, including those in the US. Inpex also plans to debottleneck its Ichthys project to 9.3 million tons/yr by 2024.

Volumes from CP2 would help Inpex expand its trading volumes, which are targeted to reach 10 million tons/yr by 2030.

The CP2 project is slated to be Venture Global’s third liquefaction facility following its earlier schemes Calcasieu Pass and Plaquemines. The CP2 LNG facility is slated to have a nameplate export capacity of 20 million tons/yr, which is targeted to start construction in 2023.

Venture Global Expands Asian Customer Base

Inpex represents Venture Global’s first supply agreement with a Japanese offtaker. Chinese buyers have so far been the only Asian buyers which have committed to buy supplies from Venture Global's Calcasieu Pass and Plaquemines schemes.

Inpex now joins four other CP2 LNG customers, which include ExxonMobil, Chevron, EnBW and New Fortress Energy, all of which have also signed up for 1 million tons/yr each.
Clara Tan, Singapore

Russian LNG Target Slips

Investment in Russia's oil and gas industry rose in 2022, but the 2035 LNG capacity target has apparently slipped.

Russia aims to double its LNG production to 64 million tons per year in "the nearest time" and reach 100 million tons level by 2035, said Deputy Prime Minister Alexander Novak in an interview with the Tass news agency.

Russia's long-held target had been to reach 140 million tons by 2035, and Moscow had insisted until just recently that nothing had changed, but the cutoff of western technology due to the war in Ukraine may be taking its toll.

Investment Up

Investment in Russia's oil and gas industry has risen in 2022 and is not expected to fall in 2023, said Novak.

In the first 10 months of 2022, investment in the sector amounted to 1.4 trillion rubles ($20 billion), compared with 1.5 trillion rubles in all of 2021.

"This means that by the end of this year the figure will be higher [than in 2021]," Novak said

Natural Gas Sector

In the gas industry, the investments of Gazprom alone are expected to come in at nearly 2 trillion rubles ($29 billion) for 2022 and grow to a record 2.3 trillion rubles next year, he noted.

Separately, consultancy Rystad Energy has recently forecast that upstream investment in Russia will amount to $35 billion in 2022 — some $15 billion below the $50 billion it had expected before Russia's invasion of Ukraine in February.

Rystad expects Russian upstream investment to remain subdued until at least 2025, driven largely by delays in several major LNG projects that will face technological and financial constraints following the withdrawal of Western investment partners.

Novak said Russian oil and gas producers have given no indication that they expect to invest less and have in fact signaled that all major projects remain on track.

Gazprom has said its 2023 investment program will cover upstream gas projects on the Yamal Peninsula and in East Siberia, as well as the continuing ramp-up of flows through the Power of Siberia pipeline to China.

Novatek aims to launch the first of three LNG liquefaction trains at the 19.8 million ton per year Arctic LNG 2 project at the end of 2023.

Domestic LNG Tech

Novak also noted that Russia is making progress on developing its own proprietary LNG technology — notably Novatek's Arctic Cascade liquefaction process — to reduce dependence on foreign technology.

Novak pointed to the Arctic Cascade technology developed by Novatek with the capacity of 1 million metric tons a year. It could be expanded up to 2 million — 3 million tons/yr in the future, he said.

Simultaneously, Rosatom, Novatek and Gazprom are working on developing the equipment for liquefaction trains of 5 million — 6 million tons/yr capacity, including heat exchangers, Novak added.
Staff Reports

Japan's Green Plan to Spur Alternatives, But Also Accelerate LNG

A draft of Japan's "Green Transformation" plan is a mixed bag for the country's LNG demand.

The plan would "maximize" nuclear power, build hydrogen and ammonia supply chains, yet accelerate a "strategic surplus" of LNG.

Liberal Democratic Party (LDP) Prime Minister Fumio Kishida convened a meeting Dec. 23 at which the 150 trillion yen (US$1.12 trillion) draft "Basic Policy for the Realization of Green Transformation" was presented.

The draft was drawn up under the direction of Ministry of Economy, Trade and Industry (Meti) chief Yasutoshi Nishimura in less than four months after Kishida ordered the study Aug. 24.

Nuclear Pivot

The draft plan pivots toward "maximum utilization" of nuclear power, which will likely do the most to limit the share of LNG in the Japanese market.

It also addresses 22 sectors, including renewable energy, hydrogen-ammonia, carbon recycled fuels, storage batteries, shipping, aviation and transportation.

The plan would invest over 7 trillion yen (US$52.8 billion) to build hydrogen and ammonia supply chains.

The draft plan envisions 5 trillion yen toward building a large-scale and robust supply chain and approximately 1 trillion yen in the development of infrastructure and retrofitting of existing facilities and about one trillion yen into R&D aimed at ensuring Japan's technological superiority and development of domestic advanced research bases.

Domestic introduction of hydrogen and ammonia is expected to reach 3 million tons of hydrogen and 3 million tons of ammonia equivalent in 2030, and 20 million tons of hydrogen and 30 million tons of ammonia equivalent by 2050.

Acceleration of LNG

The draft plan calls for the acceleration of policies to build a "strategic surplus" of LNG by utilizing the procurement capabilities of private sector companies, including the continuation of involvement in international projects such as Russia's Sakhalin 1, 2 and Arctic LNG 2.

The draft plan envisions upstream investment in collaboration with other Asian states as well as efforts to build a mutual cooperation system for LNG in times of emergency or tight supply and demand.


Kishida said that the government will “provide bold upfront investment support” of 20 trillion yen to spur a total of 150 trillion yen in public and private investments.

The first installment of 500 billion yen in “GX Economic Transition Bonds” will be included in the 2023 national government budget, NHK reported Dec. 19.

The draft plan is now being submitted by Meti for a month of public comment from Dec. 23, 2022 through Jan. 22, 2023 together with a draft and future action plan for nuclear power. The plan is expected to be ratified by the LDP-led Cabinet in February.
Dennis Engbarth, Taipei

Gas Intake for US LNG Export Plants Dips in Freeze

US LNG output was affected by upstream well freeze-offs amid a North American cold weather wave.

Feed gas intake by most US LNG export terminals dropped sharply last week as an unusually cold Arctic incursion into the eastern US froze wells and vital infrastructure from North Dakota and Appalachia to the major Gulf Coast plays in Texas and Louisiana.

Dry gas production, which fell roughly 16 billion cubic feet per day on Dec. 24, climbed to around 90 Bcf/d by Dec. 26, or 10% below pre-freeze dry gas production close to 100 Bcf/d, Bloomberg estimates.

As temperatures dropped into the single digits and teens last week from Texas to the Carolinas. US LNG terminals took in roughly 3.3 Bcf/d less in feed gas on Dec. 23, with curtailments most severe at Venture Global’s Calcasieu Pass operation in Louisiana. At the height of the cold snap from Dec. 23-26, intake at the terminal averaged 467 MMcf/d, a fourth of its usual supply.

Meanwhile, the idled Freeport LNG terminal continued to take in a steady 25 Bcf/d during the freeze. But it is thought the gas is being used to fuel an onsite gas-fired power plant that is sending needed electricity into the Texas grid.

While feed gas intake at all the affected terminals continued rising Tuesday, they had still not reached pre-freeze levels except for Cheniere Energy’s Sabine Pass, which saw a relatively small 0.86 Bcf/d drop on Dec. 23 and a 0.92 Bcf/d rise in intake on Dec. 24. Gas intake at Cheniere’s Corpus Christi operation was not discernably impacted.

Likewise, Georgia's Elba Island intake fluctuated with the cold, but the smaller Cove Point terminal in Maryland did not.
Tom Haywood, Houston

In Brief

China's ENN Signs Up for More US LNG Volumes

China's ENN has increased its offtake deal with US-based NextDecade for volumes from the proposed Rio Grande LNG export plant.

The deal further strengthens the prospects for a final investment decision (FID) on the project early next year.

ENN LNG (Singapore), a subsidiary of ENN Natural Gas, has now agreed to a 20-year sales and purchase agreement for 2 million tons per year from Rio Grande LNG, to be located in Brownsville, Texas. The new level is a 0.5 million ton per year increase from the original 1.5 million tons announced earlier this year.

All volumes of LNG are indexed to Henry Hub and will be supplied from the first three trains at Rio Grande on a free-on-board basis.

NextDecade is currently targeting FID on the first three trains — 16.2 million tons of the 27 million ton/yr export project — during the first quarter of 2023, with FIDs of its remaining trains to follow thereafter.

Coupled with the latest offtake deal with Portugal's Galp, NextDecade has sold 9.8 million tons of offtake, or about 60.5% of the capacity of the first three trains.
Michael Sultan, Washington

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 ASIANetbackNetback25. Jul8. Aug22. Aug5. Sep19. Sep3. Oct17. Oct31. Oct14. Nov28. Nov12. Dec26. Dec10203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia36.00------
SW Europe31.10------
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)--5.28--5.33
NBP, UK (futures)--24.06--31.57
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF------32.66
Zeebrugge (Belgium)--------
German NCG------29.03
NBP (UK)------27.78
US Markets
US Spot Prices
Sabine Pass, Louisiana--4.89--5.24
Corpus Christi, Texas--3.93--4.64
Cove Point, Maryland--6.04--7.53
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month--5.28--5.33
Second Mth--5.12--5.22
Third Mth--4.48--4.82
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaJan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '220255075100125Energy Intelligence