December 29, 2022

WWW.ENERGYINTEL.COM

Gazprom Sees Production, Exports Decline

Russia's largest gas producer and exporter, state-controlled Gazprom, will see its exports dropping sharply in 2022 — to their lowest level since the 1990s — as a result of the loss of its European market.

However, the company says it will develop new export routes, especially those to China, where Gazprom sees the largest consumption increase in the next two decades.

Summarizing 2022 results, Gazprom head Alexei Miller said that the company will produce 412.6 billion cubic meters of gas in 2022, down by almost 20% from 514.8 Bcm produced in 2021.

Gazprom's lower production will result in Russia's total gas production declining by 12% on the year in 2022 compared to the country's post-Soviet record of 762.3 Bcm in 2021.

Pipeline of Troubles

The sharp drop in pipeline gas exports to Europe was the key reason behind the decline in Gazprom's production. Miller said Gazprom will export 100.9 Bcm to the far abroad this year, which is the lowest level since the 1990s.

Last year, Gazprom, Russia's sole pipeline gas exporter, sent 175 Bcm to Europe (including Turkey) and another roughly 10 Bcm to China, with total exports standing at 185.1 Bcm in 2021.

Gazprom's exports and production drop accelerated in the second half of this year due to a sharp drop and later halt in gas flows via the Nord Stream export pipeline to Germany, coupled with an earlier halt in supplies via the Yamal-Europe pipeline and lower shipments via Ukraine.

Miller said, however, that the current production is enough for the company to ensure the necessary supplies to the domestic market and ensure the company's export obligations.

Chinese Diversification

Miller reiterated that Gazprom will continue diversification of its exports as the company expects global gas demand to growth further — by almost 20% in the next two decades.

Of the total growth, China should account for roughly 40% of additional consumption. Gazprom plans to ramp up shipments to China to nearly 100 Bcm/yr — 38 Bcm/yr via the Power of Siberia line already in operation, 10 Bcm/yr via the recently signed "Far Eastern route" and up to 50 Bcm/yr via the still planned Power of Siberia 2 project.

Miller said Gazprom hit its new record for supplies to China on Dec.28. The company recently launched the giant Kovyktinskoye field that should help it ramp up shipments to China.

Other diversification projects include the planned natural gas hub in Turkey first announced by Russian leader Vladimir Putin in October. Miller said Gazprom has started "practical implementation" of the project.

Deputy Prime Minister Alexander Novak said recently that decisions on the project are expected to be taken in 2023 with discussions ongoing with possible other participants, including Qatar, Algeria and Azerbaijan.

Steady Sakhalin-2

Gazprom's majority-owned Sakhalin-2, despite a government-decreed ownership shift, has nevertheless kept LNG exports steady, with the exception of the Covid-19-stricken 2021 (see graph below).

Most of Sakhalin-2 LNG exports go to Japan, South Korea, Taiwan and China.

Created with Highcharts 9.0.0(million tons)SAKHALIN-2 LNG EXPORTSJapanSouth KoreaTaiwanChinaOthers2013201420152016201720182019202020212022024681012Source: Kpler

Staff Reports

Sinopec Bags New Hydrogen Projects

Asia's largest refiner Sinopec is progressing with its green hydrogen ambitions, bagging approvals for two new projects in Inner Mongolia that are slated to commence construction in the next 12 months.

The approvals come on the heels of Sinopec's peak natural gas consumption forecast.

The larger of the two projects approved last week is tagged at 20.5 billion yuan ($2.9 billion) – to be sited in Ulanqab in central Inner Mongolia and targets annual green hydrogen production of 100,000 tons, according to a statement last week from the Inner Mongolia energy bureau.

The Ulanqab project is to be integrated with a wind farm of 1.7 gigawatts (GW) and a solar farm of 804 megawatts (MW) for supplying the renewable electricity required for manufacturing green hydrogen.

The green hydrogen to be produced would be transported via a long-distance pipeline to Sinopec’s Beijing Yanshan petrochemical complex, which already houses a hydrogen purification facility that supplied the Beijing Winter Olympics.

Construction on the Ulanqab project is slated to start construction in December 2023, with completion scheduled for June 2027.

Ordos Phase 2

The other proposal approved last week by Inner Mongolia is a 3-billion-yuan ($430 million) project to be sited in the Uxin region of Ordos city.

It has a planned hydrogen production capacity of 20,000 tons per year and is the second phase of Sinopec’s Ordos green hydrogen project, the first phase of which has already commenced construction and is scheduled to be operational by the end of 2022.

A 400-megawatt (MW) wind farm would be built at the Ordos Phase 2 project to supply renewable electricity needed for manufacturing green hydrogen, which would be used to substitute for coal-based feedstocks currently utilized by the Zhongtian Hechuang olefins plant in Ordos.

Ordos Phase 2 is scheduled to start construction in June 2023 and targets operational startup in June 2024.

Flagship Xinjiang Project

Sinopec has big hydrogen ambitions that envisage the company becoming China’s top supplier. Apart from scale, it is also aiming for a leadership role in creating an “innovative and high-quality” localized production chain based on indigenous technologies, said the state-owned oil and gas giant in its medium- to long-term hydrogen implementation plan unveiled in September 2022.

Sinopec’s flagship solar-to-green hydrogen project in Xinjiang’s Kuqa region broke ground in late 2021. The 3-billion-yuan ($430 million) project has been billed as the largest of its kind globally. When completed, it would outsize the current record holder, which is a similar project already operational in China’s remote Ningxia region by coal-based chemicals producer Baofeng Energy.

Sinopec expects the first of seven production lines at its Xinjiang Kuqa project to be operational before the end of 2022, with full operations scheduled for 2023. The green hydrogen to be produced would be channeled to Sinopec’s nearby Tahe refinery, substituting for the gray hydrogen (produced from natural gas) currently being used there.
Kim Feng Wong, Singapore


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India32.6033.0832.5933.0832.1331.9733.6431.4833.5432.6631.7831.4531.85
Sodegaura, Japan33.0734.6834.6934.8232.9628.8134.2131.6234.0735.2332.1131.0433.19
Zeebrugge, Belgium14.9613.2212.7713.3114.4214.7914.0412.7513.9012.8014.5413.5314.64
Huelva, Spain30.4328.5728.0928.6829.8129.5629.4427.9829.3028.1329.8728.6829.88
Isle of Grain, UK18.4616.6716.2116.7617.9318.2817.6416.2117.3716.2518.0316.9918.13
Everett, US2.440.741.100.822.101.930.011.641.400.332.66----
Created with Highcharts 9.0.0($/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
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.134.564.695.00
NBP, UK (futures)+0.6923.3522.6627.27
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF0.1224.8024.6827.96
Zeebrugge (Belgium)--------
German NCG0.6321.9121.2824.65
NBP (UK)0.5919.3118.7223.32
US Markets
US Spot Prices
Sabine Pass, Louisiana-0.343.724.067.13
Corpus Christi, Texas----0.006.64
Cove Point, Maryland-1.833.185.0131.58
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month-0.134.564.695.00
Second Mth-0.084.124.194.93
Third Mth-0.083.934.014.43
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaJan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '23Jan …0255075100125Energy Intelligence