January 4, 2023

WWW.ENERGYINTEL.COM

Poland’s LNG Imports Hit Record High

Poland imported a record 4.4 million tons of LNG last year, of which about 60% came from the US, PKN Orlen confirmed on Wednesday. The LNG volumes were the country’s main source of gas supply, helping offset the loss of Russian pipeline gas volumes which ground to a halt in April.

A total of 58 LNG cargoes were received by the Polish Oil & Gas Company (PGNiG) — which merged with PKN Orlen last year — at the President Lech Kaczynski import terminal in Swinoujscie. The total shipments were 23 more than 2021, when 2.8 million tons of LNG was imported into Poland’s sole LNG terminal.

The majority of the cargoes were sourced from the US, holding the world’s largest liquefaction capacity, which provided 36 shipments, up from 16 in 2021. A total of 18 cargoes came from Qatar, two from Nigeria and one from each of Egypt and Trinidad and Tobago, PKN Orlen said.

Main Source of Supply

The LNG imports helped offset the loss of Russian pipeline flows, which ground to a halt in April after Warsaw refused to pay for supplies in Rubles.

“The liquefied natural gas shipments received at the President Lech Kaczynski terminal were Poland’s main source of natural gas supply in 2022, covering as much as one-third of the country’s demand. We successfully harnessed the ORLEN Group’s capabilities, and the available regasification infrastructure to safely navigate the national economy through the biggest crisis in the European gas market,” Daniel Obajtek, President of the Management Board of PKN Orlen said in a statement.

PGNiG’s supply contract with Gazprom expired at the end of 2022, and the Polish firm said previously on several occasions that it would not renew the deal for approximately 10 billion cubic meters. Poland has been preparing for the end of Russian gas imports for a number of years, namely through LNG purchases as well as pipeline gas imports from Norway through the recently launched Baltic Pipe.

To support increasing LNG imports, the regasification capacity of the President Lech Kaczynski terminal was expanded last year by 1.2 Bcm to 6.2 Bcm. The utilization rate of the terminal was approximately 94% in 2022, up from 78% in 2021, PKN Orlen noted.

Throughput at Poland’s sole terminal could be even higher this year as PKN’s contracted US LNG volumes will ramp up. Deliveries under the Polish firm’s long-term contract with Venture Global start this year, while contracted supplies with Cheniere will increase to 1.45 million tons annually.

Some of the volumes could be directed to the Klaipeda LNG terminal in Lithuania as the Polish firm has booked capacity at the facility to receive six cargoes in 2023. PKN received its first LNG at Klaipeda last year and imported a total of 0.5 million tons through the terminal. The majority of the regasified LNG was imported to Poland through the Gas Interconnection Poland–Lithuania (GIPL) pipeline, launched in May last year.

Created with Highcharts 9.0.0(million tons)POLAND'S LNG IMPORTSQatarUnited StatesNorwayNigeriaTrinidad and TobagoEgypt20152016201720182019202020212022012345Source: Kpler

Record European Imports

Poland’s record LNG volumes contributed to Europe’s LNG imports hitting a record high of 106.6 million tons (approximately 137 Bcm) in 2022, according to Kpler data. Europe was the premium priced gas market for the majority of 2022, helping attract LNG which was needed to offset the loss of Russian pipeline gas imports — standing at 175 Bcm in 2021.

Europe’s thirst for LNG is expected to increase this year as there is widespread uncertainty over the level of Russian pipeline gas exports. The International Energy Agency estimated last year that Russian pipeline flows to Europe would total 60 Bcm for 2022.
Eric Thorp, London

Gazprom JV Sues Linde Over Stalled LNG Project

A court in St. Petersburg has frozen the Russian assets of industrial gases and engineering giant Linde, which is being sued by a Gazprom joint venture over a stalled gas-processing and LNG project at Ust-Luga on Russia's Baltic Sea Coast.

In recent years Linde had established itself as an important supplier of LNG and gas-processing technology and services to Russia, but the company suspended operations there after Moscow's February 2022 invasion of Ukraine.

Linde has roots in both Germany and the US, but since 2018 it has been legally registered in Ireland, with headquarters in the UK.

According to Russia's Interfax news service, Linde is being sued by Gazprom's RusKhimAlyans joint venture with privately owned RusGasDobycha.

Interfax said the joint venture plans to initiate proceedings at the Hong Kong International Arbitration Center to recover an advance of around $1 billion that it paid under a 2021 contract to design and build the Ust-Luga LNG plant.

RusKhimAlyans terminated the contract in September of last year, saying Linde had refused to start work on the project and had rejected requests to repay the advance on the grounds that doing so could violate EU sanctions.

The joint venture has estimated the value of Linde's assets in Russia at slightly less than $500 million while Linde has indicated they are worth more than $1 billion.

In addition to the Ust-Luga project, Linde's portfolio of projects in Russia also included Gazprom's Portovaya LNG facility and Amur gas-processing plant, as well as Novatek's Arctic LNG 2 liquefaction plant.

"Sabotage by Unfriendly Countries"

A statement released by the St. Petersburg court said that "contractors from unfriendly countries are sabotaging the completion of the construction of one of Russia's largest gas processing plants."

Russia has also lost control of industrial assets in other countries as a consequence of the war in Ukraine, with Germany taking over oil giant Rosneft's stakes in three German refineries on grounds of national security.

Amid a sharp fall in Russia's pipeline gas exports to Europe — its main export market — Moscow has been putting greater emphasis on LNG as a way to diversify sales.

Before the war in Ukraine, Russia had planned to export 80 million-140 million tons per year of LNG by 2035, up from around 30 million tons in 2021.

And last month Deputy Prime Minister Alexander Novak said that LNG production and exports would grow to 100 million tons/yr by 2035.

Russian companies led by Novatek, Gazprom and Rosatom have been working on the development of liquefaction technologies to bypass sanctions.

And Novatek is already using its own Arctic Cascade technology at its Yamal LNG project.

Novak said Russia is also working to develop the capability to produce its own heat exchangers for large LNG plants.

For more coverage of the Ukraine crisis, visit Ukraine Crisis: Energy Impact
Michael Ritchie, London

Azerbaijan Ramps Up Gas Exports to Europe

Azerbaijan increased its gas exports to Europe and Turkey by some 20% last year to around 22 billion cubic meters (Bcm) and it plans to ramp up deliveries again to 24 Bcm in 2023, President Ilham Aliyev said during a recent trip to Romania.

Gas from the Caspian Sea producer has become an indispensable source of supply for the European Union since Russia slashed its exports to the bloc after its invasion of Ukraine in February 2022.

In July of last year European Commission President Ursula von der Leyen signed an agreement in Baku with Aliyev to double gas imports to the EU to 20 Bcm by 2027, describing Azerbaijan as a "reliable and trustworthy" supplier.

Europe began buying Azeri gas in late 2020, with the start-up of the 880 kilometer Transadriatic Pipeline (TAP) that runs westward from the Turkish-Greek border, across Albania, and then under the Ionian Sea to southern Italy.

The pipeline is owned by BP (20%), Azerbaijan's Socar (20%), Italy's Snam (20%), Belgium's Fluxys (19%), Spain's Enagas (16%) and Switzerland's Axpo (5%).

All of the gas comes from Phase 2 of the BP-operated Shah Deniz project in the Caspian Sea.

Expansion Weighed

Most of the gas entering the pipeline is tied up under long-term sales contracts between the Shah Deniz consortium and a group of European buyers including Hera Trading, Shell, Edison, Greece's Depa and Bulgaria's Bulgargaz.

TAP is now operating above its nameplate capacity of 10 Bcm/yr. In 2022 it handled around 11 Bcm of gas, and volumes are set to rise to 12 Bcm this year.

The TAP shareholders have been sounding out market players' interest in booking additional capacity, that would justify the cost of expanding it by as much as 10 Bcm/yr.

Azerbaijan is also a key source of gas for Turkey, whose state importer Botas has a long-term contract with the Shah Deniz consortium to buy 6 Bcm/yr of Phase 2 gas delivered via the Tanap pipeline that runs west from Turkey's border with Georgia.

Turkey also buys around 3 Bcm/yr of gas from Shah Deniz Phase 1, which ends up at the Erzerum hub in the East.

Gulmira Rzayeva, head of Eurasia Analytics, says Turkey has every reason to import as much Shah Deniz gas as it can, because the prices it pays are "extremely low" compared to other options as they are linked to oil rather than prices at gas hubs.

Turkey imports gas via various routes, including LNG which arrives via the Mediterranean Sea and Russian gas delivered by pipeline beneath the Black Sea.

For more coverage of the Ukraine crisis, visit Ukraine Crisis: Energy Impact
Paul Sampson, London


In Brief

China to Increase Domestic Gas Production in 2023  

China is set to increase domestic natural gas production in the new year, the National Energy Administration (NEA) said this week.

China’s domestic natural gas production is expected by NEA to increase 6 billion cubic meters this year, or 2.8% annually, to 223 Bcm in the new year from 217 Bcm last year.

The growth is attributed to Chinese leader Xi Jinping’s direct order to increase domestic gas production for the purpose of national energy security.

In statistics through November, China was already seen tilting toward domestic natural gas and pipeline gas, and away from LNG imports, leading to what has now become the first annual decline in LNG imports since China's massive ramp up began (see graph).

Created with Highcharts 9.0.0(million tons)CHINA'S LNG IMPORTSAsiaOceaniaAmericasAfricaEurope20162017201820192020202120220102030405060708090Source: Kpler

Staff Reports


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India23.0323.4923.0323.4922.5922.4424.0221.9823.9223.0922.2621.9422.32
Sodegaura, Japan23.5625.0925.1125.2223.4619.5124.6522.2024.5125.6122.6521.6323.67
Zeebrugge, Belgium23.3221.4921.0121.5922.7523.1422.3521.0022.2021.0522.8821.8122.98
Huelva, Spain16.2214.5114.0814.6015.6515.4315.3113.9615.1814.1015.7114.6115.72
Isle of Grain, UK15.6713.9113.4714.0015.1515.4914.8613.4514.6013.5015.2514.2315.35
Everett, US2.440.741.100.832.111.930.011.641.400.332.67----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback1. Aug15. Aug29. Aug12. Sep26. Sep10. Oct24. Oct7. Nov21. Nov5. Dec19. Dec2. Jan10203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia27.0026.36-0.64-0.64
SW Europe20.7016.87-3.83-3.83
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.184.173.994.71
NBP, UK (futures)-2.1718.3220.4922.56
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-2.7819.5322.3224.55
Zeebrugge (Belgium)--------
German NCG-2.1817.5519.7421.39
NBP (UK)-3.8316.5220.3418.64
US Markets
US Spot Prices
Sabine Pass, Louisiana0.133.783.654.06
Corpus Christi, Texas----0.00--
Cove Point, Maryland0.673.232.565.01
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month0.184.173.994.71
Second Mth0.143.783.644.69
Third Mth0.133.683.554.19
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaJan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '230255075100125Energy Intelligence