January 9, 2023

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France’s GTT Quits Arctic LNG 2-Related Projects in Russia

Paris-based producer of containment systems for LNG transportation and storage, GTT, said last week it will cease its activities in Russia.

GTT will withdraw from the projects to build Arc7 ice-class tankers at the Russian Zvezda shipyard for Novatek’s Arctic LNG 2 scheme and to build concrete gravity-based structures (GBS) for Arctic LNG 2 liquefaction trains, the company said.

The withdrawal is in line with the general exodus of Western investors and technology partners from Russian projects in the wake of Russia’s February 2022 invasion of Ukraine.

GTT said it made the decision, “following an in-depth analysis of European sanction packages number 8 and 9 notably prohibiting engineering services with Russian companies.”

Tankers

GTT’s exit from the tanker project might cause further delays in construction of LNG carriers for Arctic LNG 2 at Zvezda, which was already expected to miss deadlines due to sanctions which hinder the delivery of some parts and equipment.

Without enough tankers, Novatek will likely be forced to use part of the Yamal LNG tanker fleet to ship LNG from the first Arctic LNG 2 train, a source told Energy Intelligence earlier.

GTT said its contract with Zvezda would be suspended effective as of Jan. 8 this year, but the company will remain involved in the construction of the two most advanced LNG tankers to ensure the safety of the projects and the integrity of the technology, in compliance with the international sanctions in force.

GTT’s contact covered construction of 15 Arc7 tankers for Arctic LNG 2 at Zvezda.

The company is also involved in construction of six Arc7 ice-class tankers and two floating storage units for Russian Arctic projects, and these projects are proceeding normally, it said. Also, eight conventional LNG carriers, under construction in Asian shipyards, ordered by international shipowners for Russian Arctic projects, “can operate in all types of conditions,” GTT said.

GBS Construction

The impact on the GBS construction project at the Novatek Murmansk yard in northwestern Russia might be limited, however. Novatek CEO Leonid Mikhelson said in September that key equipment for all three trains of Arctic LNG 2 had been delivered before relevant EU sanctions came into force in May.

The terms of GTT’s departure from the GBS project are currently being finalized, the French company said.

The contract covers the design of three GBS platforms for the main GBS construction contractor Saren B.V., a joint venture between Italy’s Saipem and Turkey’s Renaissance Heavy Industries.

Saipem said in 2022 it would conclude activities under Arctic LNG 2-related contracts, and Novatek was reportedly seeking to give the GBS construction contract to Russian Nipigas’ Nova Energies subsidiary and little-known UAE-registered firm Green Energy Solutions.

Novatek plans to launch the first 6.6 million ton per year train of Arctic LNG 2 in late 2023. The train is almost completed and needs to be moved from the Novatek Murmansk yard to the plant’s location in the Ob Bay in the Arctic.

The company also maintains plans to launch the second and third trains in 2024 and 2026, although it admits it must solve some difficulties created by sanctions.

For more coverage of the Ukraine crisis, visit Ukraine Crisis: Energy Impact
Staff Reports

QatarEnergy, Chevron Phillips Announce Petchem FID

QatarEnergy and Chevron Phillips Chemical Co. have announced a final investment decision on a new $6 billion integrated petrochemicals facility in Qatar's Ras Laffan industrial city.

Scheduled to come on line in late 2026, Ras Laffan Petrochemicals will have an ethane cracker with an annual production capacity of 2.08 million tons per year — "the largest in the Middle East" — the partners said.

It will also include two high-density polyethylene derivative units with a combined capacity of 1.6 million tons/yr.

This is the second major venture in the strategic partnership between QatarEnergy and Chevron Phillips.

The US company — a joint venture between Chevron and refiner Phillips 66 — faced stiff competition from the likes of Shell and TotalEnergies to join QatarEnergy in the Ras Laffan project back in 2019.

It will boost Qatar's petrochemical production to almost 14 million tons/yr and "reinforce our integrated position as a major global player in the upstream, LNG, and downstream sectors," said Qatari Energy Minister Saad al-Kaabi.

Speaking at a Jan. 8 signing ceremony, he noted that the project would also double Qatar's ethylene production capacity and increase local polymer production from 2.6 million tons/yr to more than 4 million tons/yr.

The Ras Laffan Petrochemicals financial investment decision (FID) follows a November FID announcement for the two companies' $8.5 billion Golden Triangle polymers plant on the US Gulf Coast in Texas.

While Chevron Phillips will be the lead partner with a 51% stake in the Golden Triangle plant, QatarEnergy will take the lead with a 70% stake at Ras Laffan.

Ethane feedstock for Ras Laffan will come from Qatar's North Field as part of the country's big LNG expansion plans, marking the first time that a Qatari LNG project will separate ethane from methane.

One source noted similarities between the LNG expansion and the petrochemicals project, including a fast-track approach.

"Construction began with early works at the site in June 2022, and startup is expected in late 2026. Like the LNG expansion, FID for Ras Laffan Petrochemicals has essentially been triggered by the award of the main engineering contracts," the source said.

Those contract were given to a joint venture of Samsung Engineering and Taiwan's CTCI for the ethane cracker and Italy's Tecnimont for the polyethylene units.

Chevron Phillips co-parent Chevron had been one of six potential foreign partners shortlisted for the North Field LNG expansion, but dropped out of the race when it became clear just how thin the profit margins would be for the foreign investors.

Rafiq Latta, Nicosia

Spain Looks to Extend Iberian Gas Price Cap

Spain will ask the European Commission for an extension of the Iberian gas price cap measure for electricity generation, which was introduced in both Spain and Portugal last May, until at least the end of 2024, Spain’s minister of ecological transition, Teresa Ribera, said on Monday.

The measure, which was green-lighted by the commission last May following intense negotiations with the Iberian countries, essentially works as a subsidy for gas-fired power generators, and in turn, reduces the electricity bills of both families and industrial users in the two countries.

However, market participants in Spain have argued that these regulations can have negative effects on Spanish LNG and gas imports.

“We want to keep benefiting from the exceptional measure that we have implemented in Spain and Portugal, so yes, we have the intention to request the extension of the Iberian exception beyond May 2023,” Ribera said in an interview at national TV channel Antena 3.

The mechanism has limited the offer price that companies that use gas for power generation can present at €40 per megawatt hour until Dec. 31. Between now and May, the cap will increase by €5/MWh each month, and the minister said that Spain is looking to maintain it at a similar level beyond May.

“We would like it to stay in the lowest possible range, around €45-€50/MWh, with the possibility to extend it until at least the end of 2024," Ribera said.

Gas prices have been falling in Spain since the record highs of last August, when prices settled above €200/MWh for several days.

The front-month February 2023 gas contract on the Spanish PVB hub closed at €69.63/MWh on Jan. 9
Daniel Stemler, Madrid

Russian Gas Output Falls 16% in Fourth Quarter

Russia's natural gas production fell 16% to some 168 billion cubic meters in the fourth quarter of 2022, compared with the same period of 2021, reflecting a sharp decline in exports to Europe against the backdrop of the war in Ukraine.

Daily export flows to Europe plummeted over the course of last year, and that means Russia's gas production is likely to remain under pressure in 2023.

Export flows via Ukraine fell further at the start of this month amid unusually warm weather in Europe and extreme cold in Russia.

Gazprom Leads the Decline

Because of relatively strong production during the first months of 2022, Russia's full-year gas output fell less dramatically, by 11.8% to 672.6 Bcm, according to sources with access to the official data.

Russia had produced 762.3 Bcm in 2021, a record level for the post-Soviet era.

The decline in output last year was led by Gazprom, the country's top producer and its sole pipeline gas exporter.

Gazprom had previously reported that its full-year 2022 production totaled 412.6 Bcm, down 20% from 2021, while its full-year exports to Europe (including Turkey) and China fell 45.5% to 100.9 Bcm.

In the fourth quarter, Gazprom’s production fell 27.4% year on year to some 99.3 Bcm, Energy Intelligence calculates based on the company's data. Its fourth-quarter exports to Europe and China fell 64.4% year on year to some 14 Bcm.

The decline in exports accelerated in the second half of 2022 after Gazprom slashed flows via the Nord Stream gas pipeline to Germany in the summer and then cut them off completely in late August. An explosion then wrecked the line in late September.

Westward flows to Europe via the Yamal-Europe pipeline ended in May after Poland and Russia implemented sanctions against each other.

Furthermore, Gazprom did not utilize the full capacity of the two remaining export routes to Europe — the Ukraine transit route and the Turk Stream pipeline — in the second half of 2022.

Germany — Europe's biggest gas consumer — reported last week that Russia's share of German gas imports fell to 22% in 2022 from 52% in 2021. A further fall seems likely in 2023 as Germany builds up its LNG import capacity.

Ukrainian Transit Down

Transit flows via Ukraine have fallen in the last few days after starting the new year at around 42 million cubic meters per day, a level that had been fairly stable since last May (see graph).

The transit nomination for Monday was 35.5 MMcm/d, the same as on Sunday, according to Gazprom.

Exports via Turk Stream averaged 25.5 MMcm/d in the first week of January, down 12% from the final week of December.

The recent further decline in Gazprom's exports might reflect lower nominations from buyers because of unusually warm weather in Europe, as well as high levels of wind power generation and elevated levels of gas storage in the region.

The front-month Dutch TTF gas futures contract hit a 15-month low last week, and despite some subsequent upward moves is still trading below its late December levels.

Reduced demand for gas even resulted in net storage injections on several days in late December and early January, with only marginal net withdrawals for most of last week, according to data from Gas Infrastructure Europe (GIE).

Some observers have suggested that Gazprom might be also cutting export flows because of extremely cold weather in Russia.

Gazprom might have opted to redirect some gas designated for export to Europe to Russia's domestic market, instead of reopening gas wells that had been taken off line during the past several months because of lower production levels, they said.

The extreme cold spell in Russia is expected to end later this week, which probably led Gazprom to decide against reopening those wells.

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

Russian Gas Production
(MMcm)Dec '22Nov '2220222021Dec '21
Gazprom 35,700.032,900.0412,600.0514,800.047,200.0
Novatek6,654.16,535.080,241.677,217.46,726.1
Rosneft5,886.95,536.753,373.642,816.93,553.1
Gazprom Neft2,880.62,806.933,059.025,783.22,928.7
Lukoil 1,607.21,549.718,454.419,079.11,628.9
Other Producers 4,655.64,475.950,422.953,719.04,215.6
PSA Operators 2,090.11,993.624,420.928,880.12,772.6
Russia Total 59,474.555,797.8672,572.3762,295.869,025.0
Created with Highcharts 9.0.0(MMcm/d)RUSSIAN GAS FLOWS VIA KEY ROUTES TO EUROPENord StreamUkrainian TransitTurk Stream to EuropeMay1'22May8'22May15'22May22'22May29'22Jun5'22Jun12'22Jun19'22Jun26'22Jul3'22Jul10'22Jul17'22Jul24'22Jul31'22Aug7'22Aug14'22Aug21'22Aug28'22Sep4'22Sep11'22Sep18'22Sep25'22Oct2'22Oct9'22Oct16'22Oct23'22Oct30'22Nov6'22Nov13'22Nov20'22Nov27'22Dec4'22Dec11'22Dec18'22Dec25'22Jan1'23Jan8'23020406080100120140160180Source: Gazprom, GTSOU, Nord Stream AG, Entsog, Energy Intelligence

Staff Reports


In Brief

Flow of Iranian Gas to Turkey Disrupted

Turkey's imports of natural gas from Iran, one of its top suppliers, fell by 70% on Jan. 1, state importer Botas said at the weekend.

The sharp drop follows a similar disruption at the same time last year and apparently reflects Iran's difficulty in meeting its own runaway domestic gas needs.

After Russia, Iran was Turkey's main source of natural gas for much of last year, supplying 671 million cubic meters — or 20% of total imports — in October, the last month for which official data is available.

Botas said gas supplied via the Gurbulak-Agrı border point fell after a malfunction in Iran's gas transmission network. It added that Iran had pledged to resolve the problem and Turkey would cover the shortfall from gas in storage.

Iranian officials could not immediately be reached for comment, but a senior oil ministry addressed Iran's growing domestic gas consumption at the weekend, saying it currently amounts to 650 MMcm/d of the 850 MMcm/d Iran produces.

Speaking on national TV, he said production capacity would need to rise to 1.5 Bcm/d by the end of the decade — at an estimated cost of $80 billion — to meet Iran's needs.

A sudden dip in Iranian gas exports to Turkey in January of last year coincided with a cold snap across the region and forced Ankara to ration industrial gas and power consumption to avoid supply disruptions to households.
Simon Martelli, London


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India23.3723.8123.3923.8022.9722.8224.3022.4224.2123.4422.6522.3622.72
Sodegaura, Japan23.9825.4125.4325.5223.9120.2525.0122.7424.8825.8923.1422.2024.10
Zeebrugge, Belgium17.1615.5215.1215.6016.6517.0016.2915.0916.1515.1416.7715.8316.87
Huelva, Spain20.2618.6318.2318.7119.7219.5119.3918.1219.2618.2519.7818.7519.79
Isle of Grain, UK19.7318.0517.6418.1319.2419.5618.9517.6318.7017.6619.3318.3719.42
Everett, US2.881.301.651.382.572.410.012.131.910.933.08----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback8. Aug22. Aug5. Sep19. Sep3. Oct17. Oct31. Oct14. Nov28. Nov12. Dec26. Dec9. Jan10203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia27.0026.630.16-0.37
SW Europe20.7020.911.390.21
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.203.913.71--
NBP, UK (futures)+1.6522.2120.5622.51
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF1.4222.2720.86--
Zeebrugge (Belgium)--------
German NCG1.6119.5817.97--
NBP (UK)1.3920.5619.17--
US Markets
US Spot Prices
Sabine Pass, Louisiana0.223.653.43--
Corpus Christi, Texas0.203.253.05--
Cove Point, Maryland0.523.893.37--
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month0.203.913.71--
Second Mth0.173.563.39--
Third Mth0.173.493.31--
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaFeb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '230255075100125Energy Intelligence