January 10, 2023

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Croatia Rides the Central European LNG Demand Wave

Croatian LNG imports soared year on year in 2022, with skyrocketing demand in Central Europe set to turn the country’s sole LNG terminal on the island of Krk into a key regional import center in the years ahead.

Croatia’s Krk floating LNG terminal received 1.81 million tons of LNG throughout last year, up from 1.20 million tons in 2021, according to data from commodity analytics firm Kpler.

Cargoes from the US dominated the supply mix in 2022 with 1.51 million tons, followed by Egypt (0.21 million tons) and Qatar (0.07 million tons).

Monthly LNG imports to Krk averaged about 115,000 tons prior to Russia's invasion of Ukraine, while averaging about 156,000 tons since the invasion, a 36% gain (see graph below).

While the local subsidiaries of Hungarian state-owned gas trader MVM CEEnergy and Swiss trading firm Met Group, as well as Croatian power utility HEP, remained the main capacity holders at the terminal, a new set of regional companies is now eager to gain access to the facility to replace the loss of Russian pipeline supplies.

Created with Highcharts 9.0.0('000 tons)CROATIA'S LNG IMPORTSJan'21Feb'21Mar'21Apr'21May'21Jun'21Jul'21Aug'21Sep'21Oct'21Nov'21Dec'21Jan'22Feb'22Mar'22Apr'22May'22Jun'22Jul'22Aug'22Sep'22Oct'22Nov'22Dec'22050100150200250Source: Kpler

New Players in Town

Russia’s invasion of Ukraine and the subsequent cuts of pipeline flows by state-owned Gazprom to Europe have pushed various companies in Central Europe — home of some of the companies most dependent on Russian gas — to seek alternative supplies in the form of LNG.

Last May, Slovakia’s state-run gas importer SPP announced that it secured LNG cargoes for delivery to several European terminals, including Croatia’s Krk facility. The first of these cargoes was imported by SPP to Krk on May 1 from the US Corpus Christi export plant, likely on a spot basis.

Then, in September, SPP said that it had entered into a supply agreement with US major Exxon Mobil, marking Exxon’s first LNG supply contract with a Central European buyer. Although, the details of the deal are not clear, it is reasonable to think that at least a portion of the volumes from Exxon will be delivered to the Croatian terminal.

Neighboring Slovenia is also looking to secure LNG supplies and the country’s infrastructure minister, Jernej Vrtovec, said last March that it had initiated talks with Qatar over a potential LNG supply deal. At the time, the minister said that Slovenia was looking to obtain regasification capacity at Krk and/or at Italy’s Rovigo terminal, which is also located in the northern Adriatic Sea.

Most recently, in early December, Hungary and Qatar reached a political agreement allowing the start of intercompany negotiations between MVM CEEnergy and QatarEnergy over a term LNG supply agreement. If a deal is reached, the Hungarian company is expected to book additional capacity at the Krk terminal, which in turn would likely consolidate its position as the principal user of the facility.

Expansion Plans

Croatia is now banking on the rapidly rising LNG demand in the region to support an expansion of the regasification terminal to make room for new users.

The terminal’s capacity was already increased last year by 300,000 cubic meters per year to 2.9 billion cubic meters per year, or roughly 2 million tons of LNG.

However, in August, the country’s government announced that it plans to double the capacity of the Krk floating storage and regasification unit to 6.1 Bcm/yr, or roughly 4.2 million tons of LNG.

Such expansion would represent a major turn of events for the Croatian terminal, which during its planning phase rather struggled to attract market interest.

The facility was originally planned as a 6 Bcm/yr onshore terminal, but after it failed to lure sufficient interest from market participants during several open seasons, it was downsized and moved offshore for cost-saving reasons.
Daniel Stemler, Madrid

Moscow Approves Vysotsk Capacity Expansion

Russian has approved a design project to expand the capacity of Novatek’s Cryogas Vysotsk, or Vysotsk LNG, by 36% to 895,000 tons per year.

Glavgosexpertiza, a unit of the Russian Ministry of Construction, Housing and Utilities, said Monday that the expansion won’t involve construction of another liquefaction train. The project, which the Russian regulator approved, is focused on an upgrade of Cryogas Vysotsk production and transportation facilities.

Novatek will also build a new 2.5 megawatt booster-compressor station, the regulator said without providing the timeline.

The privately-owned Russian LNG export champion launched the 660,000 ton per year Cryogas Vysotsk plant on the Baltic Sea coast in northwestern Russia in 2019.

Novatek had considered building a second train at Vysotsk to boost capacity to 1.14 million tons/yr but later abandoned the idea due to the uncertainty around the prospects of the LNG bunkering market in the Baltic area.

Instead, it focused on maximizing Vysotsk output through engineering upgrades of the existing facilities.

Created with Highcharts 9.0.0('000 tons)VYSOTSK LNG EXPORTSLithuaniaFinlandSwedenBelgiumNetherlandsNorwaySpain20192020202120220200400600800Source: Kpler

Novatek CEO Leonid Mikhelson said that Vysotsk operated above capacity last year, with Novatek having expected production to end up at some 720,000 tons, though Kpler data differs (see graph above).

The medium-sized Vysotsk plant exports LNG in 30,000 cubic meter tankers to the Baltic Sea countries of Europe, which increased imports of Russian LNG in 2022 while gradually phasing out pipeline gas imports from Russia deemed more toxic amid Russia’s war in Ukraine.

Novatek's core production region is the West Siberia Arctic where it controls the flagship Yamal LNG plant which last year produced around 21 million tons, with a big portion of cargoes going to Europe.

The company still has ambitious plans to expand LNG production in the Arctic to up to 70 million tons/yr by 2030, as Moscow seeks to diversify gas exports amid the loss of the European market for pipeline gas.
Staff Reports

Nigerian LNG Supplies to Spain Continue Upward Pace

Nigerian LNG supplies into Spain look set to hit their highest levels in nearly a year this month, as big contractual buyers top up deliveries despite the region's warmer-than-usual winter.

Spain is poised to receive eight cargoes from Nigeria LNG this month, according to a Spanish LNG cargo arrival schedule obtained by Energy Intelligence. That figure is the highest number of Nigerian LNG cargoes that Spain has taken since December 2020, although volumes — totaling about 520,000 tons — are the most since February 2022.

The implied increase in volumes comes unexpectedly given the country's above-average temperatures and tepid winter demand for natural gas. Things have been particularly mild to start 2023: During the first 10 days of this month, Spanish gas demand averaged 836.5 gigawatt hours. That compares to 1191 GWh during the first 10 days of December, data from gas grid operator Enagas shows.

Given those realities, not all are convinced the slate of cargoes will ultimately call Spain home.

“With demand so low, I don’t think all of them end up arriving [in Spain],” a trade source active on the Spanish market told Energy Intelligence of the scheduled cargoes. If cargoes do ultimately sail elsewhere, the potential destination list is long, as Nigeria serves as a swing supplier shipping LNG to several Northeast Asian countries, several European countries and India, among others.

For now, though, the cargo arrival schedule shows Nigeria LNG's main contractual buyers in Spain as the top recipients. Naturgy is set to receive three of the cargoes, while Eni is expected to take two. Endesa, TotalEnergies and Pavilion Energy are set to receive one cargo each.

On the Upswing

Nigeria's upstream struggles have weighed on Spain's intake of Nigerian LNG in recent years, but volumes have been on the upswing in the wake of Russia's February 2022 invasion of Ukraine and Europe's subsequent scramble for non-Russian gas supplies.

Data from commodity analytics firm Kpler shows that Spanish deliveries of Nigerian LNG hit 4.3 million tons per year in 2022, their highest level since 4.4 million tons/yr was received in 2011 (see graph below).

Notably, the uptick last year came despite an overall decline in Nigerian LNG shipments, which fell by around 2.6 million tons/yr versus 2021, to 14.6 million tons/yr, Kpler data shows.

Spain is a crucial conduit for connecting waterborne LNG supplies to inner Europe and saw its wider LNG imports jump significantly last year as the continent furiously sought to fill storage ahead of winter while reducing dependency on Russian gas. Overall imports hit 21.16 million tons in 2022, up more than 40% from 2021, according to Kpler data.

Created with Highcharts 9.0.0(million tons)NIGERIAN LNG EXPORTS TO SPAIN20082009201020112012201320142015201620172018201920202021202201234567Source: Kpler

Daniel Stemler, Madrid


In Brief

Northeast Asian Spot LNG Pricing Hits Eight-Month Low

Spot LNG prices in Northeast Asia fell by $5 to $22 per million Btu, according to Energy Intelligence assessments for deliveries four to eight weeks ahead. Spot prices in Southwest Europe dropped by 40¢ to $20.30/MMBtu

Asian spot LNG prices dropped to their lowest level since May on weak demand and thin trading activity largely due to stubbornly mild temperatures in Northeast Asia.

China’s populous eastern regions are experiencing warm temperatures, limiting the country’s heating needs. In this context, Chinese national oil companies are understood to have recently resold several cargoes for February delivery, a source tells Energy Intelligence.

In Taiwan, the Central Weather Bureau is forecasting normal seasonal temperatures over the next four weeks while the Japan Meteorological Agency announced a 60%-70% chance of above-normal temperatures across the country until Jan. 20.

Only South Korea has been experiencing cold weather in recent weeks with meteorologists expecting it to continue until Jan. 22 before temperatures bounce back to normal. However, a second cold wave is forecast for early February.

The bearish trend could continue over the coming weeks with two Australian facilities expected to come back online.

Maintenance work at the Shell-operated Queensland Curtis LNG plant is expected to be completed on Jan. 16, according to the Australian Energy Market Operator. Shell is also in the process of restarting its 3.6 million ton per year Prelude floating LNG facility following a fire on Dec. 21. However, the facility is believed to have tripped during an attempt to resume operations this week.

Created with Highcharts 9.0.0($/MMBtu)REGIONAL SPOT PRICESNortheast AsiaSouthwest EuropeJan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '23020406080Energy Intelligence

Marc Roussot, Singapore and Daniel Stemler, Madrid


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India18.7719.2018.8019.1918.3918.2419.6717.8519.5818.8418.0817.7918.15
Sodegaura, Japan19.4120.8020.8220.9119.3415.7820.4118.2120.2821.2618.6017.6819.53
Zeebrugge, Belgium16.1214.4914.0914.5715.6115.9615.2514.0615.1214.1115.7314.8015.83
Huelva, Spain19.6518.0317.6318.1119.1118.9018.7817.5218.6517.6419.1718.1419.18
Isle of Grain, UK18.5516.8816.4816.9618.0618.3817.7816.4617.5316.5018.1517.2018.24
Everett, US2.330.771.110.842.021.870.011.591.370.402.54----
Created with Highcharts 9.0.0($/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 Asia22.0022.00-4.63--
SW Europe20.3020.30-0.77--
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.273.643.913.99
NBP, UK (futures)-1.5020.8822.3820.86
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-0.9521.3422.2822.59
Zeebrugge (Belgium)--------
German NCG-0.6618.9219.5819.50
NBP (UK)-1.3419.3820.7220.72
US Markets
US Spot Prices
Sabine Pass, Louisiana-0.353.303.653.65
Corpus Christi, Texas-0.362.893.25--
Cove Point, Maryland-0.793.103.892.56
Elba Island, Georgia--3.30----
Nymex Henry Hub Futures
Near Month-0.273.643.913.99
Second Mth-0.253.313.563.64
Third Mth-0.243.253.493.55
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaFeb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '230255075100125Energy Intelligence