January 17, 2023


Qatar's Al-Kaabi Sees Russian Gas Eventually Returning to Europe

Qatari Energy Minister Saad al-Kaabi on Saturday said Russian gas would likely return to Europe at some point despite ongoing diversification efforts, due to a lack of alternatives and the ongoing need for the fuel.

As a result of Russia's ongoing war on Ukraine, Western states have imposed wide-ranging energy sanctions on Moscow, with Europe intensifying its efforts to reduce its dependency on imports of Russian fossil fuels while also speeding up energy transition initiatives.

“I understand Europe today says there is no way they will go back to Russian gas. We are all blessed with the ability to forgive and forget. They [Europe] will have a much bigger diversity, but Russian gas is coming back to Europe ... whether soon or in the next five years, it will come back,” said al-Kaabi.

“This war and situation will not last forever,” he told the Atlantic Council Global Energy Forum in Abu Dhabi, on his first visit to the United Arab Emirates' capital since Gulf Cooperation Council states including Saudi Arabia and the UAE in early 2021 agreed to rebuild damaged relations with Doha after a political rift that lasted for more than three years.

Asked by Energy Intelligence when Russian gas might return to Europe, al-Kaabi said: “When there is a political resolution and I hope to God this happens sooner rather than later — because this is going to be the solution of the gas markets.”

He added that Qatar remained committed to its long-term supply contracts to Asia and was therefore limited in its ability to send additional supplies to Europe until new capacity comes on line from its US project around 2024-25 and its own mega expansion in the following years.

Limited Supplies

Although gas prices had come down recently due to a mild winter in Europe, a lack of investment in the sector in recent years meant that new gas supplies would remain limited, in turn leading to ongoing price volatility.

"The issue will be when they want to replenish storage in the coming year. There isn’t much gas coming to the market before 2025-27, so the volatile situation is here to stay," al-Kaabi said, also stressing that natural gas wasn't a transition fuel but rather a destination fuel.

UAE Energy Minister Suhail al-Mazrouei struck a similar note, saying that gas would continue to be required to feed the global energy system as a baseload fuel for a long time.

"It may reduce percentagewise but in absolute numbers it will increase. And with increasing demand we won’t have enough supply," he told the conference.

He also said that many countries' lack of clarity on long-term strategies had made it difficult to invest in the upstream sector. “Everyone wants to buy in a two- to three-year span, and this is not enough to develop gas,” al-Mazrouei said.

Peace First

Eni CEO Claudio Descalzi told the forum that it would be difficult to forgive when it comes to the war in Ukraine, adding later — while speaking to reporters — that there would need to be talks about peace before there’s “forgiveness.”

Asked when Russian gas might return to Europe, he said that it would depend on both sides.

“[Russia] is selling and building a lot of infrastructure to the east, to China and India. But in any case, they are still sending gas to Europe. So it will depend on both parties. It is still too early to answer these kinds of questions,” Descalzi said.

The Italian industry veteran, like other executives and officials at the conference, also stressed the challenge of bridging the gap between supply and demand due to a lack of investment.

“There is a big increase in gas demand. We have this issue that we have to invest … and investing now is not easy, you need the right KPIs to ask for money,” he said.

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

Yousra Samaha, Abu Dhabi and Amena Bakr, Abu Dhabi

Freeport LNG Takes More Feedgas, But Restart Elusive

Freeport LNG begin to ramp up its feedgas intake over the weekend, but skepticism about an imminent restart of the US export facility abounds.

Kpler data shows that the 15 million ton per year Freeport LNG plant on the Texas Gulf Coast received feedgas over the weekend. Market watchers are keeping a close eye on gas flows around the facility — responsible for 17% of the US' LNG export capacity — as it looks to restart following a June 2022 explosion.

Unlike the nine-day steady trickle of about 25 million cubic feet per day of feedgas during December and a similar trickle of 22 MMcf/d for 21 days in July-August 2022, the current flow to Freeport has risen quickly from about 44 MMcf/d to 68 MMcf/d.

"We are still targeting second half of this month for the safe, initial restart of our liquefaction facility, pending regulatory approvals," Heather Browne, director of corporate communications for Freeport LNG, told Energy Intelligence on Tuesday.

Yet not all are sure those pending approvals will come in time.

Freeport's planned initial restart most recently slid from mid-December to the second half of January due to continued regulatory approval delays — and in spite of feedgas volumes also flowing last month.

Even if Freeport is able to stick to its targeted timeline, full operations would not be expected until March.

Safety First

"The last thing [safety regulators] want is evidence they moved too quickly," says Gary Kruse of DC-based consultancy Arbo, which closely follows US energy regulatory matters.

To actually get approval by the Federal Energy Regulatory Commission (FERC) and Pipeline and Hazardous Materials Safety Administration to restart by end-January would surprise me, he told Energy Intelligence, citing regulators' early December data request from Freeport and insistence they would take their time to read and respond to the information.

Kruse explained that responses to such data requests often take several iterations due to answers regulators deem insufficient. That said, he admitted that the public does not have a complete view of all supplemental information provided.

"There could be more progress than I'm seeing," Kruse said, noting that there is at least a "path to restart" underway.

Perhaps tellingly, market sources say Freeport LNG canceled some upcoming shipments for February loading last week as regulators said they had not received applications yet requesting a restart. Those sources suggest even a February restart of the export terminal looks increasingly unlikely.

Rip Van Freeport

When Freeport LNG shut down following an explosion in June 2022, the closure sent US domestic gas prices plummeting by about 21%, heading off a run to $10 per million Btu for July 2022 gas futures as about 2 Bcf/d was suddenly going to be staying home.

The closure also caused about a 10% gain in the European TTF gas benchmark to about $28/MMBtu as Europe was in a relatively early phase of adjusting to a world without Russian piped gas supplies.

Fast forward a few months and Freeport could wake up in an entirely different short-term market, one in which the plant's return will have a limited impact. Europe has since shorn up more than enough gas for this winter, and as a result of that and other market factors, prices on both sides of the Atlantic are deflated.

The US February prompt-month futures contract hit an 18-month low last week of around $3.42/MMBtu — about half the price level seen pre-explosion.

Meanwhile, a mid-January plunge took Southwest European spot LNG below July 2021 levels this week. Spot LNG price assessments by Energy Intelligence for that region shed $6.15 week on week to settle at $14.15/MMBtu, also about half the price level seen post-explosion.

Longer-Term Impact

Before Freeport shut down, there was a major swing in deliveries from Asia to Europe, according to Kpler data, which underscores Freeport's importance to Europe next winter.

For 2021, the plant's first year operating near capacity, Freeport exported 13.5 million tons — 50% to Asia, 29% to Europe, and 20% to the Americas.

For the first half of 2022, Freeport's destinations flipped — it exported 6 million tons, 69% to Europe, 19% to Asia and 11% to the Americas.

There is also the issue of the inevitable rise in US gas prices upon Freeport’s restart, which will no doubt trigger a round of domestic political handwringing about the impact of LNG exports on US consumers.
Michael Sultan, Washington

Novatek Boosts LNG Portfolio Sales

Russia's Novatek boosted LNG sales via its trading arm despite — and because of — wartime resistance to Russian gas supplies.

Novatek boosted LNG sales from its trading arm’s portfolio by 25% on the year in the fourth quarter of 2022, according to preliminary data released by the company on Monday.

Novatek reported a 6.3% increase in full-year LNG sales on export markets to 8.45 billion cubic meters in 2022. That means its fourth-quarter sales were 2.46 Bcm, up from 1.97 Bcm in the same quarter of 2021, Energy Intelligence calculates.

Likely Reasons

The privately owned company did not provide the reasons behind a growth in LNG portfolio sales. But the growth might be attributed to the overall growth in LNG production at Novatek-controlled Yamal LNG, bigger spot sales from Yamal and an increase in Novatek’s direct offtake contract volumes at Yamal.

Novatek has yet to provide final production results of Yamal, but it expected the project to post a new record of some 21 million tons for 2022, up from 19.6 million tons produced in 2021.

Spot sales from Yamal are understood to have increased largely because Russia’s blocking sanctions against trader Gazprom Marketing & Trading (GM&T), formerly owned by Russia’s Gazprom and now taken over by Germany and renamed Sefe Marketing & Trading, forced Yamal to stop supplies under GM&T’s 2.9 million ton per year contract in August.

That affected Novatek’s portfolio sales because Yamal doesn’t sell spot cargoes on its own but does it through equity shareholders. Novatek controls 50.1% in Yamal LNG but sells 60% of its spot cargoes, because financial investor China’s Silk Road Fund, which owns 9.9% in equity, doesn’t trade LNG. The other two shareholders, France’s TotalEnergies and China National Petroleum Corp. (CNPC) each sell 20% of Yamal spot cargoes, in line with their 20% equity stakes in the project.

Yamal shareholders were particularly interested in sending more spot cargoes to Europe where record prices resulted in higher margins than those of deliveries to Asia.

Part of the GM&T contract volumes were redistributed among equity shareholders, which increased Novatek’s direct offtake from Yamal by 500,000 tons/yr and is also understood to have positively affected the company’s portfolio sales.

Indeed, Novatek’s portfolio sales started to grow in the second half of 2022 while in the first six months, the company posted a 5.2% year-on-year decline to 4.05 Bcm. In the third quarter, its LNG portfolio sales grew 13% on the year to 1.93 Bcm, which can however also be explained by a lack of summer maintenance unlike in 2021 when one of three large Yamal trains stopped for three weeks in August.

Gas Production Up

Novatek’s total natural gas production, including a proportionate share in production of joint ventures, rose 2.6% on the year to 21.32 Bcm in the fourth quarter and 2.8% to 82.14 Bcm in full-year 2022, the company said.

The growth in Novatek’s production contrasts with a 20% decrease in gas output of Russia’s top producer Gazprom driven by a sharp drop in pipeline gas exports to Europe. Russia’s second-largest producer, Novatek has no access to pipeline gas exports, which are exclusively handled by Gazprom.

Novatek’s growth can be attributed to a ramp-up in production from recently launched fields of the North Russky upstream cluster in West Siberia focusing on domestic pipeline gas sales, as well as to the higher production from the South Tambei field in the Arctic, which solely feeds the Yamal LNG project.

Yamal LNG produced 32.2 Bcm of gas in 2022, up 7% from 2021, according to sources. Higher production at Yamal LNG also contributed to the growth in Russia’s overall LNG production, which Deputy Prime Minister Alexander Novak said Monday rose 8% to 46 Bcm in 2022.

Novatek 2022 Operational Results
Natural Gas (Bcm)21.3220.782.6%82.1479.892.8%
Liquids (million tons)
Total Hydrocarbons (million boe)166.70162.002.9638.90626.302.0
Total Hydrocarbons (million boe/d)1.811.762.91.751.722.0
Natural Gas Sales (Bcm)Q4'22Q4'21%Chg20222021%Chg
Domestic Sales19.6718.148.468.0967.870.3
LNG Exports2.461.9724.98.457.956.3
Total Sales22.1420.1110.1%76.5575.821.0%

Staff Reports

In Brief

Spot LNG Prices in Europe Plunge

Spot LNG prices in Northeast Asia fell by $2 to $20 per million Btu, according to Energy Intelligence assessments for deliveries four to eight weeks ahead. Spot prices in Southwest Europe shed $6.15
week on week to settle at $14.15/MMBtu.

Delivered spot prices on both Atlantic and Pacific basins fell to their lowest levels since 2021, due to scant demand and comfortable supplies in an unprecedented winter season. Northeast Asia
prices reached their lowest since August 2021, and Southwest European prices were at their lowest since July 2021.

Lower-than-expected winter temperatures in northern Asia continue to depress gas consumption, with trading also limited in anticipation of the Lunar New Year festivities, which start on Jan. 22.

Similar to Asia, spot LNG prices in Southwest Europe remained bearish due to ample LNG supply and high underground storage facilities. Spanish storage tanks were at 94% of their capacity on Jan. 15, while Portuguese stocks were 98% full, data from Gas Infrastructure Europe shows.

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

Marc Roussot, Singapore and Yousra Samaha, Dubai and Daniel Stemler, Madrid

Hong Kong Targets LNG Imports This Year

Hong Kong expects to start LNG imports via a floating terminal this year following construction delays caused by the Covid-19 pandemic.

“The terminal is targeted to go into commercial operation in mid-2023,” said a spokesman from HongKong Electric (HK Electric). Fabrication and associated offshore installation of the jetty topside structure and equipment have been achieved.

Hong Kong has set a target to reduce its total carbon emissions by half before 2035 from the 2005 level and achieve carbon neutrality before 2050.

“We are working closely with our service providers, including LNG and FSRU [floating storage and regassification unit] suppliers, to ensure the project goes in smooth operation,” said the spokesperson. Work on hookup and pre-commissioning of the jetty topside equipment is continuing.

Project start-up was initially slated for 2021 before it was pushed back to 2022. Dubbed Hong Kong Offshore LNG Terminal, the FSRU project is owned jointly by two local utilities HK Electric and CLP Power, and is aimed at displacing coal and supplementing existing pipeline gas supplies.

The FSRU will be connected to HK Electric’s coal-fired Lamma Power Station and CLP’s gas-fired Black Point Power Station via two subsea gas pipelines. Called Bauhinia Spirit — the vessel is regarded as the world's largest FSRU with a storage capacity of 263,000 cubic meters — which is now chartered by Singapore LNG under a one-year contract.

Shell is expected to supply LNG to the terminal under a 10-year contract, which is understood to be more competitive than current Asian LNG market prices.
Clara Tan, Singapore

ACER Warns LNG Price Calculation Could Take Weeks

The EU’s Agency for the Cooperation of Energy Regulator’s (ACER) has warned it may take weeks to calculate a price for its daily LNG price assessment as a lack of data once again thwarted efforts to calculate a price on Tuesday.

ACER launched its daily LNG price assessment on Jan. 13 but has been unable to calculate a price due to a lack of eligible trades. The assessment is based on daily data submitted by all companies bidding, offering or buying LNG destined for the EU.

ACER said the lack of data was expected and suggested it could take weeks before it is able to calculate a price.

“The aim is for ACER to produce a robust and objective LNG price assessment that is transaction based rather than based on calling traders. The first days have not resulted in sufficient data for a single specific LNG import price for the EU. This was an expected outcome, given that the market for spot LNG transactions into the EU is highly illiquid,” ACER spokesperson Una Shortall said in a statement.

A total of 57 market participants are registered to report data and ACER on Tuesday reminded the firms of their reporting obligation.

ACER will use its daily price assessment to calculate its daily LNG benchmark, expected to launch by Mar. 31. The benchmark will be a spread between the LNG price assessment and the daily settled price of the front-month TTF contract traded on the Intercontinental Exchange.
Eric Thorp, London

Russia's China Gas Exports Exceed Target

Deputy Prime Minister Alexander Novak said Russia exported 15.5 billion cubic meters of pipeline gas to China in 2022, exceeding the target set in the supply contract.

The target for last year had been set at 15 Bcm in line with a ramp-up schedule for the Power of Siberia contract that was signed by Gazprom and China National Petroleum Corp. (CNPC) in 2014.

Supplies started in December 2019 and amounted to an annual total of 10.39 Bcm 2021. The contract calls for supplies to reach a plateau level of 38 Bcm/yr in 2025.

China took more Russian gas than planned last year because it relied more on pipeline gas imports — with prices linked to oil — and also increased its own domestic gas production.

Record high spot LNG prices also discouraged imports of LNG.

In the first 11 months of 2022, China's LNG imports fell 20% versus the same period of 2021, while pipeline gas imports rose 10%, according to the latest data from the country's customs authority.

However, Russia's LNG exports to China increased 40% to some 5.9 million tons during that period, mainly thanks to the lower price of CNPC's oil-linked offtake contract with Yamal LNG in Arctic Russia.

Russia's overall LNG production rose 8% to 46 Bcm in 2022, Novak said on Monday.
Staff Reports

Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India16.8117.2316.8517.2216.4516.3117.6815.9517.6016.8916.1515.8816.22
Sodegaura, Japan17.5018.8318.8518.9317.4414.0318.4616.3718.3419.2716.7215.8517.61
Zeebrugge, Belgium17.1215.5315.1415.6116.6316.9716.2715.1216.1415.1616.7515.8316.84
Huelva, Spain13.5112.0011.6412.0713.0112.8212.7011.5212.5811.6513.0712.1213.08
Isle of Grain, UK16.1514.5714.1814.6415.6815.9915.4114.1615.1814.2015.7814.8715.86
Everett, US2.170.660.990.731.871.720.011.451.240.302.37----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback15. Aug29. Aug12. Sep26. Sep10. Oct24. Oct7. Nov21. Nov5. Dec19. Dec2. Jan16. Jan10203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia20.0020.00-2.65--
SW Europe14.1514.15-3.89--
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)--3.59--3.64
NBP, UK (futures)+1.7018.3816.6820.89
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF1.3818.8517.4721.45
Zeebrugge (Belgium)--------
German NCG1.0516.3515.3018.83
NBP (UK)-0.1216.9517.0719.39
US Markets
US Spot Prices
Sabine Pass, Louisiana--3.43--3.30
Corpus Christi, Texas--2.85--2.89
Cove Point, Maryland--2.92--3.10
Elba Island, Georgia--3.43--3.00
Nymex Henry Hub Futures
Near Month--3.59--3.64
Second Mth--3.25--3.31
Third Mth--3.22--3.25
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaFeb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '230255075100125Energy Intelligence