January 19, 2023

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NextDecade Nets First Japanese Buyer

US LNG developer NextDecade has secured its first Japanese buyer after Itochu Corporation signed a 15-year supply deal for 1 million tons of LNG per year from the proposed Rio Grande LNG (RGLNG) plant in Brownsville, Texas.

NextDecade's proposed plant is part of what is being called a US-based LNG 'mega-expansion' totaling 45 million tons that is expected to get the go-ahead over the course of 2023.

The Deal

NextDecade confirmed the Itochu deal on Thursday and said the volumes will be indexed to Henry Hub on a free-on-board (FOB) basis. The contract marks Itochu’s first supply deal for US LNG.

"We are honored to have Itochu Corporation as our first Japanese customer," NextDecade's CEO Matt Schatzman said in a statement.

The supply deal keeps NextDecade on track to take a final investment decision on the first three trains at the five-train 27 million ton capacity RGLNG plant during the current quarter. With the Itochu contract, NextDecade has now penned eight long-term supply deals for a total of 10.75 million tons of capacity. The first three trains have a total capacity of up to 17.61 million tons.

“We look forward to providing Itochu and their customers with LNG, and we are actively working to reduce the carbon footprint of the Rio Grande LNG facility through our proposed carbon capture and storage project,” Schatzman added.

US LNG supplies to Japan peaked in 2021 at just over 7 million tons before before plummeting due to competition from Europe in 2022 (see graph).

Created with Highcharts 9.0.0(million tons)US LNG EXPORTS TO JAPAN201620172018201920202021202202468Source: Kpler

Diversifying Supply

Interest in US LNG supplies has increased since Russia’s invasion of Ukraine, with Asian and European buyers competing for volumes. However, Japanese firms have largely been absent from the flurry of deals for US LNG since March last year.

Itochu’s deal is one of two signed by Japanese firms for US LNG volumes since the war in Ukraine and comes weeks after Inpex signed a 20-year deal with Venture Global for 1 million tons of LNG from its proposed CP2 LNG plant in Louisiana.

For Itochu, the contract with NextDecade will more than double its contracted LNG volumes and help the firm diversify supply.

Itochu has one long-term deal running currently for 0.7 million tons from Oman LNG and last month signed a binding sheet agreement to extend the deal which expires in 2025. Under the agreed terms Itochu will take 0.8 million tons from Oman LNG starting in 2025 for a period of five or ten years.
Eric Thorp, London

Snam to Spend €9B on Gas Infrastructure

Italian energy infrastructure firm Snam will invest €10 billion ($10.8 billion) under its 2022-26 strategic plan and will direct 90% of the capex budget towards gas infrastructure projects aimed at enhancing energy security in its home market.

The planned €10 billion spend was unveiled on Thursday and marks a 23% increase compared to the 2021-25 plan. The budget for gas projects is up €900 million from the 2021-25 plan, while planned spending on energy transition projects – hydrogen and biomethane — is €1 billion, down from €1.3 billion.

Gas Transport Expansion

Snam will spend €6.3 billion on gas transport projects, including the onshore Adriatic Line aimed at increasing gas flows between the north and south of Italy.

Snam CEO Stefano Venier said the Adriatic pipeline should be completed by 2027 and that the final regulatory approvals for the final section of the pipeline should be granted by early March.

The firm will spend €1.4 billion on the purchase of two new floating storage regasification units (FSRUs) and related infrastructure investments. The company secured the FSRUs last year and Venier said one of the vessels should be in operation by May.

Italy's LNG imports hit a record high in 2022 as the country reacted to lower Russian piped gas flows (see graph).

Created with Highcharts 9.0.0(million tons)ITALY'S LNG IMPORTS200820092010201120122013201420152016201720182019202020212022024681012Source: Kpler

Gas Storage Expansion

Snam will also spend €1.3 billion on expanding gas storage sites and opening a new storage facility at the Alfonsine field located near Ravenna, where Snam is looking to site one of its new FSRUs.

The Alfonsine storage site will have a capacity to store 1.8 billion cubic meters of gas and will take five years to complete, Venier said. Increasing pressure at existing storage sites will add 1 Bcm of capacity by 2026, the Snam CEO added.
Eric Thorp, London

Turkey Looks to Fresh LNG Expansion

Turkey is poised to start up its third floating storage and regasification Unit (FSRU) later this month amid a pivot towards the greater energy security provided by LNG.

Saros FSRU on the Gallipoli peninsula in European Turkey will have a capacity of 28 million cubic meters per day (10.2 billion cubic meters per year) and will be operated by state gas firm Botas.

The Vasant FSRU “passed through the Suez Canal on Monday, [and] is expected to continue its journey in the Mediterranean, off the coast of Egypt, and anchor at Turkey this week,” the semi-official Anadolu news agency reported.

The latest import capacity addition will bring Turkey's LNG import capacity to about 29 million tons as the country struggles to establish itself as a gas hub.

Record Setting

Existing terminals include the 20 MMcm/d Aliaga FSRU near Izmir, operated by private consortium Etki, which started up in late 2016, and the 27 MMcm/d Dortyol FSRU in eastern Turkey.

In addition to the FSRUs, Turkey has two conventional LNG import terminals, the Marmara Ereglisi LNG Terminal with a capacity of 5.9 million tons, and the Aliaga Egegaz LNG Terminal at 4.4 million tons.

Turkey imported 10.8 million tons of LNG in 2022, an all-time record for the country, according to Kpler (see graph).

Created with Highcharts 9.0.0(million tons)TURKEY'S LNG IMPORTS200820092010201120122013201420152016201720182019202020212022024681012Source: Kpler

Shift to LNG

Turkey saw LNG imports reach nearly a quarter of all gas imports for the January to October period in 2022 — the most recent month for which there is official data (see table).

In addition to security of supply concerns, price has been a big driver of Ankara’s LNG drive. Recent contract renegotiations, which took effect on Jan. 2022 left Russian gas with a 70% TTF weighting and prohibitively expensive.

Turkish Gas & LNG Imports
(MMcm)Jan-Oct 2021Jan-Oct 2022Difference
Total Gas47,74144,730-3,011
Of Which LNG9,84111,0251,184
Of Which: Algeria 4,9244,073-851
Egypt2761,6301,354
USA2,8534,4571,604
Others1,788865-923
LNG % Of Total20.6124.65--

Rafiq Latta, Nicosia


In Brief

Gazprom Cuts Ukraine Gas Transit Flows

Gazprom further reduced flows of Russian gas to Europe via Ukraine on Thursday, citing lower demand from customers as the main reason.

Ukraine transit flows were cut by more than 20% to just 25.1 MMcm/d. They had previously held steady at a little more than 40 MMcm/d in the second half of 2022 but dipped to an average of around 37.5 MMcm/d in the first half of January 2023.

Gazprom's pipeline exports of Russian gas to Europe have collapsed since Russia's invasion of Ukraine in February, with shipments via the Nord Stream and Yamal lines stopping altogether. Europe was previously Russia's biggest export market by far.

Although Russia and Ukraine are at war, Russian gas continues to flow through Ukraine to countries such as Slovakia, Austria and Italy, with Gazprom paying Ukraine transit fees.

But European countries have been turning to sources of supply, including imports of LNG, and have vowed to end their previous dependence on Russian gas and oil.

In August of this year, European gas futures briefly spiked above €300 per megawatt hour amid concerns that the region could face a severe shortage of gas this winter.

However, prices have since fallen sharply as mild weather helped European countries stockpile plenty of gas.

In late trading on Thursday, the front-month Dutch TTF gas futures contract was trading just above €60/MWh — well below last summer's peak, but still relatively high by historic standards.

Created with Highcharts 9.0.0(MMcm/d)RUSSIAN GAS FLOWS VIA KEY ROUTES TO EUROPENord StreamUkrainian TransitTurk Stream to EuropeJan 1'22Jan 11'22Jan 21'22Jan 31'22Feb 10'22Feb 20'22Mar 2'22Mar 12'22Mar 22'22Apr 1'22Apr 11'22Apr 21'22May 1'22May 11'22May 21'22May 31'22Jun 10'22Jun 20'22Jun 30'22Jul 10'22Jul 20'22Jul 30'22Aug 9'22Aug 19'22Aug 29'22Sep 8'22Sep 18'22Sep 28'22Oct 8'22Oct 18'22Oct 28'22Nov 7'22Nov 17'22Nov 27'22Dec 7'22Dec 17'22Dec 27'22Jan 6'23Jan 16'23050100150200Source: Gazprom, GTSOU, Nord Stream AG, Entsog, Energy Intelligence

Staff Reports

ACER Publishes First NWE LNG Price Assessment

The EU’s Agency for the Cooperation of Energy Regulator’s (ACER) has published its first North West Europe (NWE) spot LNG price, set at €56.77 per megawatt hour, however, insufficient data is still preventing the regulator from calculating a South Europe spot LNG price.

ACER’s first NWE spot LNG price was calculated using seven spot delivered-ex-ship (DES) transactions and two firm spot DES bids.

The EU began pursuing a new price index last year amid skyrocketing wartime prices at the Dutch TTF, but the ACER benchmark has a long way to go before it becomes a viable alternative hedging option.

“Today, sufficient market transactions were reported to calculate a single North West Europe (NWE) Spot LNG price. The Spot LNG price of 56.77 EUR/MWh relates to the North West zone. It is a meaningful representation of the price at which spot LNG Delivered ex ship (DES) was bought and sold in NWE,” ACER spokesperson Una Shortall said in a statement.

ACER launched its daily LNG price assessment on Jan. 13 and was unable to calculate prices for the first four assessments. Insufficient data is still preventing ACER from calculating a South Europe spot price.

ACER’s daily price assessment will be used 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

Sefe Secures Regas Capacity At Future German Stade LNG Terminal

Germany’s Securing Energy for Europe (Sefe) has booked 4 billion cubic meters per year of regasification capacity at the planned German Stade LNG terminal.

Sefe has reserved the capacity for a 20 year period starting from 2027, when the 9.9 million ton/yr (13.5 Bcm/yr) onshore terminal is set to begin operation.

The agreement also allows Sefe to switch from LNG and supply the facility with ammonia in the future, as project developer Hanseatic Energy Hub (HEH) looks to ramp up the import of hydrogen-based energy sources.

“LNG is a backbone of our supply portfolio, and the agreement with HEH is of strategic importance to the SEFE Group. The capacities will advance us on our mission of ensuring the security of gas supply in Germany and Europe and drive the green energy transformation,” said Dr. Egbert Laege, managing director of Sefe.

Sefe, previously known as Gazprom Germania, was officially nationalized and recapitalized by the German federal government in December. Its LNG trading arm Sefe Marketing & Trading currently has a term offtake contract at Cameroon's Kribi plant, which runs until 2026.

This is the Stade terminal’s second capacity deal in quick succession. In December, German utility EnBW booked 3 Bcm/yr of regasification capacity for a 25 year period.
Daniel Stemler, Madrid

Indonesia Approves Eni Gas Project

Indonesia has approved Eni's development plan for the Merakes East deepwater gas field which is part of its East Sepinggan production-sharing contract.

"The development of this field will provide additional reserves to ensure supply to the East Kalimantan System so that the Bontang LNG [plant] can operate more optimally," said Dwi Soetjipto, chairman of regulator SKK Migas.

The regulator said the project represents an investment of $3.35 billion.

The approval paves the way for Eni — which holds a 65% operated interest — to sanction the project this year and start production in 2024.

Gas from the Merakes East field will be sent for processing at the nearby Jangkrik floating production unit, which is also operated by Eni.

Some of the gas will be supplied to Indonesia's long-established 22.6 million tons/yr Bontang liquefaction facility and some will be sold into the domestic market.
Clara Tan, Singapore

Sonatrach Eyes Increase in Output

Algeria's state-controlled Sonatrach expects to raise its oil and gas output to around 200 million tons of oil equivalent this year, according to CEO Toufik Hakkar, as Europe looks to the North African nation to replace Russian pipeline gas.

Hakkar said Sonatrach is set to sign new deals with Italy's Eni ahead of a visit to Algiers next week by Italian Prime Minister Giorgia Meloni.

“My number one priority is to make sure the company registers growth in reserves and production for next year and the following years," Hakkar told Reuters.

In 2021 Sonatrach produced 185 million tons of oil equivalent, according to its most recently published annual figures, with natural gas production of 132 Bcm and crude oil output of some 42 million tons.

Algeria exported 56 Bcm of gas last year, up from 54 Bcm in 2021, and it will raise its output again this year as new fields come on line, Hakkar said.
Tom Pepper, London


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India16.8517.2716.8917.2616.4916.3417.7215.9817.6316.9316.1915.9216.26
Sodegaura, Japan17.5318.8718.8918.9717.4714.0718.5016.4018.3819.3116.7615.8817.65
Zeebrugge, Belgium20.5118.8818.4818.9620.0020.3519.6418.4619.5018.5020.1219.1920.21
Huelva, Spain15.6814.1613.7814.2315.1814.9914.8613.6714.7413.8015.2414.2715.25
Isle of Grain, UK18.4416.8316.4416.9017.9718.2817.6916.4217.4516.4618.0617.1418.15
Everett, US2.100.590.920.661.801.660.011.381.170.242.30----
Created with Highcharts 9.0.0($/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 Asia20.0020.040.180.04
SW Europe14.1516.33-0.522.18
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.043.283.313.70
NBP, UK (futures)-0.1718.8419.0020.68
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-0.2119.4419.6520.47
Zeebrugge (Belgium)----14.59--
German NCG-0.1916.7516.9417.75
NBP (UK)-0.5219.2719.7920.01
US Markets
US Spot Prices
Sabine Pass, Louisiana-0.212.933.143.52
Corpus Christi, Texas-0.132.682.813.40
Cove Point, Maryland0.102.882.783.18
Elba Island, Georgia------3.35
Nymex Henry Hub Futures
Near Month-0.043.283.313.70
Second Mth0.013.123.113.36
Third Mth0.033.113.093.31
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaFeb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '230255075100125Energy Intelligence