January 23, 2023

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Freeport Asks Regulators to Restart Some Operations 

Freeport LNG has asked US regulators for permission to resume some operations to prepare for the facility’s eventual full restart.

The news, along with colder weather forecasts, pushed February gas futures upward, with Henry Hub jumping 27.3¢ Monday to $3.447 per million Btu.

Market watchers are closely monitoring the resumption of production at the plant after an explosion and fire last June. The facility’s flows represent about 17% of US LNG export capacity — an ever-more vital source of gas volumes both to Europe and to global markets since the invasion of Ukraine last year.

Freeport told the US Federal Energy Regulatory Commission (FERC) in a letter that it has completed various repairs to the Quintana Island facility, performed safety reviews, revised procedures, implemented new safety systems and performed necessary training.

“As such, Freeport respectfully requests authorization from FERC to commence cool down of its Loop 1 transfer piping and reinstate the facility’s boil off gas (BOG) management compressors and associated piping,” Freeport said in its letter dated Jan. 22.

The cooldown will be done “slowly and methodically” over about 11 days, the company said.

But Freeport acknowledged that “subsequent approvals will be necessary to commence Loop 1 LNG circulation and ship loading to Dock 1, as well as [to] begin to return the liquefaction trains to operation.”

Freeport, which asked FERC to respond by Tuesday, added that it will provide daily, confidential progress updates to regulators once it begins the initial process.

Spokeswoman Heather Browne said the company’s target for the facility start-up remains in the second half of this month.

“Today’s approval request that we filed with FERC signals the actions we will execute for the initial restart of our facility,” she told Energy Intelligence in an email.

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 amid 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 might not be expected until March given the time it takes to ramp up.
Everett Wheeler, Washington

Regulators Warn EU Gas Cap Could Cause Instability

The EU’s gas price cap could result in trading shifting to non-EU venues or over-the-counter (OTC) markets, which would lower liquidity and increase financial instability, the bloc’s regulators said on Monday.

The Agency for the Cooperation of Energy Regulators (ACER) and the European Securities and Markets Authority (ESMA) published separate reports on Monday assessing the potential impacts that the gas price cap — formally known as the Market Correction Mechanism (MCM) — could have on the European gas market.

While the regulators said that they had not yet observed market changes following the MCM announcement, both warned that they could not rule out future impacts on financial and energy markets.

Notably, ESMA said it is likely that the cap could lead to market participants adapting their trading activity to contracts and venues not covered by the MCM.

“Such adaptations could be achieved by various means, notably by shifting trading to OTC or to non-EU venues … Some of these adaptations are likely to reinforce trends that can already be observed today, such as the trend to move trading OTC, which is likely to further lower open interest and ultimately reduce available liquidity on regulated markets for TTF contracts,” ESMA said.

An uptick in OTC trading could increase margin calls and drive volatility.

ICE Instrument

Intercontinental Exchange (ICE), host of TTF trading, is reportedly looking at launching a new instrument in London that is similar in design to the current TTF ICE Endex contract, a well-placed trade source told Energy Intelligence.

ICE would clear block trades executed OTC at a higher price than the cap as the MCM only applies to screen orders, the source said, adding that the settlement price will not be affected by the cap. The instrument would use OTC information in cases where there was not enough liquidity in the screen when it comes to set the settlement price.

ICE would not comment when contacted by Energy Intelligence.

Following the adoption of the cap in December, the exchange operator said it would review whether it can continue to operate a market in TTF gas futures and has previously suggested it could move the trading hub outside of the EU.

Cap Launch

The MCM will go live on Feb. 15 and will be triggered if the front-month TTF contract exceeds €180 per megawatt hour for three days — and if the contract also exceeds an international LNG reference price by €35 for the same three days. The cap will also apply to other EU gas hubs but these could be exempted at a later stage, officials said in December.

While the cap will go live next month, it is unlikely that it will be triggered in the near term as TTF is currently priced at around €62/MWh.

Both ACER and ESMA suggest that the potential impacts of the cap on energy and financial markets will only become clear when the MCM is close to being triggered.

The regulators will submit more comprehensive reports examining the cap on Mar. 1.
Eric Thorp, London

Greater Tortue FPSO Sets Sail

The floating production, storage and offloading (FPSO) unit for the Greater Tortue Ahmeyim LNG export project, offshore Senegal and Mauritania, has set sail from China to its final destination off the coast of the two West African countries.

The FPSO has left the Cosco shipyard in Qidong, China on Jan. 20, following successful sea trials and it is set to arrive in the Tortue project site via Singapore, project developer BP said in a statement on Jan. 23.

Last September, the FPSO vessel drifted some 200 meters off the quayside after Typhoon Muifa hit the Chinese shipyard, but it did not cause any damage to the unit.

The FPSO will process the extracted natural gas by removing condensate, water and other impurities and subsequently send the processed gas volumes to the project’s floating LNG (FLNG) facility, where it will be liquefied and loaded onto LNG vessels.

BP said that the FPSO will be able to process about 500 million standard cubic feet of gas per day.

The majority of the LNG will be sold on the global market, with some volumes supplied to the host countries’ markets to meet rising demand.

The first phase of the Greater Tortue project is set to produce 2.3 million tons of LNG per year starting from the end of this year. Andrew Inglis, CEO of Kosmos Energy, the minority partner in the project, said that at the end of last year the project was more than 90% complete.

“We are developing one of the world’s most unique and innovative gas projects and the FPSO forms one of the most important components. Achieving the successful sail away of the GTA Phase 1 FPSO is a testimony to the tremendous partnership with our contractors Cosco Shipping and Technip Energies,” said Rahman Rahmanov, BP’s vice president, projects, for Mauritania and Senegal.

Daniel Stemler, Madrid

Novatek Boosts Gas Reserves


Novatek increased its proved natural gas reserves by 7.5% in 2022 to 2.43 trillion cubic meters as of Dec. 31, Russia’s LNG export champion said on Monday.
The privately owned company attributed the growth to successful exploration, including at Arctic fields designed to feed Novatek’s ambitious LNG expansion projects, as well as to acquisitions.

The reserves were calculated by Russian auditor Advantage Energy in accordance with a US Securities and Exchange Commission classification and include a proportionate share in joint ventures, Novatek said.

Under the Petroleum Resources Management System (PRMS) classification, Novatek’s proved and probable gas reserves increased 3% last year to 4.07 Tcm, the company said (see table).

In previous years, Novatek used to hire the US-headquartered DeGolyer & MacNaughton, but Russia’s February 2022 invasion of Ukraine and the international sanctions against Russia might have forced the change in auditor.

Novatek’s total hydrocarbon reserves increased 7.1% under SEC standards to 17.57 billion barrels of oil equivalent and 2.6% under PRMS to 29.73 billion boe, the company said.

The total reserve replacement rate was 282% in 2022, under SEC classification, Novatek said.

The growth in reserves was driven by both LNG and non-LNG exploration projects, according to the company.

LNG Projects

In the Arctic, where Novatek keeps plans to expand LNG production to up to 70 million tons per year by 2030 from around 21 million tons in 2022, Novatek continued exploration at the Gydanskoye, South Tambei and Verkhnetiuteiskoye fields as well as production drilling at South Tambei and the Utrenneye fields.

Acquisition of the Arkticheskoye and Neitinskoye fields at upstream license auctions also contributed to the growth in reserves, Novatek said.

The South Tambei field feeds the Novatek’s Yamal LNG project, now the only operational LNG project in the Arctic, while Utrenneye will feed the 19.8 million tons/yr Arctic LNG 2 project where Novatek plans to launch the first of three liquefaction trains at the end of this year.

Verkhnetiuteiskoye, alongside neighboring fields, is the planned resource base for the 5 million tons/yr Obsky LNG project where Novatek may take a final investment decision in the first half of this year.

Gydanskoye is part of the resource base of the Arctic LNG 1 project, where Novatek continues exploration to make sure it has enough reserves for a 20 million tons/yr plant.

The EU technology sanctions and the exodus of Western technology partners complicate Russia's LNG expansion plans, but Novatek believes it can rely on domestic equipment and technology.

Non-LNG Reserves

In the legacy Nadym-Pur-Taz area of West Siberia, focusing on pipeline gas supply to the domestic market, Novatek added reserves thanks to exploration at the North Chaselskoye field, production drilling at the North Russkoye field and the Urengoi field within the Samburgsky, Yevo-Yakhinsky, Ust-Yamsoveisky and Olimpiysky license areas.

The purchase in August of TotalEnergies’s 49% stake in the Terneftegas joint venture operating the Termokarstovoye field also helped increase Novatek’s overall reserves last year. Novatek owns 100% in Terneftegas following the deal.

Novatek 2022 Reserves
Hydrocarbon ReservesProved (SEC)Proved + Probable (PRMS)
2022202120222021
Natural Gas (Tcm)2.4312.2614.0693.948
Liquids (million tons)194189359363
Total Hydrocarbons (billion boe)17.57116.40929.72628.970
Reserves to Production Ratio28264746

Staff Reports

Taipower Affirms Hsiehho LNG Terminal Safety

The state-owned Taiwan Power Co (Taipower) stated last week that its plan to build a liquefied natural gas (LNG) receiving terminal just northwest of Keelung Harbor at the northern tip of Taiwan would not pose any danger to commercial shipping at its third largest port.

Taipower is applying for approval of its environmental impact assessment to construct two 1,300-megawatt LNG combined cycle generators on the site of the current oil-fired Hsiehho power plant just west of Keelung City. Hearings are expected to resume on the application in March.

Opposition to the new plant remains. On Jan. 19, former Keelung City council member Wang Hsing-chih, the initiator of a referendum petition against the project, in an article in “Storm Media” urged Democratic Progressive Party (DPP) President Tsai Ing-wen to not " break the hearts of the Keelung residents." The son of late DPP secretary-general and author Wang To, Wang said the project would severely harm the marine ecology, landscape and fisheries and port operations.

Wang said Taipower had yet to offer an alternative plan since unveiling in July a third version that would slice the scope of landfill needed for the terminal from the original 29.25 hectares to 14.5 hectares and to build a breakwater to insulate most of the coral marine life area from impacts. New Keelung City mayor Hsieh Kuo-liang, of the right-wing opposition Kuomintang has promised to protect the Waimushan area but has not explicitly said he would oppose the project.

Port Precedent

In response, Taipower spokesman Wu Chin-chung stated Jan. 19 that there are numerous examples of co-existence with LNG receiving terminals and international commercial ports, citing Amsterdam in The Netherlands and Yokohama in Japan, for over six decades without major incident.

Wu said Taipower had carried out over 600 modelings of LNG carrier entry into the port and that all of the results had shown that LNG carriers, ferries and cargo ships could all safely enter and exit the port without impacting normal commercial port operations.

Since the location of the planned terminal would be at the mouth of Keelung Harbor, Wu said LNG carriers would enter the receiving terminal immediately after entering the port zone, avoiding the main port area and its shipping channel. Wu added that that turnaround time would be “extremely short,” with carriers arriving at most twice monthly. Wu said that Taipower will also invite professionals and academics to convene a third-party review of its modeling for ship management and maritime engineering.

Power Needs

Wu added that the national power grid for northern Taiwan, including Taipei City, New Taipei City and Keelung City, covers 4.8 million persons and said that without the replacement of the Hsiehho plant, peak time usage in the commercial zones of these cities would exceed 6 gigawatt-hours.

The new plant will be important to replace aging facilities. Taipower`s 985 MW Kuosheng-2 unit of the Kuosheng nuclear power plant will retire in March 2023 and will be followed in 2024 by the last two of four 500 MW oil-fired units at Hsiehho, the first two having retired in 2019. As a result, the Hoping independent power producer (IPP) with two 650 MW coal fired units will be the only major operating power plant in northernmost Taiwan, leaving the region dependent on transmission of power from power plants in central and southern Taiwan until the two Hsiehho 1,300 MW units come on line in 2027 and 2028, respectively.

The Taipower spokesman added that the replacement of the four 40-year-old 500 MW oil-fired generators by two combined cycle LNG units will reduce air pollutants by 96% and carbon emissions by 52%.

Power from LNG-fueled generators accounted for 38.5% of Taiwan's 265,653 gigawatt hours of electricity generated in the first 11 months of 2022, compared with 37.2% of 290,936 GWh in all of 2021, according to data from the Ministry of Economic Affairs' Bureau of Energy.

Taiwan imported 18.26 million metric tons of LNG during the first 11 months of 2022, compared to 19.44 million tons in all of 2021. The biggest supplier in 2022 was Australia with 6.75 million tons, followed by Qatar with 4.79 million tons, the United States with 1.99 million tons, Indonesia with 985,509 tons and the Russian Federation with 962,734 million tons.
Dennis Engbarth, Taipei


In Brief

Abaxx Files with Singapore to List Physical LNG Futures

Abaxx Technologies announced Monday that a subsidiary filed paperwork with Singapore regulators to list a set of physically settled LNG futures contracts on an exchange it is launching in the Southeast Asian country.

If approved, the contracts will cover LNG trade in Northwest Europe, the North Asia-Pacific region and the US Gulf Coast. Abaxx argued the lack of a waterborne LNG price benchmark particularly affects Europe, given the continent’s increased reliance on LNG to meet its energy needs.

“Onshore gas price references cannot, by definition, reflect the dynamics of the international LNG market,” Abaxx said in a Jan. 17 whitepaper. “As evidenced during the maturation of today’s oil and onshore natural gas markets, reliable benchmark prices supported the financing and development of critical energy projects including exploration and production, pipelines, refineries, storage hubs and export/import capacity. The absence of an LNG benchmark has arguably deterred investors from participating as a result of the lack of a trusted forward price curve.”

"Asia continues to be the fastest-growing demand center for energy products and we believe our choice to operate out of Singapore positions us strategically to be at the global hub of commodity trading while benefiting from its robust regulatory framework," managing director of Abaxx Exchange Nancy Seah said.

Abaxx Exchange is seeking final regulatory approvals as a Recognized Market Operator and Approved Clearing House from the Monetary Authority of Singapore.
Everett Wheeler, Washington


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India17.2017.6117.2617.5916.8816.7318.0316.4117.9517.2916.5916.3416.66
Sodegaura, Japan17.9519.2119.2319.3017.9114.7318.8716.9218.7519.6217.2316.4218.07
Zeebrugge, Belgium19.3417.8217.4717.8918.8719.1918.5317.4418.4017.4718.9818.1319.07
Huelva, Spain17.7416.2815.9416.3517.2617.0816.9515.8316.8415.9417.3216.4117.33
Isle of Grain, UK20.5118.9818.6219.0420.0620.3619.7918.6019.5618.6320.1519.2920.24
Everett, US2.441.031.351.092.162.030.011.761.560.702.62----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetbackSep '22Oct '22Nov '22Dec '22Jan '2310203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia20.0020.340.080.34
SW Europe14.1518.39-0.124.24
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.273.453.17--
NBP, UK (futures)-0.2720.6720.9416.96
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-1.0820.7021.7817.60
Zeebrugge (Belgium)--------
German NCG0.5418.1217.5815.19
NBP (UK)-0.1221.3321.4517.36
US Markets
US Spot Prices
Sabine Pass, Louisiana0.303.423.12--
Corpus Christi, Texas3.033.030.00--
Cove Point, Maryland0.113.303.19--
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month0.273.453.17--
Second Mth0.193.223.04--
Third Mth0.173.203.03--
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaMar '22May '22Jul '22Sep '22Nov '22Jan '230255075100125Energy Intelligence