January 24, 2023

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Shell, CPC Advance Carbon-Neutral LNG Cargo

Shell and Taiwan's CPC have become the first firms to adopt the International Group of LNG Importers' emissions framework for the delivery of a greenhouse gas- (GHG) neutral LNG cargo, in a sign of what could be renewed interest in "green" LNG supplies.

The "pilot" cargo was sourced from the Chevron-operated Gorgon LNG export terminal in Australia and delivered to an undisclosed terminal in Taiwan. Shell holds a 25% stake in the 15.6 million ton per year Gorgon liquefaction plant.

To declare the cargo "carbon neutral," Shell and CPC used the GHG emissions monitoring, reporting and verification framework launched by the LNG importers' group, known as GIIGNL, late last year. GIIGNL hopes the framework will offer a transparent and credible tool to the industry by providing independent verification of both emissions and offsets related to LNG cargoes. Carbon offsets used must also meet best practice principles.

GIIGNL Secretary General Vincent Demoury told Energy Intelligence that the so-called Scope 1, 2 and 3 emissions associated with the cargo were fully offset, accounting for the full lifecycle emissions of the LNG.

The step by Shell and CPC is notable given that trade of carbon-neutral and partially carbon-offset LNG cargoes has slowed over the past year in the wake of Russia's invasion of Ukraine and concurrent energy crisis, as energy security concerns and soaring — and at times, record — gas prices have muted customers' interest in paying premiums for greener supplies.

Global LNG prices have fallen in recent weeks and are widely expected to be lower this year compared to 2022. But with prices still anticipated to remain elevated compared to pre-crisis levels, interest in carbon-neutral LNG could remain tepid.

At the same time, decarbonization objectives have not been completely sidelined, and the newest pilot cargo could indicate renewed interest as customers have had time to process the Russia-Ukraine conflict's impact on global gas flows.

Companies interested in following in Shell and CPC's footsteps using the GIIGNL framework must quantify the emissions associated with the targeted LNG cargo in a GHG footprint statement and then choose an offset plan that will either certify the cargo as GHG-neutral, GHG-offset or GHG-offset with a reduction plan.

Leading the Pack

Shell has been at the forefront of carbon-neutral LNG, having delivered the world’s first carbon-neutral cargoes in June 2019, to Tokyo Gas and South Korea’s GS Energy. Trade of lower-carbon LNG increased in 2020 and 2021 amid a low price environment, which made the additional cost of offsetting emissions easier to absorb.

CPC has been a particularly active customer for carbon-offset volumes as Taiwan seeks to balance its dual efforts to raise natural gas's use in its power mix from around 38% to 50% by 2025 while also setting course for net-zero emissions goals by 2050. Shell delivered two carbon-neutral LNG cargoes to Taiwan in 2020, with Eni and BP among its other "green" LNG suppliers.

Despite a higher price environment, GIIGNL expects GHG-neutral LNG trading more broadly to pick up again this year.

“We expect indeed to see more declarations of GHG-neutral LNG this year as companies become more familiar with the framework methodology,” Demoury said.
Eric Thorp, London

US LNG Cargo Finally Finds Home in Spain

A US LNG cargo is finally set to be unloaded in Spain after an unusually long stint floating off the Iberian Peninsula. Traders suspect that congested LNG terminals were the main cause of the remarkably long floating, rather than a commercial arbitrage play.

The 165,000 cubic meter Energy Glory is under long-term charter with Japanese utility Tokyo Gas to lift cargoes from the Cove Point export facility in Maryland under a term supply contract with Pacific Summit Energy, the North American trading arm of Japanese trading house Sumitomo. In this case, the vessel lifted a cargo from Cove Point on Nov. 20.

Since arriving to the southern coast of Spain later that month, however, the vessel has been loitering around the Alboran Sea and western Mediterranean without a clear indication of its ultimate destination.

Now, the vessel is expected to unload the cargo at Spain’s Barcelona terminal on Jan. 26, a Spanish shipping source confirmed to Energy Intelligence.

Storage Saturation

LNG trade sources polled by Energy Intelligence struggled to pinpoint the exact reason for one of the longest LNG cargo floatings observed in recent months, but several of them suggested Spain's saturated terminal tanks were the most likely cause.

“I presume it is related to the lack of contracted LNG storage capacity. There were intramonthly [delivery] slots renounced for December and January, but obtaining capacity to unload was very complicated,” one Spanish trader said.

Spanish terminals found themselves overrun by an influx of LNG cargoes during the final quarter of 2022, as a massive accumulation of vessels was forced to act as floating storage across southern Spanish waters for weeks as ships waited their turn to discharge. Spanish LNG terminal and gas grid operator Enagas even had to implement temporary restrictions on cargo unloadings in October and November in order to maintain safe operations.

Still, the rapid plunge in both spot LNG and Spanish hub prices that resulted from the wave of supply and milder-than-normal winter temperatures makes it unlikely that the Energy Glory was acting as commercially driven floating storage awaiting higher prices to unload, sources say.

Energy Intelligence LNG price assessments show spot prices in Southwest Europe shed $20 per million Btu between Dec. 12 and Jan. 16, to settle at $14.15/MMBtu. Near-term futures prices on the benchmark TTF have also plummeted in recent weeks, erasing any economic incentive to play floating storage as a profitable arbitrage.

In line with that sharp decline in prices, LNG imports into Spain are estimated to drop from 1.84 million tons in December to 1.3 million tons this month, according to Kpler.

Cargo Replacement?

The seller's apparent struggles to unload the cargo earlier may have provided Spanish utility Naturgy with an ideal opportunity to replace lost supplies, if it were in fact the buyer.

Two market sources suggested that Naturgy — the largest player on the Spanish LNG market — is the likely purchaser. “It smells Naturgy, a cheap purchase that no one else wanted,” one of the sources said.

Pricing aside, Naturgy has had to navigate a recently extended force majeure at Nigeria's Bonny LNG export facility, Energy Intelligence understands, based on a source close to the matter.

The Spanish utility is a contractual buyer of Nigerian LNG, and while supplies from the West African country have generally been on the rise, the force majeure has caused a hiccup in shipments.
Daniel Stemler, Madrid

Woodside Upbeat on Caribbean Deepwater 

Deepwater resources have potential to play a key long-term role in reversing falling LNG exports at Trinidad & Tobago’s Atlantic LNG facility — but must be competitive to secure investment, an audience heard at a key industry conference.

Australia’s Woodside Energy is still working out where its 3.2 Tcf deepwater Calypso project fits in its portfolio, according to remarks at the Trinidad and Tobago Energy Conference 2023, hosted by the Energy Chamber of Trinidad and Tobago.

"Deepwater will remain the driving force … we’re quite hopeful,” Calypso project director Stacy Patrick said, not just for the company’s Trinidad project but exploration acreage off Barbados as well.

The company is still easing into its new role in the country following its acquisition of the oil assets of Australian compatriot BHP last year.

Trinidad’s Atlantic LNG has long been in the hunt for new feedstock: it has capacity for 15.3 million tons per year, but only exported about 8 million tons in 2022.

Early Stages

Patrick said Calypso remains in its early stages, but the company still has a “lot of work going on” with the project, which lies in deep waters about 250 km off Trinidad’s southeast coastline.

Woodside completed a seismic assessment of Calypso back in December and continues to explore commercial and marketing solutions. The company is also screening development concepts for the project, according to a December investor presentation.

But the Trinidad project must still compete with other multi-billion dollar opportunities in its portfolio, such as Mexico’s Trion and Australia’s Browse, Patrick said.

"We’re not talking about spending hundreds of millions of dollars, we’re talking about spending billions of dollars," in the country, she said.

With that kind of money at stake, the company "can't make sub-optimal decisions," she said.

The project is seen not just as a strategic resource for Trinidad and Tobago, but for Woodside as well, and is supported by stakeholders, government and Trinidad’s National Gas company as well as contractors.

"Challenges are not insurmountable, we’ll find solutions to do it," she said.
Michael Sultan, Port of Spain


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India15.8716.2715.9316.2615.5515.4116.6915.0916.6115.9615.2615.0115.34
Sodegaura, Japan16.6217.8817.9017.9616.5913.4417.5415.6017.4218.2815.9215.1116.75
Zeebrugge, Belgium16.9115.4315.0815.4916.4516.7716.1215.0515.9915.0816.5715.7316.65
Huelva, Spain17.5516.1015.7616.1617.0716.9016.7715.6516.6515.7617.1316.2317.15
Isle of Grain, UK18.1916.6816.3316.7417.7418.0417.4816.3017.2616.3317.8416.9917.92
Everett, US2.350.941.261.002.071.940.011.671.480.622.53----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback22. Aug5. Sep19. Sep3. Oct17. Oct31. Oct14. Nov28. Nov12. Dec26. Dec9. Jan23. Jan10203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia20.0019.00-1.34-1.00
SW Europe14.1518.20-0.154.05
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.193.263.453.59
NBP, UK (futures)-2.3518.2220.5718.60
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-1.3919.3520.7419.02
Zeebrugge (Belgium)--------
German NCG-1.5916.5018.0916.21
NBP (UK)-2.2219.0021.2217.15
US Markets
US Spot Prices
Sabine Pass, Louisiana-0.073.353.423.43
Corpus Christi, Texas----3.032.85
Cove Point, Maryland-0.283.023.302.92
Elba Island, Georgia------2.85
Nymex Henry Hub Futures
Near Month-0.193.263.453.59
Second Mth-0.173.063.223.25
Third Mth-0.143.063.203.22
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaMar '22May '22Jul '22Sep '22Nov '22Jan '230255075100125Energy Intelligence