February 3, 2023

WWW.ENERGYINTEL.COM

Hopes Rise for Mozambique LNG Restart

Work could soon resume on the $20 billion Mozambique LNG project after the chief executive of TotalEnergies, Patrick Pouyanne, visited on Friday the troubled northeastern region of Cabo Delgado, where the 13.12 million ton per year project is headquartered.

Total, which operates Mozambique LNG with a 26.5% stake, declared force majeure on the project in April, 2021, after a series of insurgent attacks near the site in the Afungi peninsula.

The company has been under pressure from the Mozambican government for some time to resume operations, but insists it cannot do so until the safety of its staff can be fully guaranteed.

The Tour

Pouyanne, who was accompanied on his visit by Mozambique’s president, Filipe Nyusi, said the lifting of the force majeure would require the “restoration of security in the region, the resumption of public services and the return to normal life for the people of the region.”

Pouyanne was given a tour of the project facilities as well as the towns of Palma and Mocimboa da Praia, which had both suffered bloody attacks by insurgents but are now under full government control.

Total says it has entrusted a leading humanitarian and human rights expert, Jean-Christophe Rufin, with a mission to assess the overall situation in Cabo Delgado. His team is due to deliver a report to Total and its partners by the end of this month to decide whether the conditions are suitable for a resumption of work at Mozambique LNG.

The Delay

The largest single energy project in sub-Saharan Africa, Mozambique LNG was originally due to come on stream in 2024, but start up has been pushed back to 2026 at the earliest.

All the gas for the two parallel trains will come from the Atum and Golfinho fields in Deepwater Area 1 in the Rovuma Basin.

Apart from Total, the other shareholders are Mozambique’s state oil company. ENH, Japanese duo Jogmec and Mitsui with 10% each, India’s ONGC Videsh, Bharat and Indian Oil sharing 30% and Thailand’s PTT with 8.5%.

The Other Projects

Mozambique LNG is one of three LNG projects in Mozambique.

The 15.2 million ton per year $23 billion Rovuma LNG project led by ExxonMobil is awaiting a final investment decision, which is not expected at least for another year.

In November, the country celebrated the shipment of its first-ever LNG cargo from the Eni-led 3.4 million ton per year Coral South Project. Last summer, Eni was proposing an additional floating liquefaction plant for Mozambique, doubling the bet on an offshore export strategy.
Paul Sampson, London

Demand Destruction: Australian LNG Import Terminal Scrapped

South Korean infrastructure developer Energy Projects & Infrastructure Korea (EPIK) has abandoned its proposed LNG terminal at Newcastle in New South Wales, southeastern Australia, due to high LNG prices as Europe's troubles impact down under.

In its January gas inquiry report this month, regulator Australian Competition & Consumer Commission (ACCC) said high LNG prices and demand for floating storage and regasification units (FSRUs) are placing pressure on some of the proposed terminals.

The regulator said EPIK has declared its proposed terminal as “economically unfeasible,” ceasing development activities in September last year.

Noting that the risks posed by conditions in the international LNG market are not unique to EPIK’s project, the ACCC said all proposed terminal projects are exposed to this risk, so they could also be abandoned or delayed, until conditions improve.

EPIK’s Newcastle project was declared as critical state significant infrastructure by the government of New South Wales in 2019. But there were few updates on the project thereafter. EPIK was not immediately available for comment.

Asian LNG prices hit record highs last year, especially in the third quarter, following the war in Ukraine, as buyers competed with European buyers for cargoes and Asian prices tracked higher European gas hub prices such as the Dutch TTF.

Apart from higher and volatile LNG prices, aspiring Australian importers also face competition for FSRUs from Europe which is scrambling to wean itself off Russian pipeline gas.

Remaining Projects

Among the remaining project developers looking to serve the country's populous southeast, Australian Industrial Energy (AIE) is seen as the frontrunner with its project in Port Kembla in New South Wales, but the firm had said a decision to bring in the FSRU is "highly dependent upon gas retailers committing to use" the terminal.

Another project is spearheaded by Viva Energy which wants to install a FSRU next to its Geelong refinery in Victoria. But the firm is still awaiting environmental approval since it submitted its environmental plan in August.

But an approval by the Victoria government is not guaranteed as Viva's project has been facing local opposition from activist groups. Viva said last year that it would delay a final investment decision to 2023 due to delays with receiving the environmental approval. Viva is understood to have lost its FSRU booking with Hoegh last year amid strong demand from Germany to secure floating import terminals.

Local independent Santos is pushing for its Narrabri gas project in New South Wales which it argued would reduce the requirements for LNG imports on the country’s southeastern coast.
Clara Tan, Singapore

Finland’s Idle LNG Terminal Gets First Capacity Bookings

Estonian gas company Eesti Gaas has become the first firm to book capacity at Finland’s Inkoo floating LNG terminal — which is yet to receive a commercial cargo after coming online in January.

Eesti Gaas confirmed on Friday that it will receive seven cargoes at Gasgrid’s Inkoo LNG terminal in the spring and summer.

A Gasgrid source told Energy Intelligence that Eesti’s bookings mark the first for the Inkoo terminal.

The terminal has been ready to receive LNG cargoes since Jan. 16 but has not received any deliveries amid a reported lack of capacity bookings over the first quarter. The 5 billion cubic meter per year Exemplar floating storage and regasification unit (FSRU) arrived in Finland on Dec. 28 and has been installed to end Finland and Estonia's dependence on Russian gas.

Eesti Gaas could export the regasified volumes to Estonia and the wider Baltic region via the bidirectional 2.6 Bcm/yr Balticconnector pipeline.

Eesti Gaas operates in Finland, Latvia, Lithuania and Poland and serves 50,000 customers.

Created with Highcharts 9.0.0(million tons)BALTIC LNG IMPORTS ON THE RISEFinlandLithuaniaPoland20142015201620172018201920202021202202468Source: Kpler

Increasing LNG imports

In addition to the seven cargoes booked for Inkoo, Eesti Gaas will receive three cargoes at Lithuania’s Klaipeda LNG terminal this winter.

The first of the three cargoes arrived at Klaipeda in January, with Equinor delivering a shipment sourced from the US. Eesti Gaas will receive its next cargo at the Lithuanian terminal in March. Eesti took delivery of five cargoes at Klaipeda last year, three sourced from the US and two from Norway.

Estonia’s dependency on LNG is set to increase this year due to Tallinn banning imports and purchases of Russian gas, effective Dec 31, 2022.

Eesti Gaas CEO Margus Kaasik noted that the price of gas in Europe is falling and that this is driving fuel switching by many of the company’s customers.

“Today, in the middle of the heating season, we can say that not only has the price of gas gone down, but there are signs that gas is returning to competition. Several of our business customers, who used alternative fuels in the meantime, are already coming back, because it is already more affordable to heat and produce with natural gas than, for example, with light fuel oil or liquid gas, and driving a car is already cheaper with CNG than with petrol,” Kaasik said in late January.

The company has reduced gas prices for some household customers in Estonia by 52% this month.
Eric Thorp, London

US E&Ps Make Case for Exposure to Global LNG Market

US gas producers, seeking greater exposure to international markets, have recently pushed into the LNG export sector. But their strategy is more about diversification than an overhaul of the E&P business model, executives said this week.

“We're not going to be big LNG players like Cheniere or Freeport or anything like that,” Devon Energy CEO Rick Muncrief said at the NAPE conference in Houston on Wednesday. “I mean, from our perspective, it's how can we get some exposure in international markets and help our allies around the world. We do the same thing with oil.”

Last year, Devon inked an initial agreement with floating LNG (FLNG) specialist Delfin Midstream to help develop an offshore liquefaction facility off Louisiana. The deal includes a pre-sanction investment by Devon and a heads of agreement to finalize a 1 million ton per year tolling agreement for capacity in Delfin’s first FLNG project. Muncrief said Wednesday that the project would take about 10% of Devon’s gas production volumes.

US independents have been increasingly interested in exposure to the global LNG market after Russia’s invasion of Ukraine pushed commodity prices higher and made North American supply more attractive to foreign buyers. For instance, ConocoPhillips has partnered with Sempra to develop the Port Arthur LNG project in Louisiana, while Chesapeake Energy has inked a deal to supply the Golden Pass LNG project with “responsibly sourced” gas.

'Most of Our Investors Get It'

But Chesapeake CEO Nick Dell’Osso said the company’s LNG strategy was not about short-term gains.

“Most of our investors get it, and they think it's a good idea,” he said at the conference. “At the end of the day, the way I describe it to our investors, is this is not arbitrage capture. This is diversification of market. The US gas is being sold in international markets. We should have exposure to that. That's diversification of your product sales points and ultimately like any other portfolio diversification.”

Chesapeake has also committed 700 million cubic feet per day of its Haynesville Shale gas production to Momentum Midstream’s NG3 gathering system, which will ferry gas from Haynesville fields to third-party interconnections near Gillis, La. — including several pipelines that directly supply LNG export facilities along Louisiana's Gulf Coast.

The project will have an initial capacity of 1.7 billion cubic feet per day, expandable to 2.2 Bcf/d, and includes carbon capture and sequestration that will remove and store underground 100% of the project's CO2 emissions.

Asked whether customers would pay a premium for carbon-neutral LNG, Dell’Osso said the market was still evolving. “I'm just not sure that the market has evolved enough," for customers to pay a premium for US responsibly sourced gas, he said.

However, the emissions reduction efforts do play an important role in getting producers a seat at the bargaining table, he added.

Common Theme

The move toward market diversification is common among large upstream gas players. Last fall, in third-quarter earnings calls with analysts, other major gas producers laid out the prospects for breaking into the LNG export arena.

Southwestern Energy CEO William Way said 65% of its 4.2 Bcf/d equivalent of Appalachian and Haynesville production already makes its way to Gulf Coast markets, and the company is working to earmark more of its production for international destinations.

And Antero Resources stressed that the 2.3 Bcf/d of firm transportation along pipelines serving the Cove Point LNG export terminal in Maryland and the Gulf Coast LNG "fairway” enabled the company to achieve a 49¢ per million Btu premium to Nymex Henry Hub futures prices in the quarter — a premium likely to get even more attractive "as additional LNG trains and terminals are completed."
Caroline Evans, Houston


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India14.6115.0014.6914.9814.3414.2015.3713.9415.3014.7214.0713.8414.14
Sodegaura, Japan15.4516.6016.6216.6815.4312.5816.3014.5616.1916.9714.8114.0915.57
Zeebrugge, Belgium18.3116.9216.6116.9817.8818.1817.5616.5717.4416.6017.9917.2118.07
Huelva, Spain16.6815.3415.0515.4016.2416.0815.9514.9415.8415.0416.3015.4816.31
Isle of Grain, UK17.7816.3916.0816.4417.3717.6417.1216.0516.9116.0817.4616.6917.54
Everett, US3.031.742.031.792.772.660.012.402.221.443.20----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback29. Aug12. Sep26. Sep10. Oct24. Oct7. Nov21. Nov5. Dec19. Dec2. Jan16. Jan30. Jan10203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia18.5017.67-0.33-0.83
SW Europe16.5017.320.960.82
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.052.412.462.85
NBP, UK (futures)+0.4717.8317.3616.99
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF0.7618.9218.1617.55
Zeebrugge (Belgium)--------
German NCG0.2316.2816.0515.02
NBP (UK)1.2118.5717.3616.46
US Markets
US Spot Prices
Sabine Pass, Louisiana-0.262.402.662.69
Corpus Christi, Texas----0.002.49
Cove Point, Maryland-13.283.1016.382.53
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month-0.052.412.462.85
Second Mth-0.042.482.522.88
Third Mth-0.032.632.662.97
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaFeb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '23Feb '230255075100125Energy Intelligence