February 7, 2023

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Exxon Signs Up for Maiden Mexican LNG Volumes

Exxon Mobil has secured its first LNG volumes from Mexico after penning two 20-year supply agreements with Mexico Pacific for 2 million tons of LNG from its proposed Saguaro Energia LNG project, located on the Pacific coast.

Under the agreements, Exxon Mobil LNG Asia Pacific will purchase 1 million tons annually of LNG on a free-on-board basis from the first two trains of the proposed three-train, 14.1 million ton per year Saguaro Energia LNG export terminal. The US major also has the option for 1 million tons per year from Train 3.

Exxon is the third buyer at Saguaro Energia, joining fellow major Shell and China’s Guangzhou Development Group, which have both signed 20-yr contracts for 2.6 million tons/yr and 2 million tons/yr, respectively.

The contract with Exxon means Mexico Pacific has now sold approximately 70% of the capacity of the first two trains, edging the firm closer to a final investment decision.

“We have reached a critical point on contract volumes required for FID on our first two trains and will now shift focus to close contracting on the significant commercial momentum in place for a subsequent Train 3 FID,” Mexico Pacific CEO Ivan Van der Walt said in a statement.

Mexico Pacific has previously said it will take a final investment decision on the first two trains in 2023, with first LNG expected to flow in 2026.

North American Portfolio

For Exxon, the volumes from Saguaro Energia add to its growing North American LNG portfolio and is in line with its goal of doubling its LNG supply portfolio by 2030. Last year saw the US major sign up for 1 million tons per year from NextDecade's proposed Rio Grande LNG plant and 1 million tons per year from each of Venture Global’s Plaquemines and CP2 LNG plants. Exxon is also marketing 30% of the volumes from the Golden Pass LNG plant, in which it is partnered alongside QatarEnergy.

Like the US Gulf Coast LNG plants, Saguaro Energia will source gas from the US shale patch, and potentially provide an outlet for Exxon’s growing Permian production.

“We look forward to working with Mexico Pacific to continue growing Exxon Mobil’s LNG portfolio and deliver Permian natural gas to global markets,” Peter Clarke, Senior Vice President of LNG for the Exxon Mobil Upstream Company said in a statement.

Mexico Pacific suggests its Saguaro Energia facility can deliver the lowest landed price of North American LNG into Asia due to low-cost gas from the Permian and shorter shipping times as carriers will not need to transit the Panama Canal.
Eric Thorp, London

Petronet on the Hunt for New LNG Contract Volumes

Indian state-run LNG importer Petronet LNG will need around 22 million tons of LNG a year in term contracts to replace Qatari supply agreements expiring in a few years, and to secure additional volumes for new projects.

But Petronet, which is India’s biggest LNG importer, is yet to conclude any definitive agreements, while countries including China, Germany and Thailand have snapped up scarce volumes from Qatar and Oman.

"We will conclude some term volumes from Qatar by the end of this year," said V.K. Mishra, CFO of Petronet LNG, at India Energy Week in Bengaluru, formerly known as Bangalore. He said that high prices of the fuel have led to delays in concluding term contracts.

India slid to seventh place among the world's largest importing countries in 2022, having been in fourth place in 2021, as high prices and European competition took their toll. India's most recent peak in LNG imports was in 2020 (see graph). However, Petronet's 2022 share of India's imports, about 40%, is at its highest level since 2017.

Created with Highcharts 9.0.0(million tons)INDIAN LNG IMPORT PEAKH-EnergyTrafiguraEssarRILBPCLTorrent PowerShellUnknownAM/NSIOCGSPCGAILPetronet2017201820192020202120220102030Source: Kpler

New LNG Import Projects

Petronet said it needs 12 million tons per year of LNG by 2025-26.

These volumes will help utilize 5 million tons in expansion capacity at the 17.5 million ton per year Dahej LNG import terminal, and supply another 3 million tons/yr for the 5 million ton Kochi facility, once Gail completes laying pipelines to customers.

Petronet also needs 4 million tons/yr for a proposed floating storage and regasification unit facility at Gopalpur on India's east coast, which is scheduled to open by 2025.

Qatar Negotiations

The existing 25-year 8.5 million ton per year LNG import contract with Qatar expires in 2028, and Petronet is seeking an additional 1 million tons/yr, or a total of 9.5 million tons from Qatar.

Qatar is also yet to supply 50 standard size cargoes previously deferred by Petronet.

Qatar may supply the fuel from the proposed North Field East expansion project, Mishra said. The negotiations are with the Qatar government company, and not with individual project partners like Total, which have been allocated marketing volumes.

High LNG Prices

"India cannot afford to absorb LNG at $20 per million Btu,’’ said company CEO A.K. Singh at a recent media briefing. Supplies from the existing 25-year term contract with Qatar cost only around $11/MMBtu at current crude price levels. Current spot rates of $16/MMBtu are still expensive for many Indian customers, he said.

Customers paid an average price of $18.50/MMBtu in January for gas traded on the Indian Gas Exchange, the closest one gets to market prices in India, according to IGX data. TTF traded at around $20/MMBtu, and Platt’s West Indian Marker for LNG was $22/MMBtu.

Mishra said that copious supplies of LNG will come to the market from new projects in 2026, and it may be prudent to wait it to out to get a better slope. India is comfortable with 10%-13% slopes, pegged to Brent crude. Anything above may not be sustainable in the long run, Mishra said.

High prices have sent India’s LNG demand lower this fiscal year by around 15%, and availability of more Russian LNG can bring prices lower, said billionaire Leonid Mikhelson, chairman of Novatek, at India Energy Week. Novatek is also in talks with Indian companies like state-run gas distributor Gail and Petronet to supply cargoes under term contracts.

Cheniere Energy and Tellurian are also keen on supplying the Indian market, company officials said.

Shipping Costs

But Gail and Petronet may have to arrange ships to absorb both US and Russian volumes.

Both Indian companies prefer importing LNG on a delivered basis even though the previous contracts with both the US and Qatar were on FOB terms.

Shipping is a major issue for Indian LNG importers because charter rates are high and carriers are in short supply, said an official from state-run Shipping Corporation of India (SCI), which provides ships for Petronet's existing term contracts. Its not possible to secure long term charter rates of $70,000 per day, which Petronet is paying for transport under its existing supply contracts, the SCI official said.
Dinakar Sethuraman, New Delhi

Bangladesh to Increase LNG Purchases This Year

Bangladesh will increase purchases of LNG this year after prices for the fuel declined from record levels seen in 2022, a top Bangladeshi official said.

Bangladesh was able to purchase around 75% of the 3 million tons of LNG it needs annually to meet domestic demand, said Tawfiq-e-Elahi Chowdhury, advisor to the Prime Minister for Power, Energy and Mineral Resources Affairs, on the sidelines of India Energy Week in Bengaluru.

LNG purchases dropped last year after Dhaka stopped importing spot shipments from July, after the war in Ukraine sent LNG prices to an all-time high (see graph). LNG turned unaffordable for Bangladesh after prices rose to record levels, crossing $50 per million Btu, Elahi said. The fuel is affordable only at around $15/MMBtu, he added.

South Asia, including Bangladesh, India and Pakistan, was expected to be a major LNG importing region, but all three countries have seen demand setbacks.

Created with Highcharts 9.0.0(million tons)BANGLADESH LNG IMPORTSQatarNigeriaUSMalaysiaEgyptAlgeriaOthersRussia201820192020202120220123456Source: Kpler

Spot LNG Import Resumption

Prices of spot LNG have crashed by a third to around $16-$18/MMBtu this year because of warm weather in Europe, high inventories and strong winds. Coupled with China's pandemic-led lockdowns there has been less demand for the fuel.

At current prices, Bangladesh can resume importing the fuel, Elahi said. Dhaka has now placed a tender for a cargo for delivery in late February. Total has bid around $20/MMBtu for supplying the cargo, the country's Daily Star newspaper reported.

Bangladesh imports term LNG through a 10-year import deal with Oman and a 15-year import deal with Qatar, with both agreements linked to crude prices. But it needs spot LNG to meet rising domestic use of the fuel.

The government hiked domestic gas prices by 15%-18% in January for industries, generators and commercial establishments while keeping prices unchanged for households, CNG and fertilizer plants.
Dinakar Sethuraman, New Delhi

Woodside Starts Reassessing Sunrise Concept

Woodside Energy said a new round of concept selection for the development of the Sunrise project will have a “strong focus” on delivering gas to Timor-Leste, the country's long-sought goal.

This comes after Woodside opened the door back in December for gas from the long-delayed Greater Sunrise Fields to be processed in Timor-Leste, as requested by President Jose Ramos-Horta.

"Against a backdrop of global geopolitical instability and constrained energy supply chains, there is an opportunity for the Sunrise Joint Venture to significantly advance this regionally important project," said Woodside Energy CEO Meg O’Neill.

Sunrise is one of several long-stalemated projects around the world seeing fresh momentum amid the current energy crisis.

Floating, Backfill, or Beaco

Woodside said in the past that it prefers either a floating concept or sending the gas to backfill existing LNG facilities in Australia.

The closest ones are Santos’ 3.7 million ton per year Darwin LNG plant and Inpex’s 8.9 million ton/yr Ichthys LNG facility.

The studies will consider using the latest technologies such as modular LNG that did not exist in the past.

It will also include evaluation of which option provides the most meaningful benefit for the people of Timor-Leste.

Timor Leste, which holds a 56.56% stake through Timor GAP — the Timor-Leste national oil company — has put considerable pressure on Woodside over recent years for Sunrise gas to be piped to its shores, likely to the south coast town of Beaco.

Stake and Size

Woodside has a 33.44% operated stake in Greater Sunrise, while Japan’s Osaka Gas holds a 10% stake.

The Sunrise and Troubadour gas and condensate fields, known as the Greater Sunrise Fields, are located in the Timor Sea and hold around 5.3 trillion cubic feet of contingent gas resources and 226 million barrels of condensate.
Marc Roussot, Singapore

Novatek to Delist From London Exchange

Russia’s Novatek will cancel the listing of its global depositary receipts (GDRs) on the London Stock Exchange (LSE) on Mar. 8, the company said in a statement on Tuesday, as wartime decoupling from Europe continues.

The privately owned natural gas and LNG producer said it had requested the UK Financial Conduct Authority and the LSE to cancel the listing and admission of the GDRs to trading on the exchange’s main market.

The decision follows the actual suspension of trading of the company’s GDRs from Mar. 3, 2022, Novatek said. On that day, the LSE suspended trading of Russian GDRs which had dropped to almost zero value because of the international sanctions imposed on Russia in response to its invasion of Ukraine that started on Feb. 24 last year.

In April, the Kremlin obliged Russian companies to delist from foreign exchanges, but allowed exceptions, which Novatek secured. State-run gas giant Gazprom and its oil arm Gazprom Neft, as well as privately owned oil producer Lukoil were among those who delisted their receipts from foreign exchanges in 2022.

Novatek says its GDR program remains in force despite the planned delisting. The company will continue listing its shares on the regulated market of the Moscow Exchange, it said.

Novatek is Russia’s second-largest gas producer and LNG export champion, which plans to produce between 60 million and 70 million tons per year of LNG in the Arctic by 2030, up from almost 21 million tons in 2022, despite the EU technology sanctions against Russian LNG projects.

France’s TotalEnergies holds a 19.4% stake, which it derecognized due to the war in Ukraine. Other key shareholders are Novatek’s CEO Leonid Mikhelson, who was recently reported to have handed part of his shares to his daughter Viktoria, and Russian-Finnish tycoon Gennady Timchenko, blacklisted by the US and EU. Gazprom holds 9.9% in Novatek.

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


In Brief

China's Unipec Secures Supply Deal With Oman LNG

Oman LNG has signed a new LNG supply contract with China’s Unipec, marking the first contract signed between the company and a Chinese firm.

The deal is a continuation of Oman's efforts to replace a series of supply contracts — amounting to about 9 million tons and expiring between 2024 and 2026, according to the International Group of LNG Importers.

The binding term-sheet agreement with China's Unipec is for the supply of 1 million tons per year of LNG and will start in 2025, running for four years, Oman’s national news agency reported on Tuesday,

Including the Unipec deal, Oman has signed 6.75 million tons worth of LNG deals — all slated to start in 2025.

A deal was signed last week with Turkish state gas firm Botas for the supply of 1 million tons of LNG per year for 10 years to start in 2025.

Last month, Oman LNG signed two supply deals with Thailand’s PTT and TotalEnergies for a total supply of 1.6 million tons of LNG starting from 2025.

The company also signed deals with other international companies including Shell, Japan’s Jera, Mitsui and Itochu with volumes totaling 3.15 million tons, all starting from 2025.
Yousra Samaha, Dubai

Spot LNG Continues to Slip

Spot LNG prices in Northeast Asia eased by 50¢ to $18/MMBtu, according to Energy Intelligence assessments for deliveries four to eight weeks ahead. Spot prices in Southwest Europe dropped 30¢ to $16.20/MMBtu.

Asian spot LNG prices have been easing for six consecutive weeks on sluggish regional demand amid rising temperatures, healthy inventories, and lower chartering rates. In addition, the planned restart of the 15 million ton/yr Freeport LNG plant in the US is further helping the market to cool down.

Meanwhile, LNG imports into Southwest Europe are expected to remain on a downward trend in February, in line with high underground storage stocks.

Created with Highcharts 9.0.0($/MMBtu)REGIONAL SPOT PRICESNortheast AsiaSouthwest EuropeFeb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '23Feb '23020406080Energy Intelligence

Marc Roussot, Singapore and Daniel Stemler, Madrid


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India14.9415.3215.0215.3114.6714.5215.7014.2615.6315.0414.3914.1714.47
Sodegaura, Japan15.7816.9316.9517.0015.7612.8916.6314.8816.5217.2915.1414.4115.89
Zeebrugge, Belgium15.6614.3013.9914.3515.2415.5314.9213.9614.8113.9915.3514.5915.43
Huelva, Spain15.5614.2413.9414.2915.1314.9714.8413.8414.7313.9415.1814.3715.20
Isle of Grain, UK16.2314.8614.5614.9115.8316.1015.5814.5215.3814.5515.9215.1616.00
Everett, US1.590.320.610.361.341.230.010.970.790.031.76----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback5. Sep19. Sep3. Oct17. Oct31. Oct14. Nov28. Nov12. Dec26. Dec9. Jan23. Jan6. Feb10203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia18.5018.000.17-0.50
SW Europe16.5016.20-0.46-0.30
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.132.582.462.68
NBP, UK (futures)-0.8316.8417.6717.49
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-1.0417.4518.4918.63
Zeebrugge (Belgium)--------
German NCG-0.8515.3516.2015.96
NBP (UK)-0.9017.0117.9117.31
US Markets
US Spot Prices
Sabine Pass, Louisiana0.162.352.192.67
Corpus Christi, Texas----0.002.60
Cove Point, Maryland0.282.322.044.62
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month0.132.582.462.68
Second Mth0.132.662.542.74
Third Mth0.152.822.672.84
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaMar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '23Feb '230255075100125Energy Intelligence