February 8, 2023

WWW.ENERGYINTEL.COM

Total Bides its Time on Mozambique LNG Restart

TotalEnergies is in no hurry to lift the force majeure on the $20 billion Mozambique LNG project, and will wait to see the results of an independent report on human rights and security in the northeastern region of Cabo Delgado at the end of this month before making any decision, the company’s chief executive Patrick Pouyanne told analysts on a conference call Wednesday.

But a relatively new theme also emerged on the call as Pouyanne added that cost would also play a role in the decision to restart construction.

Work on the 13.12 million ton per year scheme was suspended in April, 2021, following a series of militant attacks near the project site in the Afungi peninsula.

Security Situation

After a one day visit to the area last Friday, Pouyanne said he felt “positive” about the project, and saw clear signs of an improvement in the overall security situation.

“Life is back to normal, but it’s one step,” he said, stressing the need to review the dossier now being drawn up by French humanitarian veteran, Jean-Christope Rufin, that will recommend any remedial steps that Total and its partners should take regarding both security and human rights.

Pouyanne said it would share all the feedback with its partners, who comprise Mozambique’s state oil company ENH with 15%, Japan’s Mitsui and Jogmec with 10% apiece, Indian trio Bharat, ONGC Videsh and Oil India sharing 30% and Thailand’s PTT with 8.5%.

ONGC Videsh CEO Rajarshi Gupta told Energy Intelligence in a recent interview that he expects construction to resume at the Mozambique LNG project because the security situation there is stabilizing.

Cost Situation

At the same time, Total would need to resume a dialogue with the contractors working on the project — namely McDermott, Saipem and Chiyoda — to gauge whether costs have risen during the hiatus of nearly two years. This would take more time and require a separate report, he said.

“We will ask them to re-engage, but there’s no hurry,” he said. “I can wait, if costs go up, we can leave it.”

Under the initial schedule, Mozambique LNG was due to come on stream in 2024, but this has now slipped at least two years.

The advantage for Total and its partners is that it has secure funding for the project, with the US Eximbank and Japan Bank for International Co-operation pledging nearly $8 billion between them. All the loans are underpinned by long-term LNG offtake deals with buyers in Asia and Europe.

Floating Situation

Mozambique began exporting LNG in November last year, with the start-up of the Coral South floating LNG project operated by Eni with a 3.4 million ton per year capacity.

Last summer, Eni was proposing an additional floating liquefaction plant for Mozambique, doubling the bet on an offshore export strategy.
Paul Sampson, London

Russia Expands Share of Spanish LNG Market

Russia’s Yamal LNG project has firmly cemented its place as Spain's third-largest LNG supplier, helping to offset rapidly dwindling LNG flows from the likes of Algeria, Qatar, and Trinidad and Tobago, three legacy LNG providers for the Iberian country.

Supplies from the 17.4 million ton per year Novatek-owned Yamal plant to Spain jumped last year, particularly from June, thanks to a ramp up in spot cargo deliveries to the Southwest European country.

Volumes from the Russian plant into Spain reached 3.66 million tons in 2022, the highest on record, according to data from commodities analytics firm Kpler.

Although overall, the US and Nigeria have increased their market share since 2020 and remain the two largest LNG suppliers of Spain, Russia had managed to overtake Nigeria for second place during various months last year.

At the same time, Spanish imports of Algerian, Qatari and Trinidadian LNG have gone in the opposite direction (see graph).

Created with Highcharts 9.0.0SPAIN'S 2020 IMPORTS(million tons)US (25%)US (25%)Nigeria (19%)Nigeria (19%)Russia (16%)Russia (16%)Qatar (15%)Qatar (15%)Trinidad and Tobago (11%)Trinidad and Tobago (11%)Equatorial Guinea (5%)Equatorial Guinea (5%)Algeria (3%)Algeria (3%)Norway (2%)Norway (2%)Angola (2%)Angola (2%)Others (3%)Others (3%)Source: Kpler
Created with Highcharts 9.0.0SPAIN'S 2022 IMPORTS(million tons)US (40%)US (40%)Nigeria (20%)Nigeria (20%)Russia (17%)Russia (17%)Egypt (5%)Egypt (5%)Qatar (5%)Qatar (5%)Trinidad and Tobago (4%)Trinidad and Tobago (4%)Equatorial Guinea (2%)Equatorial Guinea (2%)Oman (2%)Oman (2%)Algeria (2%)Algeria (2%)Others (4%)Others (4%)Source: Kpler
Yamal in the Driver's Seat

The rise of Yamal LNG's share in the Spanish LNG mix has been driven by market as well as political factors.

Firstly, the Russian plant had managed to run above nameplate capacity during extended periods of 2022 — including the warm summer months, when production tends to drop — and offer spot cargoes to the market, when other suppliers could not satisfy Europe’s insatiable thirst for extra LNG supplies.

Most of these spot cargoes were then purchased by various Swiss energy firms eager to capitalize on sky-high spot LNG prices in Spain and across Europe. Meanwhile, utility Naturgy, the only Spanish company with a term supply contract for Yamal LNG cargoes, has also been receiving its contracted volumes.

Supplier Troubles Elsewhere

Meanwhile, the export capabilities of several other suppliers of Spain have been considerably more constrained.

Apart from the US, most of Spain's traditional LNG providers in the Atlantic Basin have been facing serious problems for years to maintain supplies, let alone increase them.

Nigeria, Algeria and Trinidad and Tobago are all suffering from upstream issues, which severely limit their export abilities, while Qatar has prioritized other markets, primarily in Asia, to sell their LNG in recent years, even during the European spot price bonanza last year.

In the case of Algeria — besides the plummeting feed gas levels due to upstream issues — expiring term contracts as well as growing geopolitical tensions with Spain over the situation of Western Sahara also likely contributed to the plunge in LNG supplies into the Iberian country.

Additionally, pipeline gas flows have historically been the main form of gas supply from Algeria to Spain, with LNG rather having a supplementary role.

An Encore in 2023?

The import pattern since the beginning of this year suggests that the market gains by Yamal LNG in Spain will continue in 2023.

Spain has so far received 500,000 tons of LNG from Yamal, Kpler showed, while it only received 60,000 tons from Qatar and zero from Algeria.

So far this year, Yamal's exports to Spain have kept pace with exports from the US and Nigeria (see graph below).

Created with Highcharts 9.0.0SPAIN'S 2023 IMPORTS(million tons)US (31%)US (31%)Nigeria (29%)Nigeria (29%)Russia (28%)Russia (28%)Egypt (7%)Egypt (7%)Qatar (3%)Qatar (3%)Trinidad and Tobago (2%)Trinidad and Tobago (2%)Australia (1%)Australia (1%)Source: Kpler

Daniel Stemler, Madrid

Taiwan’s Fourth LNG Import Terminal Navigating Political Thicket

Taiwan's proposed fourth LNG terminal has run into now-familiar domestic political hurdles.

State-owned Taiwan Power announced Feb. 4 that it will work with the Port of Keelung to draft rules for the operation of LNG carriers that would service a planned 2,600 MW LNG-fueled power plant and terminal complex just west of the port at Taiwan's northern tip.

Taipower aims for the two 1,300 MW units to come on line in 2027 and 2028, respectively, and for the terminal to be completed seven years after project approval. Before the terminal is operational, LNG fuel will initially be supplied by a floating storage and regasification unit. The LNG-fueled units are intended to replace the existing oil-fired Hsiehho power plant.

The project is also under review by the Environmental Impact Assessment Commission of Taiwan's Environmental Protection Administration.

Taiwan was the world's sixth-largest LNG importer in 2022 with 20.4 million tons, according to Kpler, exceeding the 16.5 million ton per year nameplate capacity of its two operating terminals.

Navigating Keelung

Taipower spokesman Wu Chin-chung told Energy Intelligence that researchers at the National Taiwan Ocean University in Keelung had carried out 613 modeling simulations considering harbor and terminal layout, wind, tides and waves under “most rigorous” conditions. He said the results showed that the LNG carriers can maneuver safely in the terminal zone without affecting normal commercial port operations.

In response to widely-reported statements by some shipping company representatives that the terminal plan would “ruin” Keelung Port operations, Wu announced Feb. 4 that after "abundant discussion by expert committee members," Taipower affirmed that it will consult with the Port of Keelung branch of the Taiwan International Ports Corporation to draft “standard operating procedures” on LNG carrier operations if the project passes its environmental review.

Wu related that Taipower had responded to concerns raised by shipping companies and dock workers in a briefing held before a closed door session.

Wu emphasized that entry and exit of LNG carriers would be set to avoid overlap with other vessels and would aim for early morning arrival and departure before sunset.

"If wind conditions exceed over 10 meters per second, LNG carriers will not enter the terminal area, so there is no question of safe mooring operations during typhoon conditions,” the Taipower spokesman added.

A spokesperson for the Port of Keelung told Energy Intelligence that the firm will "respect the resolution of the third party certification committee."

National Referenda Versus Local Referenda

A spokesman for the Executive Yuan — Taiwan's Cabinet — on Feb. 2 confirmed news media reports that the Democratic Progressive Party administration had determined that a petition submitted by civic groups last June for a referendum to call on the Keelung City government to reject the project should be treated as a nationwide and not a local referendum.

This position is in line with the precedent set by a national referendum in late December 2021 on whether to relocate Taiwan's proposed third LNG terminal being built by state-owned CPC next to Taipower`s Datan power plant in Taoyuan City. That initiative was defeated by a 48% to 52% margin of 8.1 million ballots cast.

Wang Hsing-chih of the Protect Keelung Waimushan Task Force told local media that the group was considering launching a drive for a national referendum.

Opposition Keelung City mayor Hsieh Kuo-liang, who took office in late December, said Feb. 3 that his administration would approve a local referendum petition if resubmitted.

Environmental lawyer Chan Shun-kui told Energy Intelligence a vote on the question within Keelung City would be invalid and added that it was unlikely that project opponents would be able to collect the nearly 300,000 valid endorsements needed to put a national referendum issue to voters.

But Chan cautioned that “the situation could still become complicated if there is a stand-off between the central government and the Keelung City government.”
Dennis Engbarth, Taipei

Equinor CEO: Europe's Gas Demand Must Shrink

Equinor's CEO says Europe needs to further reduce its natural gas demand this year and import massive volumes of LNG to refill stocks and offset the loss of Russian pipeline gas.

Mild weather has recently contributed to a steep drop in demand and provided some price relief in Europe, and Equinor expects EU storage facilities to be filled to the bloc’s 90% target by November.

"We see that the gas demand needs to be lower in order to refill at a certain level as Russian gas will be less available in 2023 compared to 2022," CEO Anders Opedal said during a presentation to investors and analysts on Wednesday.

However, Equinor believes that long-term relief will only come to the market beyond 2026, when significant new volumes of gas are expected to come from Russia and Qatar.

"In the meantime the market will remain fundamentally tight and nervous," said Equinor's head of marketing, midstream and processing, Irene Rummelhoff.

Stepping On the Gas

The Norwegian state-controlled producer became Europe's biggest natural gas supplier last year and also shipped more crude oil to its European neighbors as Russia's Gazprom slashed exports following Moscow's invasion of Ukraine.

Equinor ramped up gas production offshore Norway by 8% year on year in 2022 while its combined total oil and gas output slipped by 2%. Total output is expected to climb by 3% this year, however.

Opedal said the company expects its average annual natural gas production to exceed 40 billion cubic meters through 2030. "Our piped gas to Europe has less than one-fifth of the CO2 intensity compared to LNG imports," he added.

By the end of the decade, Equinor expects it oil and gas production to be roughly equal to current levels. It will focus on brownfield developments and subsea tiebacks to maintain steady gas output offshore Norway up to 2030 and even beyond, Opedal said.

Stable Capex

Equinor expects capital spending of $10 billion-$11 billion this year, broadly in line with previous guidance.

But it has raised its annual spending guidance for 2024-26 by $1 billion to $13 billion — to maintain steady oil and gas output and to accelerate its investments in renewable energy.

"We see this as Equinor looking to maximize its existing positions without taking a long-term structural bet on Russia's involvement in the European gas market," said RBC analyst Biraj Borkhataria.

At a $70 Brent oil price, the company would expect to deliver an annual average of $20 billion in cash flow from operations after taxes through 2030. And it estimates an annual return on capital employed above 15% toward 2030.

Equinor announced a special dividend and an additional share buyback that was well received by investors.

It expects to distribute $17 billion to shareholders this year through dividends and buybacks.

The management team said this was based on cash already on the balance sheet and is not sensitive to oil and gas prices.

RBC said this should "allay concerns around Equinor looking at large-scale M&A to drive low-carbon growth."

Tax Bill

Like its European major peers, Equinor's record profits have drawn scrutiny at a time when consumers are facing sky-high energy bills.

Greenpeace said Equinor is "the latest fossil fuel giant to post record profits looted from bill payers pockets while destroying the climate last year. Just 0.13% of its energy production came from renewables in 2022."

The company, which is subject to a 78% tax rate in Norway, said it expects to pay a record $49.9 billion in taxes for 2022.


Equinor Q4'22 Earnings Results
($ million)Q4'22Q3'22%Chg.Q4'21
Revenue34,32143,6335%32,608
Operating Cash Flow4,2676,578-488,151
Net Income7,8979,371>1003,370
Adjusted Income5,7966,715324,397
Exploration & Production Norway*14,59421,079-114,809
Exploration & Production Intl.*676942-2689
Exploration & Production US*474889-19587
Marketing, Midstream & Processing*-5401,452-46-997
Renewables*-86-46NA-38
Liquids Production ('000 b/d)1,0151,012-61,076
Gas Production (MMcf/d)1,0311,009-51,082
Oil and Gas Output ('000 boe/d)2,0462,021-52,158
Ren. Power Generation (GWh)517294-2%526

Deb Kelly, London


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India15.1515.5315.2315.5214.8814.7315.9114.4715.8415.2514.6014.3714.67
Sodegaura, Japan15.9817.1417.1617.2115.9613.1016.8415.0816.7317.5015.3414.6116.10
Zeebrugge, Belgium15.1213.7613.4613.8214.7014.9914.3913.4214.2713.4514.8114.0514.89
Huelva, Spain14.9613.6413.3513.7014.5314.3714.2413.2414.1413.3414.5913.7814.60
Isle of Grain, UK15.6514.2913.9914.3415.2515.5215.0113.9514.8013.9815.3414.5815.42
Everett, US1.360.090.380.131.111.000.010.740.56-0.201.53----
Created with Highcharts 9.0.0($/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 Asia18.0018.210.210.21
SW Europe16.2015.60-0.60-0.60
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.192.402.582.47
NBP, UK (futures)-0.6516.2216.8718.32
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-0.2217.2017.4218.84
Zeebrugge (Belgium)--------
German NCG-0.2315.1415.3716.24
NBP (UK)-0.6016.4517.0518.13
US Markets
US Spot Prices
Sabine Pass, Louisiana0.052.402.352.66
Corpus Christi, Texas----0.002.57
Cove Point, Maryland-0.222.102.323.98
Elba Island, Georgia--2.40----
Nymex Henry Hub Futures
Near Month-0.192.402.582.47
Second Mth-0.192.482.662.54
Third Mth-0.172.652.822.68
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaMar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '23Feb '230255075100125Energy Intelligence