February 9, 2023


Turkey Postpones Gas Hub Summit

Turkey has postponed a planned gas hub summit until Mar. 21-22 due to the deadly earthquake earlier this week, industry sources tell Energy Intelligence.

Ankara is planning a gas hub that would trade gas from various sources, including Turkey’s own production, pipeline gas from regional exporters like Russia, Azerbaijan and Iran, and LNG that would come to Turkish import terminals.

Turkey wants to complete the first transaction at its hub this year, as neighbor and rival Greece also plans a gas hub.

In January, Turkey’s state gas importer Botas signed a 10-year deal to buy 1 million tons per year of LNG from Oman LNG starting in 2025, Turkey’s first such term deal with a Mideast producer, and signed a 13-year deal to supply regasified LNG from its import terminals to Bulgaria.

Turkey initially planned to hold a summit to discuss the hub with potential suppliers and buyers in Istanbul on Feb. 14-15.

A draft agenda listed speakers from several gas importing countries in Europe, including Bulgaria, Hungary, Romania and Italy.

Officials from Russia, which floated the idea of the Turkey gas hub last year in a bid to keep its role in the gas trade with Europe despite the war in Ukraine, were not on the draft list of speakers, although a Russian delegation is understood to have been invited. Russia and Turkey have yet to agree on key pricing principles for the gas trade at the proposed hub, sources say.

The earthquake that hit Turkey and Syria earlier this week can postpone some work on the gas hub, but the project will be implemented, the Kremlin spokesman Dmitry Peskov said Thursday.

“This cannot be a priority for Turkey now, we understand this,” Peskov said. “That is why this process [of creation of the gas hub] can be moved to the right a little, but in general this will not affect the implementation of the plans,” he added.
Staff Reports

EU Looks to Extend Mandatory Cuts in Gas Demand

EU member states are expected to hold talks later this month about extending mandatory cuts in gas consumption, which are set to expire at the end of March.

The talks would come at a time when lower gas prices are stoking industrial demand for gas, which could throw the European gas market off balance again.

Member states agreed last summer to cut their gas demand by 15% between Aug. 1 and Mar. 31, 2023, relative to their average consumption in 2017-21.

The move was meant to help fill storage facilities and make sure the bloc had enough gas for winter heating after Russia slashed pipeline flows against the backdrop of the war in Ukraine.

A Dutch diplomat told Energy Intelligence that extending the regulation is on the EU's radar.

"I believe it is on the agenda. It is certainly something that the Netherlands will advocate," the diplomat said.

EU energy ministers are likely to discuss extending the cuts at an informal meeting in Stockholm on Feb. 27-28, the diplomat added.

Germany is also in favor of extending the regulation "as long as it remains necessary — possibly until spring 2024," a German diplomat told Energy Intelligence.

European Commission spokesperson Tim McPhie told Energy Intelligence that the commission may propose extending the demand cuts after conducting a review.

He noted that the regulation which mandated the cuts required the commission to conduct a review of EU gas supply by May 1 and report its main findings to the bloc's energy ministers.

"Based on that report, the commission may in particular propose to prolong the period of application of this regulation," McPhie said.

Crucial Measure

A reduction in demand is seen as a crucial measure to help prepare Europe for next winter, given uncertainty about the level of pipeline gas flows from Russia and limited increases in LNG supply this year.

Brussels-based think tank Bruegel has recently estimated that the EU will need to cut demand by 13% — compared to the five-year average — between February and Oct. 1 of this year to ensure that EU gas storage is filled to the required 90% of capacity by Nov. 1.

That estimate is based on Russian pipeline gas flows continuing at the current rate of around 60 million cubic meters per day and temperatures remaining in the normal range.

If Russian flows via Ukraine stop, the EU will need to cut demand by 17%, and in a scenario where flows via the TurkStream pipeline also cease, demand will need to be reduced by 20%, Bruegel suggests.

Industrial Demand

In 2022 EU gas demand was 12% lower than the 2019-21 average and reductions were largely achieved by industry and households cutting their consumption by 15%, according to Bruegel. In contrast, gas-fired power demand fell by only 2%.

Keeping a lid on industrial gas demand will be key to achieving any reduction targets going forward, but there are signs that industrial demand is recovering as gas prices continue to fall.

The front-month Dutch TTF gas futures contract closed at around €53.7 per megawatt hour on Feb. 8, marking a 17-month low.

SEB bank suggests that industrial players may move to lock in prices at current levels, making their gas demand less sensitive to prices.

Industrial gas demand in Germany, the EU's industrial powerhouse, increased each week in January and stood at 1,988 gigawatt hours per day in the week of Jan. 23-29, up 8.9% from the previous week, according to German networks agency Bundesnetzagentur (BNetzA).

Nevertheless, German demand remained below the corresponding 2022 levels.

In Italy, industrial gas demand in January was 904 million cubic meters, up 13% from December but 17% lower than in January 2022, according to provisional data from Italian grid operator Snam.

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

Eric Thorp, London

Russia, China Sign Intergovernmental Gas Deal

Russia and China have signed an intergovernmental agreement on pipeline gas supplies via the "Far Eastern Route," according to a related document prepared by the Russian Energy Ministry.

The document mentions that the intergovernmental agreement was signed by both countries on Jan. 31.

The agreement defines key parameters of a 10 billion cubic meter per year gas supply contract signed by Russia's Gazprom and China National Petroleum Corp. (CNPC) in February 2022.

It gives state-controlled gas giant Gazprom the exclusive right to supply gas to China via the cross-border section of the Far Eastern Route.

The cross-border section will stretch from the Sakhalin-Khabarovsk-Vladivostok pipeline and run across the Ussuri River near the Russian border town of Dalnerechensk, which lies north of Vladivostok.

It also notes that Russia and China are committed to supporting the use of their national currencies for payments under the contract.

The Far Eastern Route contract is the second gas supply deal between Russia and China, following the 38 Bcm/yr Power of Siberia contract signed in 2014.

Supplies via Power of Siberia started in late 2019, but it is not yet clear when supplies via the Far Eastern Route will start.

The contract is part of Russia's plans to expand its gas exports to Asia — plans which have become increasingly important for Moscow after its invasion of Ukraine almost a year ago.

The war led to a series of international sanctions against Moscow and the loss of most of its traditional pipeline gas exports to Europe.

China remains central to Gazprom's diversification efforts. Russia is also talking to Beijing about a 50 Bcm/yr contract with CNPC to export gas via the proposed Power of Siberia 2 pipeline and a transit section in Mongolia dubbed Soyuz Vostok.

Apart from monetizing new gas resources in East Siberia, Power of Siberia 2 would also take gas from West Siberian fields, which have traditionally supplied Europe and Russia's domestic market.

Gazprom is also looking for opportunities to increase domestic gas consumption and find new markets in Asia, including Central Asia.

It is also keen to keep exporting pipeline gas to Europe via a proposed gas hub in Turkey.

Turkey had been planning to hold a summit in Istanbul on Feb. 14-15 to discuss the hub with potential gas suppliers and buyers.

However, sources tell Energy Intelligence that the summit has been postponed until the second half of March because of the deadly earthquake that hit Turkey and Syria earlier this week.

Russia's Eastern Gas Pipelines


Staff Reports

Montenegro and US Discuss Yet Another Balkan Import Terminal

Government officials from Montenegro and the US have agreed to take concrete steps toward the construction of an LNG import terminal in the Balkan country, according to a statement from Montenegro’s finance ministry.

Any such regasification project will likely face industry questions about high current LNG prices and Montenegro's small domestic gas market, but wartime competition with Russian gas in the Balkans could make the project a reality despite those factors.

Potential Cooperation

On an official visit to Washington DC, Montenegrin finance minister Aleksandar Damjanovic and representatives of the US State Department discussed economic relations between the two countries, with emphasis on potential cooperation in the energy sector.

In this regard, the parties talked over the possibility of developing an LNG import terminal in the port of Bar in southern Montenegro, with the view to position the country as a “kind of energy hub” in the western Balkans.

The officials also discussed the possibility of US firms participating in the project construction.

Details on the potential size and start up date of the terminal were not mentioned in the ministry’s statement.

Adriatic LNG Bonanza

Montenegro is certainly not the only country in the region that is looking to bet big on LNG.

LNG import projects have sprung up in other Balkan countries along the Adriatic Sea in recent years as countries in the region search for alternative supply options to Russian pipeline gas.

Croatia’s 2.9 billion cubic meters per year Krk floating LNG terminal began operation in 2021, with the government now looking to double the capacity of the terminal, as regional energy companies rush to wean themselves off Russian volumes through LNG imports.

In Montenegro’s southern neighbor Albania, US developer Excelerate Energy is developing the Vlora LNG import terminal, with the plan to sell gas into the Albanian market. In cooperation with Italian grid operator Snam and state Albanian Gas Service (Albgaz), the US firm is also considering the construction of a pipeline to connect the planned Vlora terminal with the country’s gas system.

Offshore Drilling

Montenegro has also offered concession contracts for exploration of its offshore blocks to foreign companies.

Italian major Eni and Russian LNG exporter Novatek carried out exploration drilling at Block 4118-5 offshore Montenegro in 2021.
Daniel Stemler, Madrid

Taiwan’s Energy Mix Continues Shift Toward LNG

Taiwan's use of LNG for power generation has nearly overtaken its use of coal for power generation as the country attempts to go carbon neutral while getting rid of its nuclear power fleet.

Taiwan Bureau of Energy (BOE) data for all of 2022 showed that coal retained its leading position in Taiwan power generation with 42.1% of the 288,148 gigawatts per hour generated, but this figure was down from 44.3% the previous year. However, the share of LNG–fueled electricity continued to rise, despite political hurdles, from 37.2% in 2021 to 38.8% last year, according to statistics released this week.

Imports of LNG rose 2.7% to 19.96 million tons last year from 19.43 million tons in 2021. Top suppliers included Australia with 36.9%, Qatar with 26.1% and the United States with 10.5%, according to the BOE.

Taiwan was the world's sixth largest LNG importer in 2022, according to Kpler.

Renewable Shares

Taiwan's renewables topped nuclear for the first time in 2022 with 8.3%, compared to 6% in 2021, while the nuclear power share slipped from 9.6% in 2021 to 8.2% last year.

Within renewables, solar rose from 2.7% of 290,964 GWh in 2021 to 3.7% in 2022, wind power rose from 0.8% to 1.2%, hydropower rose from 1.2% to 2% and waste processing from 1.2% to 1.3%.

However, total power generation declined nearly 1%. in 2022 after rising 3.9% in 2021 and 2.1% in 2020.

Renewables topped 10% in power generation in December, thanks to a boost from offshore wind.

Government Plans

The energy transition plan adopted by the left-of-center Democratic Progressive Party administration of President Tsai Ing-wen aims to complete the phase out of nuclear power by May 2025.

Renewable power sources are expected to account for over 15% of total power generation in 2025, while the initial goal set in 2017 for a 20% share should be realized by the fourth quarter of the following year, according to Ministry of Economic Affairs officials.

LNG is expected to account for 50% of power generation in 2025 with coal at less than 30%.

Government plans for the “2050 net carbon neutrality transition” call for the share of renewables to rise to 30% by 2030, with LNG at 50% and coal at 20%.
Dennis Engbarth, Taipei

In Brief

Tortue Phase 2 Concept Debated

British major BP and US upstream player Kosmos Energy continued negotiations with the governments of Senegal and Mauritania regarding the final concept of the second phase of the Greater Tortue Ahmeyim LNG export project, with formal sanctioning likely around year-end 2023.

A final investment decision on Phase 2 of the project was initially expected during the second half of last year.

However, the rapid shift of market conditions following Russia’s invasion of Ukraine and resulting jump in European demand for alternative supply options spurred discussions between the parties to potentially increase the size of the second phase.

“It’s important that we’ve got the right project that enables us to fully access that opportunity," said Kosmos CEO Andrew Inglis last year.

Energy Intelligence understands that following the evaluation of alternative options — including an onshore solution with capacity of up to 5 million tons/year — the final scale of Phase 2 is likely to be between 2.5 million and 3 million tons/yr.

A definitive decision on the final concept of Phase 2 is expected in the current quarter, followed by a front end engineering and design contract award.

As previously planned, Phase 2 will utilize the offshore infrastructure of the 2.5 million ton per year Phase 1, which is set to begin operation toward the end of this year.
Daniel Stemler, Madrid

Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India15.0615.4415.1415.4314.7914.6415.8214.3815.7515.1614.5114.2914.59
Sodegaura, Japan15.9017.0517.0717.1215.8813.0116.7515.0016.6417.4215.2514.5316.01
Zeebrugge, Belgium14.7713.4213.1213.4714.3514.6514.0413.0813.9313.1114.4613.7114.54
Huelva, Spain14.5813.2712.9713.3214.1513.9913.8612.8713.7612.9614.2013.4014.22
Isle of Grain, UK15.2713.9113.6113.9614.8815.1414.6313.5814.4313.6014.9614.2115.04
Everett, US1.320.040.330.091.060.960.010.690.52-0.251.48----
Created with Highcharts 9.0.0($/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 Asia18.0018.12-0.090.12
SW Europe16.2015.22-0.42-0.98
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.032.432.402.46
NBP, UK (futures)-0.3715.8816.2517.38
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-0.2616.9817.2418.06
Zeebrugge (Belgium)--------
German NCG-0.1914.9115.1116.14
NBP (UK)-0.4216.0616.4817.39
US Markets
US Spot Prices
Sabine Pass, Louisiana0.002.402.402.66
Corpus Christi, Texas2.232.230.00--
Cove Point, Maryland-
Elba Island, Georgia----2.23--
Nymex Henry Hub Futures
Near Month0.032.432.402.46
Second Mth0.022.492.482.52
Third Mth0.022.662.652.66
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaMar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '23Feb '230255075100125Energy Intelligence