February 10, 2023

WWW.ENERGYINTEL.COM

Inpex to Bring Forward Ichthys LNG Debottlenecking

Inpex aims to bring forward the debottlenecking of its operated 8.9 million ton per year Ichthys LNG project in Australia by one year to the end of this year.

The company said bringing forward the debottlenecking is part of ongoing efforts to execute its medium-term plan, which includes boosting its net oil and gas production to at least 700,000 barrels of oil equivalent per day by 2024.

The Japanese explorer originally planned to debottleneck the facility in Darwin by 4.5% to 9.3 million tons/yr by 2024.

The additional volumes would come on line at a time when the market is experiencing a supply tightness, which is expected to persist until new projects come on line in the middle of this decade.

Cargo Flow

A company spokesman said Inpex expects to ship 11 LNG cargoes every month from Ichthys this year, which would add up to 132 cargoes annually. This compares with 112 LNG cargoes shipped in 2022.

The additional 20 cargoes exceeds the 400,000 tons/yr in new capacity expected from the debottlenecking. This is because Ichthys had a major maintenance shutdown, which lasted more than one month last year while it would have only a 10-day maintenance this year.

The spokesman said no specific buyers have been identified for the additional volumes, but any surplus volumes would in principle be marketed mainly to existing buyers.

The majority of Ichthys’ output is sold under long-term contracts to Japanese buyers including Jera, Tokyo Gas, Osaka Gas, Kansai Electric, Kyushu Electric, Toho Gas as well as other Asian buyers Korea Gas and Taiwan’s CPC.

Created with Highcharts 9.0.0(million tons)ICHTHYS LNG EXPORTSJapanTaiwanChinaSouth KoreaIndonesia2018201920202021202220230246810Source: Kpler

2023 Outlook

Inpex expects an increase in Ichthys production to boost its oil and gas production to 638,900 boe/d in 2023 from 622,200 boe/d in 2022, the spokesperson said.

Higher Ichthys production would help offset the impact of expected lower oil prices in 2023, the firm said. Inpex forecasts benchmark Brent would average $75 per barrel in 2023, down from $99/bbl in 2022.

Higher energy prices and a post-Covid-19 demand recovery lifted Inpex’s net profit for the financial year ending Dec. 31, 2022 to 438.2 billion yen ($3.3 billion), a 97% jump from a year ago.

But it expects net profit would weaken by 38% to 270 billion yen this year as energy prices eased.

Inpex has allocated 71 billion yen this year for oil and gas exploration to be conducted around the Ichthys field.

Abadi Status

Inpex's 9.5 million ton/yr Abadi LNG project in Indonesia is envisaged to provide long-term growth for the company.

The spokesman said negotiations are still ongoing with the Indonesian government so a revised plan of development for Abadi has not been submitted to the Indonesian government.

Inpex wants to finalize its partners and incentives for a carbon capture storage facility. Pertamina is a likely buyer for Shell's 35% stake in the project.
Clara Tan, Singapore

CNOOC Seeks One-Year LNG Supply in Latest Tender

China National Offshore Oil Corp. (CNOOC) has issued a fresh LNG buy tender seeking cargoes for delivery between June 2023 and June 2024, a source close to the matter told Energy Intelligence, though market observers don't see the tender as a harbinger of a Chinese demand surge.

The state-owned LNG buyer did not specify the number of cargoes it seeks, as it will depend on the offer price levels the company receives from interested market participants, the source said. The tender is closing on Monday, Feb. 13.

This is CNOOC's second LNG tender in recent months.

Last December, the company issued a tender looking for cargoes for the February-December 2023 period, but Energy Intelligence understands the CNOOC eventually only awarded four to six LNG cargoes due to the elevated price offers it received from suppliers.

Still Subdued Chinese Demand

Similarly to the December tender, CNOOC’s latest tender is likely aimed at obtaining cargoes for trading and optimization purposes, with demand expected to remain sluggish in China, despite the lifting of strict zero-Covid-19 policies late last year.

“We expect demand recovery would take some time, as you could see the real-estate industry is still bad now, which drags the economy from recovering,” a Chinese trade source told Energy Intelligence.

A Europe-based LNG trader also believes that CNOOC is likely seeking cheap supply for trading.

“I think they are trying to hunt for cheap cargo and if expensive, they'll not buy,” says the trader.

Created with Highcharts 9.0.0(million tons)CHINESE LNG IMPORTSJan '18Jul '18Jan '19Jul '19Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '230246810Source: Kpler

European Relief

Expectations of continued low gas and LNG demand in China certainly offer relief for European buyers that are preparing to refill underground storage tanks across the continent in the summer injection period without Russian pipeline supplies.

Without competition from Chinese firms, a massive spot price spike in Europe becomes less likely, which in turn will help European companies obtain spot LNG volumes at a considerably lower price than last year.
Daniel Stemler, Madrid

Argentina Awards 30-Cargo Buy Tender

Argentina’s state-owned LNG buyer Enarsa has awarded all 30 cargoes it was seeking in its latest tender for the March-August Southern Hemisphere winter season, Energy Intelligence understands.

The tender was awarded to British major BP, Swiss trading house Vitol and French major TotalEnergies, with each of them winning 10 cargoes, LNG trade sources said.

The first 10-cargo block was awarded to BP at a price of $19-$19.50 per million Btu. The second block to Vitol was awarded at a $3.00/MMBtu premium to the European benchmark Dutch TTF hub price, while the third package of 10 cargoes has been allocated to Total at a $4.00/MMBtu premium to the TTF price, a trader said.

Besides these three companies, portfolio player Shell, Qatari state QatarEnergy and Swiss trading houses Gunvor, Trafigura and Glencore also presented offers in the tender. China’s PetroChina declined to participate.

New Terms

Enarsa introduced various changes in the conditions of its latest tender aiming at attracting more market interest and cheaper offers, Energy Intelligence reported last month.

Apart from specifying that companies must present offers for at least a block of 10 cargoes, it also offered to pay 20% of the price of the awarded cargoes up front within five banking days, thus providing a financial reassurance to the interested market participants.

Imports History

Last year, Argentina imported 1.68 million tons of LNG, according to data from commodity analytics firm Kpler, equaling 35 partial cargoes, down from 2.42 million tons in 2021, when a major drought hit the country, reducing its hydro-generation capabilities.

The country is still far from its importing peak back in 2014 (see graph).

The country is also still pursuing the dream of LNG exports of its vast domestic gas resources — research is underway.

Created with Highcharts 9.0.0(million tons)ARGENTINA LNG IMPORTSUnited StatesEquatorial GuineaEgyptNorwayAlgeriaTrinidad and TobagoQatarNigeriaOthers201420152016201720182019202020212022012345Source: Kpler

Daniel Stemler, Madrid

Tanker Arrives at Freeport

The Kmarin Diamond, a 155,000 cubic meter capacity LNG carrier, arrived at a Freeport LNG berth on Friday.

The arrival signals forward progress toward the restart of the 15 million ton per year Freeport LNG export plant.

The plant shut down due to a fire and explosion on June 8 of last year, taking down about 17% of US LNG export capacity.

Freeport LNG Development is expecting a restart by the end of March. Analysts with East Daley said Friday they anticipate the facility will restart this month and ramp to full capacity by the end of April.

Regulatory OK

The plant has received a series of regulatory go-aheads but arguably has many more left to go.

The tanker arrival follows regulatory progress earlier this week when the US Federal Energy Regulatory Commission granted Freeport permission to return LNG Loop 1 and Dock 1 for ship loading to service.

But permission “to place the liquefaction trains including rundown piping to tanks, or other remaining facilities back into service” will require additional regulatory approvals, including by the US Pipeline and Hazardous Materials Safety Administration (PHMSA) and the US Coast Guard.

Feed Gas Flows

Meanwhile, feed gas continues to enter the plant, according to Refinitiv data.

Feed gas flows have now been active for about 16 days.

The flows will eventually lead to enough LNG having been loaded into the just-arrived tanker to constitute what amounts to a commissioning cargo to be sold on international markets.

New Market

Before the June 8 explosion, as much as 80% of Freeport's export volumes had been streaming to Europe in the aftermath of Russia's war-related pipeline gas curtailments. As a result, the explosion in June sent European gas prices soaring while deflating US prices as Freeport gas stayed at home.

Market watchers are tracking Freeport's return carefully, but the terminal is returning to a much quieter market with significantly lower gas prices on both sides of the Atlantic.

Barring any further delays beyond this spring, the plant is very likely to return to service in time to help ease European concerns about gas supply availability during the 2023-24 winter.
Everett Wheeler, Washington and Michael Sultan, Washington


In Brief

Gazprom Touts Gas as Transport Fuel

Gazprom is seeking government financial support for the development of a market in Russia for natural gas as a transportation fuel as it seeks ways to offset the loss of its main export market in Europe because of the war in Ukraine.

The state-run gas giant is proposing a government program to develop such a market in 2024-30, focusing in particular on the mass production of ships and trains fueled by natural gas, the Izvestia newspaper reported on Friday.

The newspaper said Gazprom Chairman Viktor Zubkov had sent a letter with the proposal to President Vladimir Putin in late January.

Russia already has a similar government program for 2020-24, but Gazprom's proposed follow-on program seeks broader support which could run to over 30 billion rubles ($410 million) a year, Izvestia reported.

Gazprom has long argued the case for using natural gas as a transportation fuel, but the matter has become more urgent with the collapse of its pipeline gas exports to Europe.

Russia is seeking to increase consumption of natural gas in the transportation sector to 10 billion-13 billion cubic meters per year by 2035, from around 1.5 Bcm/yr at present. In 2018, the sector consumed only 680 MMcm.

Gazprom is also seeking to increase and diversify its pipeline gas exports to Asia, including Central Asia.

CEO Alexei Miller met on Thursday with the energy ministers of Kazakhstan and Uzbekistan to discuss gas cooperation, the company said.
Staff Reports


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India15.3415.7315.4215.7115.0714.9216.1014.6616.0315.4414.7914.5714.87
Sodegaura, Japan16.1717.3317.3517.4116.1613.2817.0315.2716.9217.7015.5314.8016.29
Zeebrugge, Belgium15.7014.3414.0414.4015.2815.5814.9714.0014.8514.0315.3914.6315.47
Huelva, Spain15.4314.1113.8214.1615.0014.8414.7113.7114.6013.8115.0614.2515.07
Isle of Grain, UK16.1314.7614.4614.8115.7316.0015.4914.4315.2814.4515.8215.0615.90
Everett, US1.440.160.450.211.191.080.010.820.64-0.131.60----
Created with Highcharts 9.0.0($/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 Asia18.0018.410.280.40
SW Europe16.2016.070.79-0.13
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.082.512.432.41
NBP, UK (futures)+0.3616.2215.8617.83
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-0.0216.8716.8918.71
Zeebrugge (Belgium)--------
German NCG-0.0114.9915.0016.46
NBP (UK)0.7816.8216.0418.57
US Markets
US Spot Prices
Sabine Pass, Louisiana-0.032.372.402.40
Corpus Christi, Texas-0.102.132.23--
Cove Point, Maryland0.002.072.073.10
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month0.082.512.432.41
Second Mth0.122.612.492.48
Third Mth0.122.782.662.63
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaMar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '23Feb '230255075100125Energy Intelligence