February 13, 2023


EU Seeks More Egyptian LNG Despite Demand Concerns

The EU is seeking to maintain high volumes of LNG from Egypt despite growing indications that the country could suffer another gas crunch in the near future. Both Brussels and Cairo are also looking to a potential enlargement of the East Mediterranean Gas Forum (EMGF) to include North African states.

EU Energy Commissioner Kadri Simson told the EGYPS conference in Cairo that the EU recognized “Egypt’s role growing into a regional gas hub” and outlined that the new EU Energy Platform would be launching its “joint purchasing scheme covering about 13.5 billion cubic meters of gas."

LNG markets would be the main target of the broad EU scheme, Simson said, and referring to Egypt, added that “this is a significant opportunity to strengthen our energy ties further.”

Created with Highcharts 9.0.0(million tons)EGYPT'S LNG EXPORTSEuropeAsiaAmericas2016201720182019202020212022202302468Source: Kpler

Demand Concerns

However, Egyptian domestic gas demand is climbing steadily, government figures show, meaning that East Mediterranean gas sources in Israel and Cyprus could become increasingly vital for Egypt to maintain its role as a gas exporter and meet its domestic commitments. Egyptian Sales gas production climbed from 6.4 billion cubic feet over fiscal year 2020-21 to 6.7 Bcf over 2021-22 but consumption has risen steadily from 5.7 Bcf over 2017-18 to 6.08 Bcf over 2021-22.

Egyptian Petroleum minister Tarek el-Molla told the same EGYPS conference that Egypt expects to produce about 7.5 million tons of LNG this year in line with its 2022 production when he said it exported 80% of its LNG to Europe. He added that both LNG plants at Idku and Damietta on the Mediterranean coast were operating at less than full capacity and could be expanded.

“We haven’t yet reached 100% capacity [at the] facilities,” he said.

Egyptian LNG exports to Europe have jumped since the war in Ukraine with European and Asian destinations repositioning themselves, data from maritime intelligence firm Kpler show. Volumes to Europe leapt from 31% of total exports in 2021 to 71% last year while Asian cargoes dropped from 69% to 28%.

Europe’s provisional LNG supply deal with Egypt, signed in June 2022, also covers Israel and efforts are ongoing to boost Israeli gas exports to Egypt. These include Israel National Gas Lines (IGNL) laying a new offshore pipe between the Israeli port of Ashkelon to El-Arish in Egypt and a pipe link from Israel’s grid to the Arab Gas Pipeline in Sinai. But neither project is completed yet, an Israeli industry source confirmed late last month.

The East Med’s gas export prospects are also waiting on what concept option US Chevron will select to develop a second phase of its 22 trillion cubic foot Leviathan field which may or may not be combined with its 4 Tcf Cypriot Aphrodite gas field.

Enlargement and Decarbonization

El-Molla told the conference that in the next six years he expected to see more countries involved in the existing EMGF and that its remit would be extended to include “all types of energy” including renewables and hydrogen.

Speaking on the same panel, EMGF Chairman Osama Mobarez added that methane emissions, carbon, capture and storage and hydrogen would all be reviewed by the forum which would aim to encourage private sector and state involvement. Although he insisted that gas would “be needed beyond two decades”.

“Why not North Africa [states] in an East Mediterranean Energy Forum,” Nasser Kamel, secretary general of the Union for the Mediterranean told delegates. “If Europe is serious about [carbon] neutrality the southern shore of the Mediterranean as a hub is needed.”
Tom Pepper, Cairo

Lack of Qualified Staff is Slowing Freeport LNG's Comeback

The restart of liquefaction Trains 1 and 2 of the 15 million ton per year Freeport LNG export plant is hindered by staffing issues, Energy Intelligence understands.

Following the prolonged shutdown of the facility, as a result of a fire and explosion on Jun. 8 last year, the plant’s Train 3 has resumed operation and reached full production rate at 9:00 AM (local time) on Feb. 13, according to a source.

Freeport progress toward restart is of keen interest to the US domestic gas market as well as to European buyers looking toward a storage rebuild without Russian gas.

Lack of Staff

But the restart of the plant's other two liquefaction trains could be slowed by the lack of necessary qualified staff.

“There are only a handful of panel operators qualified for restarting the liquefaction units, and they are all busy with stabilizing Train 3. Meaning that putting T1 and 2 back online won't be as straightforward, even if they are ready,” the infrastructure source tells Energy Intelligence.

The source said that although the plant operator complied with the mandate of the US Federal Energy Regulatory Commission (FERC) to increase its staff by 30%, “the newly hired is not allowed to touch anything yet,” as they are still in training.

“You need at least two years to train a good panel operator,” the source added.

Full Restart Request

In a request to FERC on Feb. 13 for a full Phase 1 restart of commercial operations — Phase 1 includes all three existing liquefaction trains.

Freeport LNG said that it has performed a full pre-startup safety review (PSSR) of Train 2, identified and completed the necessary corrective work to safely restart the unit and is ready to begin the process to restart Train 2.

“Soon, we will perform a similar PSSR of Train 1 and complete any necessary corrective work in order to position Train 1 to be safely restarted,” Freeport LNG said.

First Loadings

The 155,000 cubic meter Kmarin Diamond, under-charter to British major BP, lifted a partial cargo from the plant on Feb. 11, and its most recent automatic identification system (AIS) broadcasting signal showed Port Said as destination, indicating that the vessel will sail through the Suez Canal to deliver the cargo to Asia, according to ship-tracking data from Kpler.

The same source said that the vessel was loaded with leftover LNG that had been sitting in Freeport’s tanks since last June, hence it could only be loaded partially.

Following the loading of the Kmarin Diamond, the 180,000 cubic meter Prism Agility has berthed at the plant on Sunday, Feb. 12, Kpler showed.

However, the source expects that it will take several days to load the vessel.

“Now that T3 is at full rate, it can produce roughly 14,000 tons per day or 1250 cubic meters per hour, so still a few days to fill up the Prism Agility,” the source tells Energy Intelligence.
Daniel Stemler, Madrid

Japan Could Start Taxing Fossil Fuel Imports

Japan's Cabinet has approved a green transformation plan that includes a levy on LNG and other fossil fuel imports starting in fiscal 2028.

Prime Minister Fumio Kishida's Cabinet gave final approval to the 150-trillion yen (US$1.14 trillion) plan after finalizing the "Basic Policy for the Realization of Green Transformation" [GX Basic Policy] on Feb. 10 after a month long period of public comment that ended Jan. 22.

The plan is a mixed bag for the country's LNG consumption, which has been on a general decline since a 2014 peak near 90 million tons (see graph).

Created with Highcharts 9.0.0(million tons)JAPAN'S LNG IMPORTS2008200920102011201220132014201520162017201820192020202120220102030405060708090100Source: Kpler

Carbon Content Levy

The Cabinet, led by Kishida's Liberal Democratic Party (LDP), sent a draft implementation bill for the GX Basic Policy, drafted by Japan's Ministry of Economy Trade and Industry (Meti) in collaboration with other ministries, to the National Diet.

If approved, the bill would give the government a mandate to set up a "GX Promotion Agency" under Meti, devise a "growth oriented" carbon pricing system, and introduce a carbon content levy on fossil fuel wholesale importers and power companies in fiscal 2028. An emissions trading system would follow by fiscal 2033.

Officials of Meti`s Agency for Natural Resources and Energy floated the notion of a carbon levy on fossil fuel imports in a presentation on GX implementation measures to a Meti advisory subcommittee Dec. 14.

Article 11 of the draft bill says that the amount of the levy will be determined by multiplying the CO2 emissions per unit of crude oil or other fuels by a coefficient specified by a government ordinance according to the classification of the fossil fuel.

Power Generation Mix

Only minor changes appeared to have been made to the draft GX Basic Policy including assurances, reportedly requested by the LDP`s coalition partner New Komeito, that nuclear power usage will be based on the Sixth Basic Energy Plan ratified in October 2021. The latter plan requires the share of nuclear power to rise from 6.9% in fiscal 2021 to between 20%-22% by fiscal 2030.

The Sixth Basic Energy Plan, which the new GX policy does not change, aims for renewables' share of electricity to rise to 36%-38% by fiscal 2030, coal to decline to 26%, LNG to decline to 27%, oil to 2% and hydrogen/ammonia to account for 1%.

With regard to LNG policy, the GX Basic Policy`s section on securing basic resources expanded the scope of government affiliated support for private companies involved in securing upstream and midstream interests in development and production by expressly listing the Japan Bank for International Cooperation as well as the Japan Energy and Metals National Corporation as responsible for bolstering national support for securing LNG supplies.

The final version of the GX Basic Policy also granted official approval to Japanese investors to maintain interests in the Sakhalin 1, 2 and Arctic LNG-2 projects in Russia “due to their importance for energy security” despite global sanctions against Moscow in the wake of Putin`s invasion of Ukraine Feb. 24, 2022.
Dennis Engbarth, Taipei

Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India15.3715.7615.4515.7415.1014.9516.1314.6916.0615.4814.8214.6014.90
Sodegaura, Japan16.2017.3617.3817.4416.1913.3117.0615.3016.9517.7315.5614.8316.32
Zeebrugge, Belgium16.6015.2314.9215.2816.1816.4715.8614.8915.7414.9216.2915.5216.37
Huelva, Spain14.2612.9512.6613.0013.8313.6813.5412.5513.4412.6513.8913.0813.90
Isle of Grain, UK14.9513.5913.2913.6414.5614.8214.3113.2614.1113.2914.6413.8914.72
Everett, US1.25-
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback12. Sep26. Sep10. Oct24. Oct7. Nov21. Nov5. Dec19. Dec2. Jan16. Jan30. Jan13. Feb10203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia18.0018.440.030.44
SW Europe16.2014.90-1.09-1.30
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.112.412.512.46
NBP, UK (futures)-0.6715.5516.2217.72
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-0.3216.6216.9418.48
Zeebrugge (Belgium)--------
German NCG-0.3314.6014.9216.21
NBP (UK)-1.0915.7316.8217.96
US Markets
US Spot Prices
Sabine Pass, Louisiana0.052.422.372.19
Corpus Christi, Texas----2.13--
Cove Point, Maryland-
Elba Island, Georgia--2.42----
Nymex Henry Hub Futures
Near Month-0.112.412.512.46
Second Mth-0.112.502.612.54
Third Mth-0.092.692.782.67
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaMar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '23Feb '230255075100125Energy Intelligence