February 15, 2023

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EU Seeks April Launch of Joint Gas Buying Platform

The EU is inviting US LNG producers to engage in the bloc's joint gas procurement platform, for which it is targeting an April launch.

European Commission Vice President Maros Sefcovic chaired a round table meeting in Washington on Tuesday, which was attended by major European gas supply companies and US LNG producers.

The commission organized the meeting to help develop closer relations with companies in the US to help secure sufficient gas supplies for Europe ahead of next winter.

The EU has set a target of filling gas storage facilities to 90% of capacity by Nov. 1, and the task is expected to be challenging because of a sharp fall in pipeline gas imports from Russia.

After the meeting, Sefcovic spoke with representatives of two think tanks, the Atlantic Council and the Center for Strategic and International Studies (CSIS), and confirmed that the commission is hoping to launch the joint gas purchase platform by April.

Previously Sefcovic had said only that the target was to make the first joint gas purchase "well before summer."

"We would like to come with the official public procurement process to the global market before the next filling season, so I am talking mid-April. That is a very tight schedule," he said at a CSIS event on Wednesday.

The commission wants to wrap up the aggregation of EU countries' gas demand within the next two to three weeks.

Member states are obliged to aggregate demand for gas volumes equivalent to 15% of their storage obligations, but joint purchases are voluntary.

Major Players Interested

Sefcovic confirmed at the CSIS event that major energy companies in Europe are interested in the new platform, but said they have signaled concerns about compliance and the potential implications of joint purchases from a competition and antitrust perspective.

He also suggested that the platform would deliver benefits in particular for smaller energy-intensive companies in some of the smaller EU member states.

"We have to do a good job in showing that with a common platform you get a better deal than if you are acting alone," he said.

Sefcovic also confirmed that Ukraine and Moldova have expressed an interest in buying gas through the platform.

Wrapping up demand aggregation by mid-March and making the platform operational by April will be key to attracting interest, he said, warning that delays could cost billions of euros.

He noted that the EU's rush to fill storage last summer after Russia reduced gas flows had helped push European gas prices to record highs of over €300 per megawatt hour and that some storage operators had purchased gas without hedging.

How It Will Work

Asked how the contracting for joint gas purchases will work, Sefcovic said there would be two modes — one using the services of a "central purchaser” and another in which companies would use an agent to negotiate on their behalf.

He hinted that joint purchases could be concluded under long-term contracts, which US LNG players have been calling for in order to underpin new liquefaction projects.

"What I hear a lot is long-term contracts. We are ready for them," he said.

He said there was a particular need to take care of small EU member states and small producers in industries such as ceramics or fertilizer "who do not have the creditworthiness with suppliers like Sempra."

"So we need to bring the value-add of the EU to aggregating the demand and making sure creditworthiness is good enough for the suppliers and combine it with long-term contracts," he added.

For more coverage of the Ukraine crisis, visit Ukraine Crisis: Energy Impact >
Eric Thorp, London and Emily Meredith, Washington

Germany’s Brunsbuttel Terminal Receives First Full LNG Cargo

The Brunsbuttel LNG terminal has received its first full LNG cargo, sourced from the United Arab Emirates (UAE) and delivered by the Abu Dhabi National Oil Company (ADNOC), German utility RWE confirmed on Wednesday.

The cargo was delivered onboard the Ish LNG carrier and marks the first cargo to arrive at the Hoegh Gannet floating storage and regasification unit (FSRU) which arrived at the German port on Jan. 20.

The LNG volumes will be regasified and fed into the German grid from the end of February as part of the commissioning of the FSRU, RWE confirmed.

“After the arrival of the floating terminal in mid-January, the first LNG delivery from Abu Dhabi is the next important step. The development of the LNG supply infrastructure in Germany continues to make rapid progress,” Andree Stracke, CEO of RWE Supply & Trading said in a statement.

RWE finalized an offtake deal at the end of last year with US-based Sempra for about 2.25 million tons per year from the proposed Port Arthur, Phase 1 export project in Texas.

Import Capacity Buildout

The Hoegh Gannet is the third FSRU in Germany to receive a commissioning cargo after Uniper’s Wilhelmshaven terminal and Deutsche ReGas' LNG terminal at the Baltic Sea port of Lubmin received LNG.

Europe’s largest gas consumer could have a total of six floating LNG terminals — with a combined import capacity of approximately 22 million tons per year — online before the end of 2023. The country is racing to increase regasification capacity to replace lost Russian piped gas volumes.

After having started 2022 with no LNG import capacity at all, Germany has now imported a total of about 570,000 tons of LNG between December 2022 and February 2023, so far, according to Kpler.

The source countries for the cargoes include the US, Spain, Angola and the UAE.

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

Spain’s Naturgy Loses Big on LNG Hedging

Spanish utility Naturgy saw its international LNG business suffer hedging losses in 2022, resulting in over €140 million (US$159 million) in losses for the segment, the utility said in its full-year 2022 results.

Naturgy’s overall net income rose by 35.8% year on year to €1.6 billion in 2022, while its overall 2022 earnings before interest, taxes, depreciation, and amortization (Ebitda) increased from €3.5 billion in 2021 to well-over €4.9 billion last year.

LNG Business in the Red

It was night and day for the utility’s international LNG business, which saw gains in the first half of last year followed by losses in the second half of last year.

During the first-half of 2022, Ebitda of the utility’s international LNG division stood at €436 million, but in the second-half of the year, it accumulated €580 million in losses, putting full-year Ebitda for the segment at - €144 million.

“In international LNG, the results have been negatively affected, as the company has reassessed the effectiveness of our hedges, due to the decoupling of the TTF index with the physical sales price,” explained Jon Ganuza, Naturgy’s global head of control during the earnings presentation.

Ganuza added that the reassessment is mostly due to the company's hedges for 2023.

The Spanish utility’s LNG business was not the only one to underperform during the second-half of 2022 due to hedging issues. Top portfolio player Shell experienced similar problems in the third quarter with its "less-effective" hedging program weighing on its LNG price realization.

LNG at the Helm

According to Naturgy, Spain imported 318 terawatt hours or 21 million tons of LNG (28.6 billion cubic meters of gas) last year, 29% of which had been delivered by the company.

On pipeline import side, Spain received around 128 TWh or 11.5 billion cubic meters of gas, with Naturgy having a 52% share in the overall imports.

The largest chunk of the utility’s LNG volumes came from the US, where it has long-term offtake contracts at both the Sabine Pass and Corpus Christi LNG export plants.

Its contract with Russia’s Yamal LNG project for 2.5 million tons per year has been repeatedly called into question in Spain, following Russia’s invasion of Ukraine.

Spanish imports from the 17.4 million ton per year Yamal LNG plant jumped by 1.17 million tons (or 47%) year on year to 3.66 million tons in 2022, according to data from maritime intelligence firm Kpler.

However, the increase was driven by spot cargo purchases from the Russian facility, primarily by Swiss commodity trading houses.

Energy Intelligence understands that Naturgy only imported its contracted volumes from Yamal into Spain.
Daniel Stemler, Madrid


In Brief

Russian Gas Transit via Ukraine Increases by 15%

Russian gas flows to Europe via Ukraine increased by another 15% on Wednesday, although they are still lower than at the end of last year.

The daily transit nomination rose to 35.3 MMcm on Wednesday from 30.8 MMcm on Tuesday, according to Gazprom, Russia’s sole pipeline gas exporter.

The Ukrainian transit previously increased by 20% on Feb. 1 to 29.4 MMcm from late-January levels, as the new month changed the price situation on the market — Gazprom’s hub-linked long-term contract prices decreased, making its gas more attractive to the buyers than in January.

In January, Gazprom’s prices remained high, reflecting higher spot prices of the last months of 2022, while spot prices decreased significantly on warm weather, high stocks and LNG inflow. As a result, the Ukrainian transit fell sharply in the beginning of January from the levels of around 42 MMcm/d that had been quite stable since May 2022.

Apart from Ukraine, Gazprom now has only one route for gas exports to Europe — the onshore continuation of the Turk Stream gas pipeline to Turkey, which supplies southern and central Europe.

Gazprom’s combined exports to Europe via the two routes averaged some 66 MMcm/d in the first half of February, up 4% from the same period of January and 14% from the daily average for the full month of January.

Compared with the same period of last year, exports fell 79% in the first half of February, reflecting deterioration of Russia’s gas relations with Europe following the invasion of Ukraine on Feb. 24 last year.

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


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India12.6213.0012.7112.9912.3612.2213.3711.9613.3012.7312.0911.8712.16
Sodegaura, Japan13.4714.6114.6314.6813.4610.6414.3212.5914.2114.9712.8512.1313.59
Zeebrugge, Belgium16.3114.9514.6415.0015.8916.1915.5814.6015.4614.6316.0015.2416.08
Huelva, Spain14.0912.7812.4912.8313.6613.5113.3812.3813.2712.4813.7212.9113.73
Isle of Grain, UK15.7114.3414.0414.3915.3115.5815.0714.0114.8614.0415.4014.6415.48
Everett, US1.20-0.070.22-0.030.950.840.010.580.40-0.361.37----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback12. Sep26. Sep10. Oct24. Oct7. Nov21. Nov5. Dec19. Dec2. Jan16. Jan30. Jan13. Feb020406080Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia15.7015.67-0.03-0.03
SW Europe14.3014.730.430.43
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.102.472.572.40
NBP, UK (futures)+0.9316.7115.7716.39
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF0.4717.0916.6217.16
Zeebrugge (Belgium)----12.73--
German NCG0.4415.1114.6715.17
NBP (UK)0.4316.4916.0716.62
US Markets
US Spot Prices
Sabine Pass, Louisiana0.022.442.422.40
Corpus Christi, Texas2.302.300.00--
Cove Point, Maryland0.142.031.892.10
Elba Island, Georgia--2.44--2.23
Nymex Henry Hub Futures
Near Month-0.102.472.572.40
Second Mth-0.102.562.652.48
Third Mth-0.102.712.812.65
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaMar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '23Feb '230255075100125Energy Intelligence