February 21, 2023

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QatarEnergy Takes Over All Qatar LNG Marketing

State-owned QatarEnergy on Monday announced it was taking over LNG sales currently managed by Qatargas in a move that should midwife the birth of an LNG marketing behemoth.

The move, set to be completed by end-2023, may have minimal impact on current operations, including those with Qatar’s Western partners, but nevertheless will have long-term consequences for the industry as a whole.

Qatargas had been a last major part of the country’s energy sector that had not been consolidated under the control of QatarEnergy CEO and Qatari Energy Minister Saad al-Kaabi, sources explain.

Al-Kaabi had signaled that such a move could be in the works when he vowed that QatarEnergy Trading would be “in the next five to 10 years the largest LNG trader in the world by far,” in an October interview at the Energy Intelligence Forum in London.

For the moment, the restructuring will probably not involve major changes to existing sales and purchase agreements, said one industry source.

Another industry source told Energy Intelligence the move is meant to avoid marketing duplication and aims at “getting the most value out of the full Qatar portfolio.”

Wake-Up Call

Nevertheless, this move should come as a wake-up call to the global LNG industry that players there will soon be dealing with a marketing organization of unprecedented muscle.

The LNG industries in Australia and the US might rival Qatar in terms of total export volumes, with all exporting in the range of 10.5 billion to 10.7 billion cubic feet per day of gas.

However, volumes from the US and Australia are marketed by many different companies. No other producing company will come close to volumes being marketed by QatarEnergy.

Qatar’s current capacity of 78 million tons per year should swell to around 137 million tons/yr by 2028, when the two phases of the North Field expansion and the 18.1 million ton/yr Golden Pass project in Texas (in which QatarEnergy has a 70% stake) will be on line.

Created only in 2020, QatarEnergy Trading by the third quarter last year was already selling 5 million-10 million tons/yr of LNG, including third-party volumes, despite not marketing Qatargas LNG. And the company is also spending around $20 billion to add around 100 new LNG tankers to its fleet.

A Seamless Transition

There was little detail in the announcement as to possible impacts on investments in existing joint ventures, which include stakes held by Western majors including Exxon Mobil, TotalEnergies and Shell in 68.5 million tons/yr of Qatargas’ liquefaction capacity, out of a total 78 million tons/yr including its wholly owned operations.

But QatarEnergy did pledge to “ensure business continuity and a seamless transition, during which Qatargas will continue to deliver on all its commitments with no interruption.”

QatarEnergy declined to comment further on the announcement.

Its partners were equally quiet.

“We are aware of the restructuring and considering the potential implications,” said a spokesman from Shell, key partner in the 7.8 million ton/yr Qatargas 4 project.

However, it does appear as though the move will also shape marketing of new production coming out of the North Field expansion.

Once the restructuring is concluded, “QatarEnergy will be the single point of responsibility for all existing and prospective customers interested in the purchase of energy products from the state of Qatar,” the company said.
Rafiq Latta, Nicosia and Tom Pepper, London

Freeport Restart Advances, But Train 1 Likely Offline Until May

US regulators have now authorized a full return to commercial service for two of Freeport LNG's three liquefaction trains. But the third train isn't likely to return to service until May because of mechanical problems, meaning restoration of the Texas export terminal's full capacity is still months away.

"Returning to liquefaction operations is a significant achievement for Freeport LNG," said Michael Smith, Freeport LNG founder, chairman and CEO.

The US Federal Energy Regulatory Commission (FERC) has now authorized an "immediate full return to service of one liquefaction train, that has already restarted, and the incremental restart and full return to service of a second train," Freeport LNG Development said Tuesday.

Freeport LNG is expected to begin the so-called defrosting process on Train 2, a pre-cool down operation aimed at removing any moisture from the pipes by introducing hot gas into the train's cryogenic system, a source told Energy Intelligence.

Freeport said operations are now using two of Freeport's three LNG storage tanks and one of its two LNG ship berths. However, the restart and return to service of the plant's Train 1 "will require subsequent regulatory approval once certain operational conditions are met."

The company said that "a conservative ramp-up profile to establish three-train production of approximately 2 billion cubic feet per day is anticipated to occur over the next several weeks as stable operation of each incremental train is established and maintained."

Train 1 Status

However, the plant's second berth and third LNG storage tank aren't expected to return to service until May, suggesting that full operation of Train 1 will not happen until then.

"[Freeport] can't start T1 right now, due to a big leak in the propane system, which is why they are going with Train 2 first," a source familiar with the operations told Energy Intelligence.

FERC's authorization did not include restart of Train 1 but noted that Pre-Startup Safety Review documentation would have to be reviewed.

Energy Intelligence reported last week that the lack of qualified staff is slowing down the full restart of the export plant.

"Over the past eight months, we have implemented enhancements to our processes, procedures and training to ensure safe and reliable operations, and significantly increased staffing levels with extensive LNG and petrochemical operating experience to reduce overtime, enhance operational excellence, and improve quality assurance and business performance," the company said.

Ships at Sea

Between Feb. 10 and Feb. 14, the facility had loaded three partial cargoes, using leftover LNG volumes that had remained in its tanks since the shutdown.

Currently, there is no vessel docked at the facility's loading berth, with four ballast vessels waiting at Freeport anchorage, according to ship-tracking data by maritime intelligence firm Kpler.
Daniel Stemler, Madrid and Michael Sultan, Washington

Israeli Leviathan Partners Approve FLNG Budget

Partners on Israel’s 22 trillion cubic foot Leviathan gas field approved Tuesday a $96.4 million budget to potentially build a floating LNG facility (FLNG), as operator Chevron evaluates its export options for a second phase development. The news comes as Europe is seeking increasing LNG export volumes from the Eastern Mediterranean via Egypt.

NewMed Energy said partners had approved pre-front-end engineering and design for Phase 1B of the Leviathan reservoir, which aims to increase total gas production capacity from 9 billion cubic meters per year to 21 Bcm/yr by constructing a 4.6 million ton-per-year FLNG facility.

Leviathan partners have previously confirmed to Energy Intelligence that Chevron plans to select an export concept by July, although President for Exploration and Production Clay Neff said at an Egyptian industry conference last week that the firm planned to announce a development concept by year-end.

Export Options

Export options include piping the gas from Leviathan and potentially the 4 Tcf Cypriot Aphrodite field, also operated by Chevron, to one of Egypt’s twin liquefaction plants at Damietta and Idku on the Mediterranean coast; using an FLNG facility close to the field, or finally via the ambitious EastMed Poseidon gas pipeline.

Chevron has remain tight-lipped on what development concept it will ultimately select although its partners, particularly NewMed, favor an FLNG option. Piping the gas subsea to an existing Egyptian terminal was widely believed to be the most cost-effective option although some industry sources have questioned how much control Chevron would ultimately have over gas flows and revenues if it selected this.

EU Energy Commissioner Kadri Simson was in Cairo last week to follow up on an existing provisional LNG supply deal between Egypt, Israel and the EU and wants to “strengthen … energy ties” further with Egypt as Europe launches its joint purchasing scheme covering about 13.5 Bcm.

Egyptian Questions

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

But at the same time Egyptian gas production climbed from 6.4 billion cubic feet per day over fiscal year 2020/21 to 6.7 Bcf/d over 2021/22, with consumption rising steadily in parallel from 5.7 Bcf/d over 2017/18 to 6.08 Bcf/d over 2021/22.

There are increasing fears that rampant Egyptian gas demand could result in another gas crunch similar to the one Cairo experienced over 2012-14 when demand outstripped marketed gas exports, forcing Egypt to severely curtail exports and switch gas feedstock to the local market.
Tom Pepper, London

India's LNG Terminals Face Delays As Customers Desert Gas

India's new LNG terminals are still getting delayed, either for lack of customers, or for lack of downstream pipeline infrastructure, or both.

As the delays stack up, the country has fallen from the world's fourth-largest LNG importer in 2021 (24 million tons) to the seventh-largest LNG importer in 2022 (20 million tons), according to Kpler.

Karaikal's Adani Question

Singapore-based gas firm Atlantic Gulf & Pacific (AG&P) is the latest company to postpone commissioning of an LNG import facility on India's southeast coast.

The Karaikal LNG terminal should have been up and running by now, but it has been delayed, a senior company executive told Energy Intelligence. The latest delay — in a years-long saga — occurred because a bankrupt Karaikal port was put on the block, the executive said.

The Adani group, currently facing flak from investors over alleged corporate malfeasance, has now bought the Karaikal port. The government is yet to sign off on the deal amid recent troubles faced by the highly leveraged group. It is also unclear if Adani's entry will lead to a change in contractual terms with AG&P.

AG&P chartered LNG carriers twice, once in 2020, and the other last December, for use as floating storage at a proposed 1 million ton per year LNG import terminal to support its city gas businesses. Last December, it agreed to charter an LNG carrier from Adnoc for use as a floating storage unit at an LNG import terminal in India.

Created with Highcharts 9.0.0(million tons)INDIA'S LNG IMPORTS BY TERMINALDahejHaziraDabholCochinMundraEnnoreJaigarh2013201420152016201720182019202020212022051015202530Source: Kpler

Other New Terminals Delayed

State-run Hindustan Petroleum will complete its 5 million ton/yr LNG import facility at Chhara in Gujarat on the west coast in March. But Chhara will remain shut because a key pipeline connecting the terminal to the grid is not ready, a company official told Energy Intelligence. Its not clear when the pipeline will be complete.

Swan Energy’s 5 million ton/yr floating storage and regasification unit (FSRU)-based Jafrabad facility in Gujarat was scheduled to open in December after several delays, but Swan has chartered the Vasant FSRU to Turkey’s Botas.

H-Energy’s 4 million ton/yr facility in Jaigarh has also faced several delays because of the lack of a connecting pipeline to customers. The facility was scheduled for commissioning last March, after chartering the 170,000 cubic meter Hoegh Giant FSRU. But Norway-based Hoegh cancelled the contract citing contractual violations, and relocated the vessel to Germany. H-Energy has not sought another vessel.

Industry sources credit the postponement of both FSRU projects to a lack of buyers for LNG in India, especially with existing terminals on the west coast operating at low capacities.

Consumption Declining

India's gas consumption in the first ten months of the 2022/23 fiscal year declined by 6.1% to 50.8 billion cubic feet from a year earlier, according to oil ministry data.

This is the first such annual decline in gas use since 2014-15 — after excluding a one time drop in gas demand in pandemic-led 2020-21.

LNG imports are down 14% over the same period.
Dinakar Sethuraman, New Delhi

Spain's Storage-Only El Musel Awaits Clearance

El Musel, the currently idle LNG terminal, located in the port of Gijon in northern Spain, is making its way through Spain's regulatory gauntlet in hopes of returning to operation after more than a 10-year hiatus.

The facility is expected to function as a “storage-only” terminal for cargo reloads as previously planned, with the idea to supply other countries, particularly in northern Europe.

However, El Musel’s role as a storage and reload hub is likely be hampered by its relatively small size.

The terminal counts two LNG storage tanks, each with 150,000 cubic meters of capacity, meaning it can only store roughly two cargoes at any given time, a rather limited amount considering the supply needs of Northwest Europe, the main demand region of the continent.

Nonetheless, the El Musel terminal could certainly provide extra flexibility to the Spanish system, particularly during periods of increased deliveries into the country, like in October and November last year, when the influx of cargoes saturated Spain's six operational terminals.

Approvals Received

Spain’s National Markets and Competition Commission (CNMC) approved a temporary singular economic regime for the El Musel terminal, paving the way for its use for both regulated and non-regulated services.

The approval allows the currently idle terminal to provide unregulated services such as cargo unloading logistics, storage and cargo reloading, as well as regulated services like “the use of the strictly necessary facilities for the correct management of the terminal and track loading bays,” CNMC said in a statement.

The regulator also stipulated that LNG logistics services under the non-regulated regime must be provided under long-term contracts, while their principal object should not be gaining access to the Spanish gas system for the supply of national demand.

More Approvals Needed

Following the the regulatory approval, the El Musel terminal still needs to receive a ministerial order as a penultimate step for its operational start, a spokesperson at Spain’s Ministry for the Ecological Transition and the Demographic Challenge confirmed to Energy Intelligence.

If the ministerial order is favorable, the country’s LNG terminal and gas grid operator Enagas can finally apply for the official authorization for the operational start of the facility at the Industry and Energy sub-delegation of the government, which should hand it over within a month.

Last year, Spanish media reports suggested that the terminal’s first tank was expected to come on line in January, however, that has been delayed.

Amortization Begins

The El Musel terminal has been in hibernation since its construction finished in 2012 due to legal issues. However, since then the facility has been receiving remuneration from the Spanish state for its financial, operational and maintenance costs.

In a report last June, CNMC said that the total investment in the terminal — that has never received a single cargo — accumulated to €318 million (about $340 million).

But the terminal could soon start the amortization of the investment it received.

CNMC estimated that through regulated services, the terminal’s remuneration with charges for the system will be €25.3 million in its first year of operation, €24.2 million in its second and €22.9 million in its third year.

In comparison, the facility currently receives €25.7 million in remuneration. This means that it costs more for the Spanish state to maintain the terminal in hibernation than actually use it, which would also allow it to begin its amortization process, CNMC said.
Daniel Stemler, Madrid


In Brief

Spot LNG Pricing Sinks to Multi-Year Lows

Spot LNG prices in Northeast Asia dropped by $1 to $14.70/MMBtu, according to Energy Intelligence assessments for deliveries four to eight weeks ahead. In Southwest Europe, spot LNG prices also fell by 70¢ week on week to $13.60/MMBtu, its lowest price since July 2021.

Asian spot prices have continued to drop for the eighth consecutive week, mainly on the back of limited demand and softer European gas hub prices. But market activity has picked up due to the weaker prices, with some demand for March and April cargoes emerging in Northeast Asia as well as in South Asia.

Demand for spot LNG has been especially thin in Northeast Asia as Japan and South Korea have maintained high inventories. In Japan, stocks increased by 6% on Feb. 13 from the previous weeks according to the country’s trade and industry ministry.

Subdued demand in Southwest Europe continues to weigh on spot LNG prices. A Europe-based LNG trader put spot discount levels to the benchmark TTF hub price at high-$2s/MMBtu on the bid side, but that price level “is not attractive for sellers.”

Created with Highcharts 9.0.0($/MMBtu)REGIONAL SPOT PRICESNortheast AsiaSouthwest EuropeMar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '23Feb '23020406080Energy Intelligence

Yousra Samaha, Dubai and Daniel Stemler, Madrid and Marc Roussot, Singapore

Taipower Advances Schedule for Hydrogen-LNG Co-Firing Demo

Taiwan Power (Taipower) will initiate a demonstration of co-firing hydrogen with LNG ahead of schedule, according to a company spokesperson. The demonstration is to take place at a power plant in southern Taiwan in cooperation with Siemens Energy about a year earlier than originally planned.

Taipower acting chairman Vincent Tseng Wen-sheng and Siemens Energy managing director John Kilpack officiated at a ground-breaking ceremony at the Hsinta Power Plant in Kaohsiung City in southern Taiwan Feb. 18 for facilities for co-firing hydrogen with one of five 445-MW LNG combined cycle generators at the plant.

Taipower and Siemens Energy signed a "Mixed Hydrogen Technical Cooperation Memorandum of Understanding (MOU)" for the trial project last year.

The ground-breaking marked the official start of work to transform the Hsinta-3 burner and build the equipment necessary to carry out the co-combustion next to the Hsinta-3 unit, including a depressurization unit, a storage area and refueling station for 16-meter hydrogen tank trucks, a hydrogen refueling station and pipeline.

Hydrogen will be supplied by state-owned CPC.

According to a Taipower spokesperson, the original schedule was for the co-firing to begin in 2025 at a 5% level for the 445-MW Hsinta-3 LNG combined cycle generator, but Taipower now expects to begin the 5% co-firing trial in 2024 instead of in 2025.

If the trial is successful, Taipower aims to gradually increase the co-combustion ratio to 15%.

Last November, Taipower signed a "Mixed Ammonia Technical Cooperation MOU" with Mitsubishi Heavy Industries for a trial ammonia and coal co-firing at its Linkou Power Plant in New Taipei City at its 800-MW Linkou-1 ultra supercritical coal fired units.
Dennis Engbarth, Taipei

Novak: No Bids for Sakhalin-2 Stake Yet

Moscow hasn’t yet received any bids for Shell’s stake in the Sakhalin-2 upstream and LNG project in Russia’s Far East, Deputy Prime Minister Alexander Novak said Tuesday.

“There are no bids so far. We have enough time. Reorganization procedures continue. When they are completed then we’ll have the bids,” Novak told reporters.

Moscow may soon complete its assessment of the damages done to the Sakhalin-2 project when Shell was a shareholder, Novak said. The assessment will affect the compensation to Shell for the transfer of the stake.

Russia last year forced an operatorship change in Sakhalin-2 where Shell held a 27.5% minus one share stake. Shell refused to take the stake in the new operator, Russia-registered Sakhalin Energy, which the Russian government now plans to sell to another investor. The sale deadline was initially set for January 2023 but in late December the deadline was canceled.

Russia’s LNG export champion Novatek has been regarded as the key, if not the only, candidate for Shell’s stake in Sakhalin-2, but it is understood to have not yet decided on joining the project.

Russia’s state-run Gazprom holds 50% plus one share in Sakhalin-2, while Japan’s Mitsui and Mitsubishi hold 12.5% and 10% stakes, respectively. All three companies retained their stakes after the operatorship change last year.
Staff Reports


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India11.6612.0411.7412.0211.4011.2612.4011.0012.3411.7711.1310.9111.21
Sodegaura, Japan12.5213.6413.6613.7112.509.7013.3511.6513.2414.0011.8911.1812.63
Zeebrugge, Belgium14.3012.9512.6513.0013.8814.1713.5712.6113.4512.6413.9913.2414.07
Huelva, Spain12.9611.6711.3811.7212.5412.3912.2611.2712.1511.3712.6011.8012.61
Isle of Grain, UK14.0612.7112.4112.7613.6713.9313.4212.3813.2212.4113.7513.0013.83
Everett, US0.96-0.31-0.02-0.260.710.600.010.340.16-0.601.13----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback19. Sep3. Oct17. Oct31. Oct14. Nov28. Nov12. Dec26. Dec9. Jan23. Jan6. Feb20. Feb020406080Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia15.7014.70-0.77-1.00
SW Europe14.3013.600.26-0.70
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)--2.07--2.57
NBP, UK (futures)-0.4614.4614.9215.60
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-0.6615.2215.8816.55
Zeebrugge (Belgium)--11.67--12.78
German NCG-0.4913.5314.0214.73
NBP (UK)-0.2714.8415.1115.89
US Markets
US Spot Prices
Sabine Pass, Louisiana--2.10--2.42
Corpus Christi, Texas--------
Cove Point, Maryland--1.83--1.89
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month--2.07--2.57
Second Mth--2.18--2.65
Third Mth--2.32--2.81
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaMar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '23Feb '230255075100125Energy Intelligence