February 24, 2023

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China Gas Signs Two LNG Deals With US-Based Venture Global  

China Gas, a private city gas distributor, has signed two 20-year LNG sales and purchase agreements with US-based Venture Global, China Gas said this Friday.

Under the deals, China Gas will buy 1 million tons per year of LNG on a f.o.b. basis from Plaquemines LNG and another 1 million tons from the CP2 LNG export facility, both in Louisiana.

The two deals, conducted through subsidiary China Gas Hongda Energy Trading, will start supply by the end of 2026 and by the end of 2027, respectively, said a China Gas source.

China Gas Hongda Energy Trading was involved in several US deals last summer.

Venture Global

Venture Global's 10 million ton per year Phase 1 of Plaquemines LNG is under construction while the same sized Phase 1 of CP2 LNG is expected to see a final investment decision this year.

Venture Global has spent the past year signing about 10 million tons worth of deals for the two projects, sometimes with offtake optionality between the two.

Venture Global already operates the 10 million ton/yr Calcasieu Pass LNG export terminal, which started production in January 2022, and is developing an additional 60 million tons of LNG export capacity in Louisiana.

China Gas

China Gas will use PipeChina’s terminals to import the LNG, said the China Gas source. PipeChina is China’s national oil and gas pipeline grid company and provides third party access to its seven LNG import terminals.

"As a major participant in China's energy market, we are committed to providing reliable and low-carbon LNG to Chinese customers," said Liu Minghui, chairman and president of China Gas Holdings.

High LNG prices last year had reduced China’s LNG imports. China’s customs data showed China’s LNG imports decreased 19.5% year on year to 63.44 million tons last year.

China's imports from the US plummeted even more dramatically (see graph), though the country has now signed long-term deals in 2022-23 for at least 13 million tons of North American LNG exports.

Created with Highcharts 9.0.0(million tons)CHINA'S LNG IMPORTS FROM THE US2016201720182019202020212022012345678910Source: Kpler

Staff Reports

Bulgargaz Issues First LNG Buy Tender For Delivery Into Turkey

Bulgaria has begun to take advantage of alternative pathways for gas supply via Greece and now Turkey.

Prior to Russia’s invasion of Ukraine, Bulgaria relied heavily on Russian piped gas supplies, but the country was forced to seek alternative supplies — in the form of LNG — after Russia ceased deliveries last April over Sofia’s refusal to pay for the volumes in Rubles.

Buy Tender

Bulgarian state-owned Bulgargaz has now issued its first LNG buy tender for delivery into Turkey, after gaining access to Turkish LNG infrastructure through a long-term deal — signed in January — with Turkey’s state firm Botas.

Bulgargaz is seeking 500,000 megawatt hours (about 33,000 tons) of LNG — around one fifth of a full cargo — for April delivery into neighboring Turkey.

The tender specifies that “the sources of LNG supply must be from countries without sanctions, embargoes, or any trade restrictions,” with the most likely aim to avoid Russian LNG, particularly from state-owned Gazprom.

This is good reason for the specification.

Gazprom’s 1.5 million ton per year Portovaya export plant began operation last September, and since then seven out of the eight cargoes lifted from the facility have been delivered to either Turkey or Greece, according to data from maritime analytics firm Kpler.

Turkey Agreement

This will be Bulgargaz’s first buy tender into Turkey since it inked a 13-year terminal access agreement with Turkish Botas early last month.

The deal allows the Bulgarian company to receive LNG cargoes into Botas’ five import terminals and subsequently flow it into Bulgaria using the Turkish pipeline network.

At the time of the agreement, Turkish Energy Minister Fatih Donmez said the deal would allow Bulgaria to transport up to 1.5 billion cubic meters of gas per year.

Bulgargaz’s last LNG buy tender came in October. The firm awarded one cargo for November delivery to Greece’s Revithoussa terminal, to Greek Mytilineos and Depa Commercial, after receiving offers from eight companies from Europe, Asia and the US.

Created with Highcharts 9.0.0(million tons)RUSSIAN PORTION OF TURKEY/GREECE LNG IMPORTSOthersRussiaPercentage from RussiaFeb'22Mar'22Apr'22May'22Jun'22Jul'22Aug'22Sep'22Oct'22Nov'22Dec'22Jan'23Feb'2300.61.21.82.40%4%8%12%16%Source: Kpler

Daniel Stemler, Madrid

High Gas Prices Close BASF Fertilizer Plant

German industrial giant BASF will permanently close an ammonia production unit and associated fertilizer facilities at its main chemicals site in Germany, marking the first closure of a fertilizer plant in Europe as a result of high gas prices.

BASF confirmed on Friday that it will close one of two ammonia production units at its Ludwigshafen chemicals site along with the associated fertilizer facilities.

The Ludwigshafen site is the world's largest integrated chemicals complex and BASF said it accounted for about 4% of Germany's gas consumption based on 2021 data.

The closures come as no great surprise because BASF had warned last year that it would permanently downsize operations in Europe because of high energy costs that it said were hurting its competitiveness.

"Europe's competitiveness is increasingly suffering from overregulation, slow and bureaucratic permitting processes, and in particular, high costs for most production input factors," BASF CEO Martin Brudermuller said in a statement on Friday.

Gas prices in Europe spiked to a record of over €300 per megawatt hour last summer after Russia slashed pipeline gas flows, prompting some major industrial consumers of gas to take production capacity off line temporarily.

Some of that capacity has been put back to work in response to a decline in gas prices from last year's highs, but current prices remain around three times higher than where they stood in February 2021.

Adding to the woes of BASF and its peers, demand for fertilizer and chemicals remains weak in Europe, and high inventory levels have also limited restarts of production taken off line last year.

BASF's move in Ludwigshafen appears to mark the first permanent closure of a fertilizer plant in Europe as a result of the dramatic changes in the region's gas market since Russia invaded Ukraine a year ago.

"As far as we are aware, this is the first permanent closure of a fertilizer facility as a direct consequence of the change in operating environment," CRU Group fertilizer analyst Alexander Derricott told Energy Intelligence.

Derricott said that while gas prices have fallen in recent months, over the longer term they are likely to remain higher than in the past and that Europe will remain at the upper end of the cost curve.

"Pressure will be further added by changes in carbon taxation, including the removal of EU ETS [Emissions Trading System] free allowances with the introduction of the CBAM [Carbon Border Adjustment Mechanism]," he said.

BASF said its global production network will be able to meet demand for fertilizer and that closing the production units at Ludwigshafen will reduce fixed costs by over €200 million ($211 million) annually by the end of 2026.

Gas Demand and Emissions to Fall

BASF said closing the production units in Ludwigshafen will significantly reduce demand for gas and power there, cutting the company's CO2 emissions by around 0.9 million metric tons per year, roughly equal to 4% of BASF's global CO2 emissions.

Ammonia production is the largest consumer of gas as a raw material at the Ludwigshafen site.

The chemicals complex consumed 24 terawatt hours of gas (around 2.5 billion cubic meters) last year, of which 50% was used for electricity and steam generation. BASF's total gas demand in Europe was 32 TWh in 2022.

BASF executives confirmed that work is underway to further reduce gas consumption at Ludwigshafen by the end of 2023 by converting natural gas turbines in its combined heat and power plants to operate on fuel oil.

The company's efforts to reduce gas demand will help balance Europe's gas market.

The EU's mandatory reduction in gas demand is set to expire at the end of March, but it is expected to be extended because Russian pipeline gas flows to Europe remain low and only limited new global LNG capacity will come online this year.

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


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India11.6912.0611.7712.0511.4311.2912.4211.0412.3611.7911.1710.9511.24
Sodegaura, Japan12.5613.6713.6913.7412.549.7813.3811.7013.2714.0211.9411.2412.67
Zeebrugge, Belgium15.4614.1213.8114.1715.0415.3414.7313.7814.6213.8115.1514.4015.23
Huelva, Spain13.6512.3612.0812.4113.2313.0812.9511.9712.8512.0713.2912.5013.30
Isle of Grain, UK14.8813.5413.2413.5914.4914.7614.2513.2114.0513.2414.5813.8414.65
Everett, US3.332.052.342.103.082.970.012.702.531.763.50----
Created with Highcharts 9.0.0($/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 Asia14.7014.720.140.02
SW Europe13.6014.290.360.69
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.142.452.312.28
NBP, UK (futures)+0.1815.3815.2114.57
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF0.8016.2815.4815.02
Zeebrugge (Belgium)------11.67
German NCG0.9215.1514.2313.87
NBP (UK)0.3615.6615.3014.49
US Markets
US Spot Prices
Sabine Pass, Louisiana0.182.352.172.27
Corpus Christi, Texas-0.032.012.041.90
Cove Point, Maryland0.032.352.322.03
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month0.142.452.312.28
Second Mth0.122.552.432.35
Third Mth0.112.702.592.50
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaMar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '23Feb '230255075100125Energy Intelligence