February 27, 2023

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Shell Inks LNG Supply Deal With Hapag-Lloyd

Shell said on Monday it had signed a “multi-year agreement” to supply LNG to 12 new vessels belonging to Hapag-Lloyd, one of the world’s biggest shipping lines, as the debate over future bunkering fuels heats up.

The UK-based supermajor said in a statement the LNG would be supplied to Hapag-Lloyd’s ultra-large dual-fuel container vessels, which can carry more than 23,500 twenty-foot equivalent units, at the Port of Rotterdam. Bunkering is expected to commence in the second half of this year.

Using LNG will enable Hamburg-based Hapag-Lloyd to reduce the CO2 intensity of these vessels by up to 23% compared to conventional fuels, Shell said.

The deal follows the signing of a similar agreement last year between Shell and another one of the world's biggest container shipping companies, CMA CGM.

“The modern ships will be deployed on Europe-Far East routes and call at major ports including Rotterdam, Hamburg, Singapore and Shanghai,” Shell added.

No details on volume or pricing were disclosed, but Jan Christensen, senior director of global fuel purchasing at Hapag-Lloyd, was quoted as saying the shipping firm had secured “flexible LNG supply at competitive terms.”

“Shipping decarbonization must accelerate and, as the lowest-carbon fuel available at scale today, LNG is a key part of the transition to lower-carbon marine fuels,” said Tahir Faruqui, global head of downstream LNG at Shell.

As with CMA CGM, Shell has also entered a strategic collaboration agreement with Hapag-Lloyd aimed at accelerating the further decarbonization of alternative marine fuels. This will initially focus on developing the potential of additional low-carbon fuels such as liquefied biomethane and e-methane.

Back in 2021, Shell participated in the world's first bunkering of an LNG-fueled oil tanker, which took place in Singapore. The bunkering vessel, part-owned by a Shell subsidiary, began operations earlier that year.
Tom Daly, London

Woodside Revisits Consultation Approach to Secure Go-Ahead on Scarborough

Woodside Energy is revisiting its consultation approach with Australia's traditional owners following a landmark ruling last year.

The company has changed the schedule of its A$16 billion (US$10.75 billion) Scarborough-to-Pluto Train 2 LNG project to allow more extensive consultation to take place.

The comment, made by Woodside’s CEO Meg O’Neill, comes amid stricter consultation requirements set last year by the National Offshore Petroleum Safety and Environmental Management Authority (Nopsema).

The Australian regulator changed its requirements after Australia's federal court found Santos did not properly consult traditional owners from the Tiwi Islands about drilling works for the Barossa-to-Darwin LNG project.

Woodside needs to secure three different secondary approvals from Nopsema related to seismic, drilling and pipeline installation activities.

“We have clear plans to consult in a manner aligned with the new requirements and are progressing those consultations,” O’Neill said.

“It’s a much broader consultation than we historically would have performed,” she said, adding that Woodside is “out talking to a wide variety of potential relevant persons.”

But the project is on track to achieve first LNG as planned in 2026, O’Neill assured.

Court Cases

However, outstanding court cases targeting Scarborough are still casting a shadow on the execution of the project.

Woodside is awaiting an opinion from the Supreme Court of Western Australia on a case initiated by advocacy group Conservation Council of Western Australia (CCWA).

CCWA asserts that the existing approval for expansion of the Pluto facility was unlawful, as it failed to properly consider and control the environmental harm generated by the development’s greenhouse gas emissions.

Another case was started by nonprofit Australian Conservation Foundation last year.

ACF lawyers argue in the Federal Court that greenhouse gas emissions that will result from Scarborough will likely have a significant impact on the Great Barrier Reef, some 3,000 kilometers away off Australia’s east coast.

Under federal law in Australia, offshore oil and gas projects will not be permitted if they are likely to have a significant impact on the Great Barrier Reef.
Marc Roussot, Singapore

Kosmos Heads to Arbitration Over Greater Tortue Contract

US independent Kosmos Energy will go to arbitration with BP over a diversion clause in the gas sales contract covering the 2.5 million ton per year Phase 1 of the Greater Tortue project offshore Senegal and Mauritania.

"There is clearly a difference of opinion between us in terms of how [the contract] would actually operate," Kosmos CEO Andrew Inglis said during the company’s fourth quarter results call this week.

"When you have a disagreement amongst friends, we’ve gone to a third party, we’ve agreed to go to arbitration and have the contract interpreted for us," he added.

The Diversion Clause

Cargoes from Greater Tortue, Phase 1, which is scheduled to produce first LNG at the end of 2023, are set to be lifted by the project operator, UK major BP, on an f.o.b. basis under a term offtake contract. The contract is indexed to a slope of the Brent crude oil benchmark.

However, the Kosmos gas sales agreement with BP includes a deliver-or-pay clause, which allows the US producer to divert cargoes to other buyers by paying an agreed non-delivery penalty to BP.

Late last year, Inglis said that the diversion clause opportunity could be worth around $200 million in additional revenue net to Kosmos over the 2024-25 period.

Inglis does not see the arbitration decision as a negative.

"This is actually a good thing because it allows us to get everything clear before we would start to use those cargo optimization options," which comes at the end of the commissioning period, around the middle of 2024, he said.

Phase Two Marketing

Inglis doesn't believe that Kosmos will need to sign up buyers before taking a final investment decision on Greater Tortue Phase 2.

"Fundamentally, Phase 2 is different to Phase 1," he said, adding that the capital involved is significantly lower, so "we absolutely will not require" contracts before project sanction.

A floating gravity-based structure, or GBS, has been chosen as the development concept for Phase 2, which would add about 2.5 million to 3 million tons of capacity at Greater Tortue.

"Going to the market now with Phase 2 at the same time as we are discussing Phase 1 allows us to get a really good understanding of the sort of fixed nature of the future contracts and the spot nature and then optimizing that between Phase 1 and Phase 2,” Inglis said.
Daniel Stemler, Madrid and Michael Sultan, Washington

FSU Built for Novatek's Murmansk Terminal Sets Sail

Construction of a key floating storage unit (FSU) for Novatek’s planned Murmansk LNG transshipment terminal has been completed.

Novatek is building the Murmansk and Kamchatka LNG transshipment terminals to optimize the logistics of LNG sales from the operational Yamal LNG plant in the Arctic and the nearby Arctic LNG 2 project scheduled to start the first of three 6.6 million ton per year trains at the end of this year.

The Saam FSU, built at Daewoo Shipbuilding and Marine Engineering’s (DSME) yard in South Korea, left the Okpo port last week and is now sailing south along the Chinese coast, according to tracking data.

The vessel doesn’t report the final destination, but it is understood to be headed to Murmansk via the Suez Canal.

It might take several months to reach Murmansk, where Novatek is now finishing the construction of the transshipment terminal.

Novatek CEO Leonid Mikhelson in early February said the company planned to complete construction of the Murmansk and Kamchatka LNG transshipment terminals at the end of the second or in the third quarter, after which it will only need to put the FSUs at the terminals.

Kamchatka’s Koryak FSU is now in the final stages of construction at DSME’s yard.

The two terminals will reload LNG cargoes from expensive and slow Arc7 ice-class vessels to cheaper and faster conventional LNG tankers, reducing the overall time of delivery and increasing the number of journeys for each Arc7 tanker.

That should also reduce the risks of insufficient Arc7 tanker fleet capacity for Arctic LNG 2, where construction of tankers at the Russian shipyard Zvezda might be delayed by the Western sanctions against Russia over the war in Ukraine.

The Murmansk terminal will reload cargoes shipped West from the Russian Arctic, while the Kamchatka terminal, located in Russia’s Far East, will reload cargoes sent to Asia via the Northern Sea Route.

Novatek plans for the two terminals to become LNG hubs selling cargoes on an f.o.b. basis.

The Murmansk terminal should also help Novatek reduce its reliance on transshipment at European ports amid the ever-growing geopolitical tensions between Russia and Europe.
Staff Reports

Indian LNG Imports Rebound

India, the largest of the world's price sensitive LNG buyers, may finally have turned the corner on imports after several years of retreats.

India’s LNG imports rebounded in January after seven straight months of year-on-year decline, as prices of the fuel settled to their lowest level since the middle of 2021.

January's imports were the highest since May 2022, according to government data.

LNG purchases rose by 8% in January from a year earlier to 2.27 billion cubic meters, flat from December, but higher from 2.1 Bcm a year earlier, according to oil ministry data. However, imports in the April-January period of the 2022-23 fiscal year ending March 2023 were 14% lower year over year to 22.7 Bcm.

India Gas Data
(Bcm) Jan'23Jan'22
Imports2.272.10
Demand 5.184.96
Production2.982.86

Price Levels

Spot LNG price levels have corrected down to around $15-$16 per million Btu, offering an opportunity for Indian buyers to make purchases, an official from a state-run oil company said.

Indian consumption of natural gas rose by 6.4% in January from a year earlier to 5.18 Bcm because of lower prices. But cumulative consumption of 50.8 Bcm for the current fiscal year was still lower, by 6.1%, from the previous year.

The GIXI (IGX Gas Index), a benchmark created by the Indian Gas Exchange, for January was $18.50/MMBtu, up from $15.70/MMBtu in December. But volumes traded on IGX are less than 3% of the total gas consumed.

LNG Import Dependency

Gross domestic production of natural gas rose by 4% in January from a year earlier to 2.97 Bcm, helping — in theory — to loosen Indian dependency on imported LNG.

Nevertheless, dependency of gas supply on LNG imports was 44% in January compared to 42% a year earlier, the government calculated.

Indian LNG imports peaked in 2020, according to Kpler, with the country in 2023 now attempting to reverse a two-year decline (see graph).

Created with Highcharts 9.0.0(million tons)INDIAN LNG IMPORTS2013201420152016201720182019202020212022051015202530Source: Kpler

Dinakar Sethuraman, New Delhi


In Brief

Petrovietnam Signs Gas Supply HOA

Petrovietnam has signed a heads of agreement (HOA) to supply gas from Block B offshore southwest Vietnam to a new gas-fired power project, dubbed O Mon II, in Vietnam's Mekong Delta region.

Petrovietnam said a gas sales contract will be finalized this year and that it also plans to sanction the project this year.

Plans call for the supply of 490 MMcf/d of gas to a power plant that is being built by Japan's Marubeni and Vietnam's Trading Construction Works Organization. The plant is supposed to be completed in 2026-27.

As one of Vietnam's most significant gas discoveries, Block B is key to helping Vietnam stem declining gas production and alleviating the country's power shortages.

The HOA aims to accelerate the Block B gas-to-power project, which has been delayed because of a lack of investment incentives.

Separately, Petrovietnam Gas is understood to have further postponed the start-up of the country’s first LNG import terminal at Thi Vai — with a capacity of 1 million tons/yr — to the third quarter of this year from 2022.

It is slated to supply gas to the No. 3 and No. 4 units at the Nhon Trach power plant in Dong Nai province in southeast Vietnam.
Clara Tan, Singapore


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India11.5911.9611.6711.9411.3311.1912.3210.9412.2511.6911.0610.8511.13
Sodegaura, Japan12.4513.5613.5813.6312.449.6813.2711.5913.1713.9111.8411.1312.56
Zeebrugge, Belgium13.4812.1611.8612.2113.0713.3612.7711.8312.6511.8613.1812.4413.26
Huelva, Spain12.3711.1010.8111.1411.9511.8011.6710.7011.5710.8012.0111.2312.02
Isle of Grain, UK13.5612.2411.9412.2813.1713.4412.9311.9112.7411.9413.2612.5313.33
Everett, US1.920.660.940.711.671.570.011.311.130.372.09----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback26. Sep10. Oct24. Oct7. Nov21. Nov5. Dec19. Dec2. Jan16. Jan30. Jan13. Feb27. Feb1020304050Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia14.7014.61-0.11-0.09
SW Europe13.6013.00-1.19-0.60
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.182.732.55--
NBP, UK (futures)-1.1414.2415.3814.93
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-1.4914.8916.3815.82
Zeebrugge (Belgium)--11.50----
German NCG-1.7313.3315.0614.06
NBP (UK)-1.2014.4615.6615.12
US Markets
US Spot Prices
Sabine Pass, Louisiana0.202.552.35--
Corpus Christi, Texas0.312.322.01--
Cove Point, Maryland0.112.462.35--
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month0.182.732.55--
Second Mth0.152.852.70--
Third Mth0.133.022.90--
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaMar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '23Feb '23Mar '23Mar…0255075100125Energy Intelligence