March 1, 2023

WWW.ENERGYINTEL.COM

Work on Mozambique LNG Expected to Resume This Summer

Work on the $20 billion Mozambique LNG project, suspended by operator TotalEnergies in April 2021 due to the violent insurgency in the northeastern region of Cabo Delgado, is set to resume in July, the chief executive of Saipem, the lead contractor on the project, said Tuesday.

"We expect to gradually restart the project, according to the information received by our clients, starting from July this year," Alessandro Puliti said after announcing Saipem’s 2022 financial results at the company’s headquarters in Milan.

Total, which has a 26.5% stake in Mozambique LNG, has not given a firm target date for lifting the force majeure on the project. But the visit last month to Cabo Delgado by its chief executive Patrick Pouyanne, has raised hopes of an imminent restart.

Human Rights Report

Pouyanne has stressed that the timing of the restart will depend on the findings of a human rights report on the region that was due to be submitted this week by humanitarian expert, Jean-Christophe Rufin. The Total boss said he would also need to sit down with the main contractors — namely Saipem, Chiyoda and McDermott — to ensure that the costs of the project had not risen.

Saipem’s Puliti said the company was not privy to the details of the human rights report, but had received reassurances from Total about the July start-up date.

"We do not have direct visibility on the report on human rights, but we agreed with Total about restarting in July ... this implies that our client is confident to solve potential pending issues by that date," he said.

A Lot at Stake

Mozambique LNG, Africa’s single largest energy project, which has financing commitments of some $15 billion from a group of multilateral and commercial lenders, was originally due to come on stream in 2024, but the delays have pushed back the date at least to 2026.

Mozambique, which has huge deep water gas reserves in the Rovuma basin, joined the club of African LNG exporters last November with the start up of the Eni-led Coral South project.

Total operates Mozambique LNG with a 26.5% stake alongside Mozambican state oil company ENH with 15%, Japanese duo Mitsui and Jogmec each with 10%; India’s Bharat, Oil India and ONGC sharing 30% and Thailand’s PTT with 8.5%.
Paul Sampson, London

Argentina to Try LNG Exports Again

YPF and Petronas have advanced plans for a major LNG export project in Argentina by signing a land lease agreement with the Port of Bahia Blanca.

Like many nations around the Atlantic Basin, Argentina would like to seize upon the gas supply opportunities that have opened in the wake of the war in Ukraine.

Land Lease

The Port of Bahia Blanca, located in the Buenos Aires province, announced the signing of the land lease deal on Feb. 28 and said the agreement is valid for six months.

The lease deal comes five months after YPF and Petronas announced that they are collaborating on the development of a mega LNG export terminal with a liquefaction capacity of up to 25 million tons per year.

Argentina's President Alberto Fernandez has also called for the rapid development of LNG exports.

The Argentine and Malaysian firms will now carry out technical, economic, maritime, soil and environmental studies to determine how to make the LNG project as competitive as possible.

The pair hope to sign a long-term land lease following the studies.

Road to FID

YPF is hoping it can take a final investment decision on the project before the end of 2023, the company’s CFO Alejandro Lew said during YPF’s third-quarter 2022 results call in November.

The deadline looks rather ambitious as Lew said a pipeline build-out is required to get the necessary volumes of feed gas from the giant Vaca Muerta shale play.

“Clearly, the government, and through the Nestor Kirchner pipeline, is taking care of the debottlenecking of Vaca Muerta to fully supply local consumption needs,” Lew said.

“But then if we manage to move forward with the [export] project," that will require additional pipeline capacity and further evaluation of the increased natural gas production needed to supply a potential LNG plant, YPF’s CFO added.

Financing the project, costing an estimated $10 billion, could also be a hurdle.

Previous Stints as an Exporter

YPF’s push to launch a large-scale LNG export project comes after several unsuccessful stints as an LNG exporter.

The company leased a floating liquefaction unit from Exmar for a 10-year period and exported first LNG from the Tango LNG project in late 2019.

Exports ceased in May 2020 amid the coronavirus pandemic which led to widespread demand destruction and lower gas prices. The lease for the Tango FLNG unit was subsequently canceled.

Argentina had yet another stint as an LNG exporter between 2010 and 2013, according to Kpler data.

Created with Highcharts 9.0.0('000 tons)ARGENTINA'S LNG EXPORTSSpainBrazilChileTaiwanKuwaitSouth Korea200820102012201420162018202020220255075100125150Source: Kpler

Created with Highcharts 9.0.0('000 tons)ARGENTINA'S LNG IMPORTSAmericasAsiaAfricaEuropeOceania2008201020122014201620182020202201,0002,0003,0004,0005,000Source: Kpler

Eric Thorp, London

Japan Approves Bills to Extend Nuclear Lifespans

Japan’s cabinet has approved bills which would allow nuclear reactors to operate longer than their current legal limit as part of the country’s "green transformation" policy for decarbonization.

The approval follows a draft decarbonization strategy unveiled by Prime Minister Fumio Kishida last December which also includes support for carbon pricing, carbon capture and storage, ammonia/hydrogen, and for the world's largest LNG importer to build strategic reserves of the fuel.

High LNG prices sparked by the war in Ukraine have heightened Japan’s concerns over its energy security and spurred a decision to maximize the country’s existing nuclear reactors, which used to provide some 30% of its power supply, and to sign more long-term LNG supply contracts.

New Rules

Currently, reactors are allowed to operate for 40 years with the possibility of extending it to 60 years if safety upgrades are implemented.

Under the new rules, the explicit 40-year limit has been removed.

Power firms need to obtain safety approval from the Nuclear Regulation Agency (NRA) every 10 years for reactors that have been operational for at least 30 years. With NRA’s approval, the Ministry of Economy, Trade and Industry would grant approval for lifetime operations on a case-by-case basis.

The total lifespan would be effectively extended to more than 60 years after excluding time spent on inspections and other periods when reactors are left idle.

However, observers remain skeptical of Japan’s ability to switch on its nuclear reactors due to possible local opposition.

LNG Impact

The major reversal of Japan’s nuclear policy since the 2011 Fukushima disaster is expected to create more uncertainties for Japan’s LNG demand.

The disaster drove Japan's LNG imports from about 69 million tons in 2010, the year prior to the event, to 87 million tons in 2012, the year after the event, according to Kpler, The response to the disaster suggests that policy reversals in favor of nuclear power will be significantly bearish for Japan's LNG demand.

After reaching a peak of 89 million tons of LNG imports in 2014, Japanese LNG imports have been on a more or less steady decline ever since (see graph).

Created with Highcharts 9.0.0(million tons)JAPAN'S LNG IMPORTS200820102012201420162018202020220102030405060708090100Source: Kpler

Clara Tan, Singapore

Russian Gas Exports to Europe Pick Up in February

Russian pipeline gas exports to Europe picked up in February as transit flows via Ukraine recovered from a sharp drop at the beginning of this year.

Exports to Europe (excluding Turkey) rose 5% from January to some 1.9 billion cubic meters in February, Energy Intelligence calculates based on gas transmission data.

That is almost 80% less than the volumes shipped in February 2022, when Russian gas was still flowing to Germany via the Nord Stream and Yamal-Europe gas pipelines.

Since the start of the war in Ukraine on Feb. 24 of last year, Europe has been seeking to phase out pipeline imports of Russian gas, while Russian gas giant Gazprom has restricted exports to Europe.

Russian gas now flows to Europe via Ukraine and the onshore extension of the Turk Stream pipeline that runs beneath the Black Sea, but both routes have been operating well below their available capacity.

Daily flows of Russian gas to Europe in the shorter month of February rose by 16% versus January to some 67 million cubic meters per day.

The higher flows in February were largely attributable to a decline in Gazprom's hub-linked long-term contract prices which were too high in January to compete with spot gas supplies against the backdrop of unseasonably warm weather and high gas stocks in Europe.

On Mar. 1, transit flows via Ukraine remained flat at some 42.2 MMcm/d, based on the daily nomination, a level at which they had remained more or less stable since May 2022 before the sharp fall in January.

Created with Highcharts 9.0.0(MMcm/d)RUSSIAN GAS FLOWS TO EUROPE VIA UKRAINE, TURK STREAMUkrainian TransitTurk Stream to Europe5. Dec12. Dec19. Dec26. Dec2. Jan9. Jan16. Jan23. Jan30. Jan6. Feb13. Feb20. Feb27. Feb2025303540455055Source: GTSOU, Entsog, Energy Intelligence

Staff Reports


In Brief

Turkey's Imports of Russian Gas Tumble

Turkey’s imports of Russian gas fell some 18% to 21.57 billion cubic meters last year, according to official Turkish data.

A switch in pricing in early 2022, that linked prices to the Dutch TTF gas hub, has meant that Russia is now typically the most expensive source for Turkey's gas purchases.

That was probably the key driver behind the country's reduced appetite for Russian gas last year.

Nevertheless, imports from Russia had been holding up relatively well until the fourth quarter, when a big dip in October and November pulled down the annual average.

In contrast to its gas imports, Turkey's purchases of Russian crude oil and refined products in particular have risen.

Iran and Azerbaijan were Turkey’s No. 2 and No. 3 gas suppliers last year, with volumes of 9.4 Bcm and 8.7 Bcm respectively — more or less flat versus 2021.

Turkey's LNG imports rose around 8% last year, even as the country's overall gas imports edged lower.

LNG imports should continue to grow this year, with the commissioning of the country's third floating storage and regasification unit.

The US (5.6 Bcm) was Turkey's No. 1 LNG supplier in 2022, edging out Algeria (5.3 Bcm). Egyptian volumes rose to 2.2 Bcm.

The last quarter saw a trio of new LNG suppliers to Turkey, with cargoes arriving from Indonesia, Oman and Russia.

Turkey's Gas Imports
(Bcm)ImportsOf Which LNGLNG Share (%)Of Which RussiaRussian Share (%)
201850.3511.3322.5%22.6247.0%
201945.2112.6928.115.1933.6
202048.1315.0831.316.1833.6
202158.7014.1124.026.3444.9
202254.8815.3928.0%21.5739.3%

Rafiq Latta, Nicosia

Wilhelmshaven Begins Regular Operations

The Wilhelmshaven LNG import terminal, with an import capacity of 5 billion cubic meters per year, or about 3.5 million tons of LNG, has now commenced regular operations as of Mar. 1.

Local authorities issued a "final acceptance audit" for Wilhelmshaven LNG on Feb. 28.

Acceptance took place, without any objections, under the leadership of the Oldenburg State Trade Supervisory Office, according to terminal developer Uniper.

"With the successful completion of this final step, the Wilhelmshaven LNG terminal in Voslapper Groden has now commenced regular operations as of today, Mar. 1, 2023," Uniper said.

The Hoegh Esperanza FSRU arrived at Wilhelmshaven back on Dec. 15, began trial operation on Dec. 21, and has been unloading one LNG tanker every week since then, according to Uniper.

The terminal is capable of supplying about 6% of Germany's gas demand, yet is only one of three currently operating terminals and among a total of six expected before the end of 2023.

"Uniper, as the installer and operator of the terminal, will continue to play a key role in ensuring that there are no gas shortages in Germany in the future, especially in the coming winter of 2023-24," the company said.
Michael Sultan, Washington


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India11.7712.1511.8412.1411.4911.3512.5311.0812.4611.8711.2210.9911.29
Sodegaura, Japan12.6013.7613.7813.8312.579.6713.4511.6813.3414.1311.9511.2112.71
Zeebrugge, Belgium14.4213.0312.7113.0913.9914.2913.6712.6713.5512.7114.1013.3214.18
Huelva, Spain12.7611.4211.1211.4812.3212.1612.0311.0111.9211.1112.3711.5512.39
Isle of Grain, UK14.5313.1312.8113.1914.1214.3913.8712.7813.6612.8214.2113.4314.29
Everett, US1.600.280.570.331.341.220.010.950.77-0.031.77----
Created with Highcharts 9.0.0($/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 Asia14.7014.830.130.13
SW Europe12.7013.390.690.69
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.062.812.752.17
NBP, UK (futures)+0.3814.2713.8915.08
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF0.3415.1814.8415.88
Zeebrugge (Belgium)------11.90
German NCG0.2213.4613.2414.01
NBP (UK)0.6915.2414.5515.24
US Markets
US Spot Prices
Sabine Pass, Louisiana0.082.592.512.07
Corpus Christi, Texas0.132.512.38--
Cove Point, Maryland0.062.432.371.93
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month0.062.812.752.17
Second Mth0.082.942.862.30
Third Mth0.093.133.042.44
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaMar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '23Feb '23Mar '23Mar '…0255075100125Energy Intelligence