March 7, 2023

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Tanzania Completes Negotiations With Shell and Equinor

Tanzania has completed negotiations with Shell and Equinor on a long-delayed scheme to build an LNG terminal on the Indian Ocean and is now in the process of drafting contracts on the project, the country’s energy minister announced on Twitter late Monday.

Tanzania LNG, which was devised more than a decade ago as the best way to monetize the country’s large deep-water gas reserves, made painstaking progress before being given a much-needed shake by President Samia Suluhu Hassan, who came to power two years ago. In June last year, her government signed a framework deal with Shell and Equinor that earmarks a target date of 2025 for a final investment decision on the project, and sets a tentative start-up date of 2029.

In its tweet, the energy ministry said its experts were preparing two contracts on Tanzania LNG: a host government agreement that would lay out a commercial and legal framework for the project, and a combined contract for the development of deepwater blocks 1, 2 and 4, which would provide all the gas for the new LNG plant.

Shell is operator of Blocks 1 and 4, which have estimated recoverable reserves of around 16 trillion cubic feet, while Equinor is the lead partner in Block 2, which has estimated reserves of over 20 Tcf.

Tanzania and the two European majors have provided few details on the commercial structure of what would be one of sub-Saharan Africa’s largest and costliest energy projects.

An independent study carried out for the government last year by South Africa’s Standard Bank gave some clues, however, by mentioning a 15 million ton per year capacity for the export terminal at the port of Lindi, and estimated gas feed of around 2.5 billion cubic feet per day. Shell and Equinor would each hold a 44% interest, with the remaining 12% to be owned by state Tanzanian Petroleum Development Corp.

There is still no guarantee that the project will get off the ground, not least because of the need to raise large amounts of project finance at a time when international lenders are moving away from fossil fuels.
Paul Sampson, London

Russia Seeks Resource Base for LNG Expansion

Russia needs to secure additional resources for new LNG projects to reach its medium-term export target of 100 million tons per year, Deputy Prime Minister Alexander Novak said Tuesday.

Projects now in development will increase Russia’s production to 66 million tons/yr from the existing capacity of some 33 million tons/yr, Novatek said at a government meeting on LNG development.

“We need to find additional resource base for projects with another 34 million tons/yr of capacity,” Novak said, as quoted in a government statement released after the meeting.

The government did not say whether the meeting discussed the fate of Gazprom’s giant Tambei field in the Arctic which Novatek has long sought to be part of its LNG expansion ambitions in the region.

Measures to Spur LNG

To spur LNG expansion, Russia also needs comprehensive cooperation between companies and state bodies, domestic production of equipment for large and medium-sized LNG projects, and reduced administrative barriers for the projects, Novak said.

Top gas producers Gazprom, Novatek and Rosneft attended the meeting, as well as officials from the energy ministry and industry and trade ministry.

Novak instructed the participants to set up working groups, assess the extent of Russia’s reliance on imported equipment, draft a roadmap to set up domestic production of LNG equipment and technology, and ensure resource base for new projects.

LNG Target Hit by Sanctions

Russia’s pre-war energy strategy set the LNG expansion target at between 80 million and 140 million tons/yr by 2035, but now Russian officials tend to the 100 million tons/yr figure, which Moscow believes it can reach by relying on domestic technology.

Most Russian LNG projects were put on pause due to the EU technology sanctions imposed last year, banning the exports of key liquefaction equipment for Russian projects, as well as withdrawal of key Western engineering contractors because of Russia’s invasion of Ukraine.

Russia still sees LNG as a key direction for its gas export diversification, as its pipeline gas exports to Europe have shrunk dramatically amid the war in Ukraine and building up exports to Asia will take years to replace the lost volumes.

Projects to Add Capacity

Novak referred to Novatek’s 19.8 million ton per year Arctic LNG 2 and Gazprom’s 13 million ton/yr Ust-Luga projects when speaking about the projects that will double the existing production.

Arctic LNG 2 looks safe to launch its first of three trains at the end of this year. Novatek admits there are more difficulties with the other two trains, but it maintains plans to launch them in 2024 and 2026.

Ust-Luga is a bigger uncertainty, following the withdrawal of Linde, key engineering and construction contractor of the project. Sources tell Energy Intelligence, Gazprom is now looking for domestic and non-Western engineering companies and equipment suppliers to build at least one train without Linde. It is now also seeking damages from Linde in court.

Novatek can however add 5 million or 6 million tons/yr in extra capacity by building the two-train Obsky LNG plant based on the company’s own Arctic Cascade technology, which still needs an upgrade for the project to go ahead. Novatek plans to take a final investment decision on Obsky in the second or third quarter this year.

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

Papua New Guinea Calls for Local Carbon Offsets

Papua New Guinea (PNG) Prime Minister James Marape has called for the Papua LNG project to be carbon-neutral through locally-based offsets.

The PM's call comes as TotalEnergies and its partners start front-end engineering and design (Feed) work on the project.

PNG is an important location for Asian supply. The country's existing liquefaction plant, Exxon-led PNG LNG, appears to be largely immune from European market stresses. The plant exported 8.7 million tons in 2022, according to Kpler, none of which was diverted from Asia to Europe despite the latter's loss of Russian piped gas.

Local Offsets

“I would like to appeal to our LNG partners to offset their carbon footprint locally,” Marape said in a statement adding that he wants PNG to remain identified as a “green country.”

Marape sees Total's tree-planting and forest conservation program in Gabon as a good example of work that could be replicated in PNG, particularly in the Gulf Province, he said.

The Gulf Province is where the Elk-Antelope fields, which will feed the Papua LNG project, are located.

Marape’s comments come after French President Emmanuel Macron invited him to attend the One Summit Forest, a conference focused on conservation and sustainable management of forests that took place in Gabon last week.

Total seems to be open to having a tree planting and forest conservation program in PNG as Marape commended the French company for its “understanding thus far.”

Total plans to spend $100 million per year to build a portfolio of projects capable of generating at least 5 million metric tons of CO2 equivalent of carbon credits per year by 2030.

These carbon credits will be used after 2030 to offset the company’s operational (Scope 1 and 2) emissions.

Low Carbon Concept

Papua LNG’s recently announced revised concept, emerging from pre-Feed studies, is already expected to lower its carbon footprint while increasing its production capacity from 5.6 million tons per year to up to 6 million tons/yr.

The expanded project is the result of a new design based on a 4 million ton per year four-train concept using electric drive (e-trains).

An additional 2 million tons/yr will come from the use of PNG LNG’s liquefaction capacity.

In exchange, Papua LNG will pay access and tolling fees as well as a pro-rated share of PNG LNG operational expenditure.

The use of e-trains combined with the re-injection of reservoir CO2 will help reduce the carbon intensity of the project, Total said in a statement.

However, it is not clear what power source the e-trains will be using.

Previously, Total and partners Santos and Exxon Mobil were eyeing a two-train concept using conventional turbines.

Lower Cost

The new concept is expected to make the Papua LNG project cheaper with costs to be refined during the Feed phase, Santos said in a statement.

Costs for the project under Papua LNG’s initial two-train design were estimated around $12 billion-$14 billion.

However, operator Total now says the project represent a $10 billion investment.

Papua LNG partners intend to explore project finance opportunities for a portion of the project cost, Santos said.

Shareholder Alignment

To better align the shareholding structure between Papua LNG and PNG LNG, Total has signed a head of agreement with JX Nippon with a view to selling a 2% interest (post Kumul back-in right) in Papua LNG.

JX Nippon is an affiliate of Eneos and already holds a 4.7% interest in PNG LNG.

Total holds 40.1% interest in Papua LNG, along with its joint venture partners Exxon (37.1%) and Santos (22.8%).

Papua New Guinea may exercise a back-in right of up to a 22.5% interest should the Papua LNG project be sanctioned at the end of the year or in early 2024.

Production is slated to start by the end of 2027 or early 2028.

PNG LNG Current Shareholding Structure
Company% PNG LNG
Exxon Mobil*33.2%
Santos42.5
Kumul Petroleum16.8
JX Nippon4.7
Mineral Resources Development Co.2.8%
Papua LNG Current Shareholding Structure
Company% Papua LNG
Exxon Mobil37.1%
Santos22.8
TotalEnergies*40.1%

Marc Roussot, Singapore

French Labor Strike Shuts Three LNG Import Terminals

Striking workers have led to the shutdown of three LNG import terminals in France.

Sufficient underground gas storage stocks and expected warmer weather are set to limit the impact on France, but cuts in gas supplies to neighbor Germany — suffering the most from Russian piped gas cuts — are not going to be helpful.

French terminal operator Elengy has reportedly shut down the Montoir, Fos Cavaou and Fos Tonkin terminals due to striking workers at the facilities, which are not expected to return to operation until Mar. 14.

Through storage withdrawals and gas export cuts, France should be able to cope with the terminals being unavailable, market sources tell Energy Intelligence.

Relying On Storage

“They will have to increase [the] withdrawals rate a bit, not export to Germany and to Spain, I think this should resolve the situation,” a source active on the Spanish market said.

However, the source added that raising withdrawals may lead to French storage sites ending the winter with lower-than-expected stock levels.

French underground storage sites were at 36% of their capacity on Mar. 6, according to data from Gas Infrastructure Europe.

From a price perspective, the terminal shutdowns are set to translate into an increased premium for the French PEG Day-ahead gas contract over the Spanish PVB and German THE equivalents, the source highlighted.

The weather is also set to come to France’s aid to limit gas demand, with warmer temperatures expected in the country for next week, says a European gas trader.

Cargo Diversions

On the other hand, the terminal shutdowns have resulted in various LNG cargo diversions from France.

The 74,500 cubic meter Global Energy, laden with an Algerian cargo, was diverted from the Fos Cavaou terminal to the Spanish Barcelona terminal, according to ship-tracking data by Kpler.

The 173,400 cubic meter Maran Gas Olympias has also been diverted from the Montoir terminal, with its new destination currently unknown.

The 137,200 cubic meter LNG Sokoto from Nigeria has been redirected toward the UK's Grain terminal from Fos Cavaou, according to the vessel's last broadcasting signal on Mar. 4.

The 174,000 cubic meter Minerva Amorgos, transporting a cargo from the US Calcasieu Pass plant, was expected at Fos Cavaou on Mar. 9. However, on Tuesday morning it changed course before reaching the Strait of Gibraltar and is now heading north in the Atlantic Ocean.
Daniel Stemler, Madrid

Enbridge, Cheniere Chiefs Call for Permitting Progress

Washington and Ottawa need to improve the consistency and speed of infrastructure permitting for the natural gas industry to be able to meet long-term demand and keep the commodity affordable for consumers, executives told CERAWeek by S&P Global on Tuesday.

“There’s a big void in the amount of infrastructure that’s being built or not built in North America,” Cheniere Energy CEO Jack Fusco said during a panel discussion. “Here in [North America] last year was the least amount of investment in natural gas pipelines since 1993. We’ve got to change that.”

The way to change that, according to Fusco and Enbridge CEO Greg Ebel, is to improve the cumbersome and lengthy permitting processes in both the US and Canada that can delay energy infrastructure projects for years and discourage investment.

“It takes longer and longer [to build pipelines in North America], and it depends on the jurisdiction,” said Ebel. “The capital is going to go where it’s going to be invested.”

Ebel pointed to the US Gulf Coast as a region in which infrastructure projects have had an easier time getting built because of a more accommodating regulatory and permitting environment. He contrasted that with the US Northeast, which is “only a few hundred miles from the Marcellus Shale” yet still suffers from supply issues that cause gas prices to skyrocket for consumers.

“There’s only one reason for that,” said Ebel. “And that’s infrastructure. You’re asking people to pay unbelievable [gas] prices … purely as a result of the infrastructure not being there.”

Rotting Carrots

Ebel acknowledged that the Biden administration was moving in the right direction in terms of improving the environment for investing in gas infrastructure projects, but stressed that slow permitting processes still stood in the way of progress.

“I was really pleased with [John] Podesta’s comments yesterday,” he said, referring to the White House climate advisor’s calls for the US Congress to pass the permitting reform package that failed last year.

“I thought that was a different way of looking at things. Let’s stop focusing on what to divest from and focus on what to invest in. … [The Biden administration] is trying to put out a lot of carrots to get capital attracted to investments in the energy transition and infrastructure. But if you can’t get the permitting done, those carrots are going to rot on the table.”

Fusco said that permitting problems could also derail some carbon reduction efforts, particularly when it comes to getting Class VI approvals from the US Environmental Protection Agency for carbon sequestration wells.

“For [Cheniere], the biggest impact [in our low-carbon strategy] will be carbon sequestration,” said Fusco. “Here in the [US] you need Class VI well permitting … That infrastructure needs to happen.”

Lost Decade

Ebel lamented what he called “the lost decade” in Canada, during which several proposed projects in British Columbia that would have moved gas from Alberta to ports on the Pacific fizzled due to various regulatory and political delays.

“10 years ago … on the Canadian West Coast there were multiple projects,” he said.

“Today we still haven’t built on the West Coast of Canada, but on the [US] Gulf Coast we’re building all kinds of things. Instead of a lost decade … we need a decade of consistency in terms of energy policy, permitting, all those things.”
Chris Raine, Houston


In Brief

Spot LNG Continues Drop From December Peaks

Spot LNG prices in Northeast Asia fell by $1.50 to $13.20/MMBtu, according to Energy Intelligence assessments for deliveries four to eight weeks ahead. In Southwest Europe, spot LNG prices fell by a further $1.60 week on week to $11.10/MMBtu.

Both markers have fallen steadily since near-term peaks in December of around $35/MMBtu and remain well south of late August peaks of $60/MMBtu-plus.

This week, Asian spot LNG prices slipped once more to new lows not seen since June 2021, with buyers waiting for new price drops before making a significant return to the spot market.

Regional demand remains low from utilities that continue to have comfortable stocks following a relatively mild winter and healthy supplies.

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

Marc Roussot, Singapore and Daniel Stemler, Madrid


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India10.1510.5310.2210.519.879.7310.909.4610.8310.259.609.379.67
Sodegaura, Japan10.9812.1312.1512.2110.968.0711.8310.0711.7212.5010.349.6011.09
Zeebrugge, Belgium14.3913.0012.6713.0613.9614.2613.6412.6413.5212.6814.0713.2914.15
Huelva, Spain10.479.158.859.2010.039.889.758.749.658.8510.099.2810.11
Isle of Grain, UK13.4112.0211.7012.0813.0113.2812.7611.6712.5511.7113.1012.3213.17
Everett, US1.670.340.630.391.401.280.011.020.840.031.84----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback3. Oct17. Oct31. Oct14. Nov28. Nov12. Dec26. Dec9. Jan23. Jan6. Feb20. Feb6. Mar10203040Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia13.2013.20-1.91--
SW Europe11.1011.10-0.88--
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.122.692.572.75
NBP, UK (futures)+0.3712.8712.5113.67
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF0.3413.8813.5414.67
Zeebrugge (Belgium)--------
German NCG-0.1912.2312.4213.40
NBP (UK)0.5914.2013.6114.32
US Markets
US Spot Prices
Sabine Pass, Louisiana0.062.522.462.51
Corpus Christi, Texas0.002.402.402.38
Cove Point, Maryland-0.122.512.632.37
Elba Island, Georgia----2.35--
Nymex Henry Hub Futures
Near Month0.122.692.572.75
Second Mth0.112.842.732.86
Third Mth0.133.062.933.04
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaApr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '23Feb '23Mar '230255075100125Energy Intelligence