March 9, 2023


No New Russian LNG Deals, Says EU Commissioner

European Commissioner for Energy Kadri Simson said Thursday EU member states and companies should not renew supply contracts for Russian LNG.

“I encourage all member states and all companies to stop buying Russian LNG, and not to sign any new gas contracts with Russia once the existing contracts have expired,” Simson said in the European parliament.

However, European LNG buyers have made it clear they would stick to their existing offtake contracts unless the EU imposes sanctions on Russian gas exports. Existing contracts run until the late 2030s.

EU sanctions in response to Russia’s February 2022 invasion of Ukraine do not target exports of Russian pipeline gas or LNG.

“I think that we can and should get rid of Russian gas completely as soon as possible, still keeping in mind our security of supply,” Simson said.

By signing no new deals Europe would give “a clear signal to our trusted partners” that it is “limiting Russia’s ability to manipulate again with our markets,” Simson told a press briefing after speaking in the parliament.

“I do believe that there is no need to renew the contracts with Russian suppliers,” Simson said.

More LNG From Russia

Russia’s pipeline gas exports to Europe have dropped significantly since the start of the war, but Russian LNG shipments to the EU increased last year to around 20 billion cubic meters, according to Simson.

In five EU member states the share of Russian LNG has increased, and this brings “reputational risk” to the European buyers, Simson told the press briefing. Spain is one such member state.

Germany, meanwhile, says it is reducing Russian LNG exposure to its gas market, the largest in Europe.

“The operators of the floating storage and regasification units, the floating LNG terminals of Wilhelmshaven and Brunsbuttel, have ruled out the delivery of Russian LNG gas, according to company statements,” a spokesperson for Germany’s Federal Ministry of Economics and Climate Protection told Energy Intelligence.

Created with Highcharts 9.0.0(million tons)RUSSIAN WARTIME LNG EXPORTSJapanBelgiumSpainChinaFranceSouth KoreaGreeceNetherlandsTurkeyPortugalOthersJan'22Feb'22Mar'22Apr'22May'22Jun'22Jul'22Aug'22Sep'22Oct'22Nov'22Dec'22Jan'23Feb'2300.511.522.533.5Source: Kpler

Russia's Persistent Customers

Most Russian volumes come from the Novatek-controlled 20 million-plus ton per year Yamal LNG plant in the West Siberian Arctic, whose long-term European offtakers TotalEnergies and Naturgy have expressed no desire to stop receiving the cargoes unless there is a direct ban from the EU.

Russian LNG also comes to Europe from Novatek’s 660,000 ton/yr Vysotsk LNG plant in northwestern Russia and Gazprom's recently launched 1.5 million ton/yr Portovaya LNG facility, located near Vysotsk.

Naturgy’s 2.5 million ton/yr offtake contract with Yamal expires in 2038.

TotalEnergies’ 4 million ton/yr deal, expiring in 2032, is understood to have been increased by another 500,000 tons/yr during redistribution of the contract volumes of UK-based Sefe Marketing & Trading, formerly known as Gazprom Marketing & Trading, blacklisted by Moscow last year.

Traders which have contracts for Yamal volumes from Novatek’s portfolio, such as Gunvor, also keep receiving Russian cargoes.

In addition to Yamal, TotalEnergies has a long-term equity-offtake contract for almost 2 million tons/yr from Novatek’s 19.8 million ton/yr Arctic LNG 2 plant scheduled to start the first of its three trains at the end of this year.

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

Russia to Expand LNG Export Rights in the Arctic

The Russian government on Thursday submitted a bill to parliament to expand LNG export rights in the Arctic.

The bill will allow for increasing LNG production volumes to 100 million tons per year over seven years, Prime Minister Mikhail Mishustin said at a government meeting to discuss the bill.

Last year, Russia produced 32.5 million tons of LNG, up 8% from 2021.

The bill will expand the resource base for LNG projects and help “increase LNG exports significantly and in general strengthen Russia’s positions on the global market for this eco-friendly fuel,” Mishustin said.

LNG expansion is an important part of Russia’s gas export diversification plans amid the standoff with the West over the war in Ukraine. Russia’s pipeline gas exports to Europe have dropped significantly since the start of the war in February 2022, and Moscow needs to find new sales markets for its gas.

Russia’s prewar energy strategy set the LNG expansion target at between 80 million and 140 million tons/yr by 2035, but EU technology sanctions imposed last year have created serious difficulties for Moscow’s ambitions.

New Export Rights

Mishustin said the government suggested expanding the geography of upstream assets which are allowed to export LNG by including upstream blocks located far from the country’s unified gas grid, primarily in the northern parts of the Yamal and Krasnoyarsk regions. The two regions harbor a combined 3 trillion cubic meters of gas, Mishustin said.

The bill, drafted by the Energy Ministry last year, would amend the law on gas exports by granting LNG export rights to companies that develop upstream blocks located fully or partly to the north of the 67th parallel, which is about 50 kilometers north of the Arctic Circle.

The bill says that LNG eligible for exports can be produced from associated petroleum gas as well as from natural gas.

It also allows LNG exports as bunkering fuel, meaning that LNG sold in Russia as bunkering fuel will be allowed to be taken across the border in a vessel’s fuel tanks.

Current Law

The current law on gas exports allows LNG exports from the Arctic for the owners of upstream blocks of “federal importance,” whose licenses stipulate production of LNG as condition for the development of these blocks. That rule has been largely aimed at formalizing export rights for private Novatek’s LNG ambitions in the Arctic.

The law also gives LNG export rights to Gazprom as the operator of the country’s gas pipeline system; to state-run companies operating on the continental shelf, with Gazprom and Rosneft the only ones to qualify; and to operators of production sharing agreements, which applies to Sakhalin Energy LLC, the operator of the Gazprom-controlled Sakhalin-2 LNG project.
Staff Reports

Argentina's Latest LNG Export Plans Taking Shape

YPF’s final investment decision (FID) timeline has slipped into 2024 for a joint LNG export project with Malaysian state oil company Petronas, according to the Argentine company’s CEO.

But the consortium is still busy with regular meetings about the project, for which it aims to carry out two competitive front-end engineering and design studies, CEO Pablo Iuliano said on the sidelines of CERAWeek by S&P Global.

“We have a shared vision and we are advancing it very well,” Iuliano told journalists.

The project’s first phase is expected to be a $5 billion-$6 billion investment, Iuliano said, climbing to $50 billion by the end of five planned phases. The first phase aims to export 5 million tons per annum – with eventual capacity envisaged to expand to 25 million tons.

That cost will include both upstream and midstream infrastructure; the consortium last week announced a land lease deal with the Port of Bahia Blanca.

“The project will be integrated from the subsurface to the vessel,” Iuliano said.

The expectation is that as soon as next week a bill will be sent Argentina’s congress to provide incentives for LNG, as well as hydrogen, Argentina Energy Secretary Flavia Royon said in another panel at the event.

Mobilizing Gas

Executives told a panel at CERAWeek that they see particular opportunity and potential for Latin American natural gas given the pressures that the Ukraine crisis brought to bear in global markets.

The continent is still working to meet internal demand, however. Argentina will take a major step forward in this regard with the expected start-up in the middle of this year of the first phase of the Nestor Kirchner gas pipeline, which will carry volumes from the remote Patagonian play dubbed Vaca Muerta to the demand center of Buenos Aires.

But once domestic demand is met, executives see potential for both regional and global exports via LNG. Sending gas to Brazil via LNG could be simpler than building out costly pipelines onshore, according to Decio Oddone, CEO of Brazilian independent Enauta.

Development of the Vaca Muerta has been slow compared to the US shale patch, which has already seen multiple booms and busts. Today, the Argentina shale patch is getting a handle on costs, bringing the play into the range of the US Permian, and only in the last year or two building momentum to build out midstream infrastructure on a large scale.

But the maturation of the US shale patch has turned into an LNG boom that provided crucial volumes in the war’s wake — and proponents in Argentina hope their country can follow suit in the years to come.

“Vaca Muerta, in this respect, is the main candidate to become the long-term LNG supplier to Europe,” Marcos Bulgheroni, CEO of Argentina independent Pan American Energy, told the panel.

Challenges Ahead

But there are also headwinds — and skepticism over whether Argentina can pull it off — given prior failed attempts.

The country’s fragile economic situation — as well as stringent currency controls — has made it perennially challenging to obtain business financing. YPF would also be undertaking the project during an inflationary period where costs are on the rise.

The Argentine government has also sometimes struggled to follow through with promised business incentives due to its own fiscal challenges, including delays in paying out generous subsidies to encourage natural gas output.

Elections are also looming later this year — a change in presidential administration in 2019 scuttled momentum on energy projects.

A source with a major upstream operator in the country said he he didn’t believe Argentina was particularly well-positioned to enter global LNG markets given challenges including broad swings in gas demand due to seasonality.

Oil Exports

But YPF is also slowly and steadily building momentum on crude exports, envisaged as another means for the company to extend its reach and secure dollars to bolster its currency woes.

Argentina's oil exports were up 63% year to year in November, according to data compiled by the General Mosconi Energy Institute.

YPF aims to take a FID this year on a new pipeline and terminal, a system called Vaca Muerta South, which will allow the export of crude from the shale basin via very large crude carriers, according to Iuliano.

Construction is expected to start at the end of this year or beginning of next.

YPF plans to invest about $2.2 billion in the project in the 2022-27 period, with planned start-up in the first half of 2026, according to an investor presentation.
Kathrine Schmidt, Houston

Trinidad, Venezuela Talks Continue

Trinidad and Tobago remains in negotiations with gas-rich neighbor Venezuela in the wake of a US sanctions waiver issued earlier this year.

The waiver cleared a significant obstacle to using Venezuelan gas in Trinidad's otherwise underused 15.3 million ton per year Atlantic LNG export plant.

"Right now we’re in conversations and negotiations with Venezuela," Trinidad's Minister of Energy Stuart Young told Energy Intelligence on the sidelines of the CERAWeek by S&P Global conference in Houston this week.

"We pretty much can’t say anything more than that at this stage," he said.

Enter the Dragon

Young, however, was upbeat about the prospects of bringing Atlantic LNG back to capacity and the role of Venezuela's Dragon gas field in doing that.

Young highlighted all the work that has already been done with respect to the field on the technical side including a 2018 term sheet for the pipeline necessary to connect the Dragon gas field with existing infrastructure — only 17 miles away — in Trinidad.

"We have an excellent relationship with Venezuela and the US is one of our major allies as well. For us, when you have proven gas reserves next to existing capacity in state-of-the art plants, it’s a no-brainer," he said.

Trinidad has existing capacity to produce LNG, ammonia, fertilizer, methanol and so "all you need is access to global reserves of gas."

The US waiver may also have implications for the currently divided Loran-Manatee gas field that crosses Trinidad's border with Venezuela.

Partnership Restructuring

Energy Intelligence understands that a necessary condition for taking advantage of the US waiver is a revised partnership agreement for Atlantic LNG. There is currently a different ownership structure for each of four liquefaction trains, one of which is idle. A more efficient unitized structure is currently being negotiated with a March 31 target for a binding agreement.

Young told Energy Intelligence that a binding restructuring agreement was close at hand.

"We have restructured Atlantic LNG. We have agreed to commercial terms with BP and Shell," he said, adding that "right now we are trying to settle the definitive agreements, which I expect to be done in the not too distant future."

"One of the more interesting and exciting things is that this time there will be third party access," to the plant, he said, which is "perfect for someone like Woodside."

The Australian company is not a partner in Atlantic LNG, but is developing the deepwater Calypso field and deciding if it constitutes a priority in its corporate portfolio.

"We see a long long future. Gas is going to be around for decades to come," Young told Energy Intelligence.
Kathrine Schmidt, Houston and Michael Sultan, Washington

In Brief

Japan Sets Hydrogen Cost Target

A Japanese consortium studying hydrogen production via the coal gasification process in Australia is targeting a cost-competitive “large-scale supply chain” by 2030 for shipping liquefied hydrogen to Japan.

Japan's largest supplier of LNG in 2022 was Australia, which brought about 31 million tons, or 42% of Japan's supply, according to Kpler, with hydrogen now having the potential to be a competitor as well as a complement to that LNG trade.

Cost Target

The aim is to achieve a hydrogen supply cost of 30 yen per normal cubic meter (Nm3) in 2030 at the point of arrival in Japan, according to a Mar. 8 statement by the consortium, which includes the New Energy and Industrial Technology Development Organization (Nedo), Japan Suiso Energy, Iwatani, Eneos and Kawasaki Heavy Industries.

This translates into a cost of $2.44 per kilogram, assuming a conversion factor of 0.0899 kg to each Nm3, which measures the amount of gas occupying 1 cubic meter at a pressure of 1 atmosphere and at a standard temperature of 0°C.

“The project will establish the world's first large-scale liquefaction and transportation technology for clean hydrogen on the scale of tens of thousands of tons per year,” said the partners.

Victoria to Japan

The production process involves the gasification of coal in Australia’s Victoria state and includes carbon capture and storage to establish a “CO2-free hydrogen supply chain.”

Under a previous pilot project, the first shipment of liquefied hydrogen extracted from coal in Victoria arrived in Japan during February, 2022.
Kim Feng Wong, Singapore

Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India9.9010.289.9710.269.629.4810.659.2110.589.999.359.129.42
Sodegaura, Japan10.7311.8811.9011.9510.717.8211.589.8211.4712.2510.099.3510.84
Zeebrugge, Belgium11.7610.4010.0810.4511.3411.6411.0310.0510.9110.0811.4510.6811.53
Huelva, Spain9.187.887.597.938.758.608.487.478.377.588.818.018.83
Isle of Grain, UK12.1310.7510.4410.8111.7312.0011.4810.4111.2810.4411.8211.0511.89
Everett, US1.510.180.470.
Created with Highcharts 9.0.0($/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 Asia13.2012.95-0.16-0.26
SW Europe11.109.82-0.83-1.28
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.012.542.552.77
NBP, UK (futures)+0.3212.9812.6613.99
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-0.2813.0413.3214.85
Zeebrugge (Belgium)--10.45----
German NCG-0.7811.7612.5413.24
NBP (UK)-0.8312.9113.7414.78
US Markets
US Spot Prices
Sabine Pass, Louisiana0.022.512.492.67
Corpus Christi, Texas-0.012.372.382.61
Cove Point, Maryland0.012.442.432.62
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month-0.012.542.552.77
Second Mth-0.032.682.712.90
Third Mth-0.032.922.953.09
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaApr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '23Feb '23Mar '230255075100125Energy Intelligence