March 14, 2023


Russia Eyes New Production Cluster

Russia's natural resources ministry is targeting the gas resources of the Sakha (Yakutia) region as a new resource base for the gas industry and LNG expansion in particular.

Natural resources minister Alexander Kozlov was quoted as saying on Monday that the state has set a task to fully study gas resources of the Yakutia region to secure the necessary resource base for the gas industry.

Russia is looking for additional resources for new LNG projects as it aims to increase LNG production to 100 million tons per year by 2030 from 32.5 million tons in 2022 — a key part of its gas export diversification as its pipeline gas exports to Europe have dropped significantly due to the war in Ukraine.

Moscow plans to explore five blocks in Yakutia with investments expected at 4.2 billion rubles ($56 million), Kozlov said.


“This will allow for creating a new gas production cluster in Yakutia with potential transportation via the Northern Sea Route (NSR),” he said.

Kozlov did not elaborate on where the cluster will locate within the huge Yakutia region, but export of the gas via NSR suggests Moscow might seek to create an LNG production cluster in the northern part of the region.

The government last week submitted a bill to the parliament to allow LNG exports from projects to the north of the Arctic Circle, where more than 40% of Yakutia’s territory is located.

Moscow seeks to significantly increase cargo transportation via NSR to Asia, with LNG regarded as the key growth driver, mainly thanks to Novatek’s LNG expansion ambitions on the Yamal and Gydan Peninsulas in the West Siberian Arctic.

An LNG production cluster in Yakutia will require an upgrade or construction of new seaport infrastructure. Yakutia has the Tiksi seaport which transported 671,000 tons of cargoes, mainly oil products and coal, in 2022, up 60% from 2021 (see map).

Russia Looking East


Yakutia Gas Projects

Yakutia doesn’t have any large or medium-sized LNG production now. Regional gas producer Yatec, of privately owned A-Property, is pursuing the 18 million ton per year Yakutia LNG plant, but its plans have been complicated by the EU technology sanctions imposed against Russia last year. The sanctions banned the export of key liquefaction equipment for Russian LNG projects, as well as led to the withdrawal of key Western contractors.

Yatec however keeps Yakutia LNG on the list of its priority projects and continues to expand its resource base for the project, which is not dependent on the NSR.

The project involves upstream development in Yakutia, construction of a 1,358 kilometer (844 mile) gas pipeline to the coastal village of Ayan in the Khabarovsk region and construction of a four-train LNG export plant in Ayan, on the coast of the Sea of Okhotsk.

State-run Gazprom has a gas production cluster in Yakutia as well, with the Chayandinskoye (Chayanda) gas field being the key asset. Launched in 2019, Chayanda feeds the Power of Siberia pipeline which exports gas to China under a 38 billion cubic meter per year deal between Gazprom and China National Petroleum Corp.
Staff Reports

EU Proposes Cautious Electricity Market Reforms

The European Commission has released long-awaited proposals for EU electricity market reforms that side-step a major overhaul, leave gas as the main price-setting fuel, and provide a boost to renewables.

The measures are intended to support rapid deployment of renewables in Europe, especially solar power and offshore wind.

They also put in place measures to support energy storage and demand-side responses to reduce consumption of fossil gas, especially during periods of high demand and prices.

WindEurope CEO Giles Dickson said he was glad the commission's proposals built on the existing market design that has worked for decades, rather than seeking a radical overhaul of the kind favored by some member states, including Spain and Greece.

In the long term, the commission expects the proposals to boost the roll-out of renewable power by promoting two-way contracts-for-difference (CFDs) for government-funded power projects and power purchase agreements (PPAs) for energy-intensive businesses.

Dickson said both measures should lead to increased investment in renewable power projects in the EU.

The commission said its proposals should provide greater certainty to suppliers and consumers of electricity, making them less vulnerable to short-term price spikes by giving suppliers more clarity about forward earnings and allowing consumers to lock into fixed-term contracts.

The proposals will also require grid operators to connect more renewable power to their networks, addressing a key condition for further growth of carbon-free electricity in Europe.

Energy Commissioner Kadri Simson said that in order for the EU to attain its energy and climate targets, "the deployment of renewables will need to triple by the end of this decade."

The commission said that the share of the bloc's electricity produced from renewable sources — mainly solar and wind — is expected to grow from 37% in 2020 to more than 65% by 2030.

Some May Be Disappointed

The proposals come six months after European Commission President Ursula von der Leyen promised a "deep and comprehensive" reform of the EU's electricity market and suggested that this would require ending the key role natural gas has played in setting electricity prices.

Gas and power prices in Europe surged last year as Russia restricted natural gas supplies to the region after its invasion of Ukraine. Prices have since fallen, but concerns about energy security persist.

The proposals do not seek to sever the connection between gas and power prices, however, although the commission argues that it will be weakened in the longer term through greater use of CFDs and PPAs.

France and Spain in particular may be disappointed by the proposal, as both had pushed for a decoupling of Europe's wholesale power and gas markets.

But France will likely be appeased by the fact that CFDs will be available for the 6-14 new nuclear power plants that it plans to build.

All new nuclear plants that receive state aid in the EU — most of them in practice — would have to take it in the form of CFDs under the commission's proposals.

The proposals must now be discussed and approved by the European Parliament and the governments of the bloc's 27 member states.

The commission said it is confident that they will prioritize the reform package and “hopes to see it adopted as soon as possible."

However, it remains to be seen whether the legislation will get across the finish line before European Parliament elections next year.

EU powerhouses France and Germany are split on the schedule for implementing the reforms.

France wants them passed before the elections, while Germany has previously proposed waiting until after the elections next spring.
Jason Eden, London and Grace Symes, London and Eric Thorp, London

Woodside CEO Sees Dynamic Market Ahead

Woodside CEO Meg O’Neill told Energy Intelligence on the sidelines of CERAWeek by S&P Global that dynamic world LNG markets lay ahead.

"I think the next few years will be quite dynamic for us as China pursues economic recovery following the Covid constraints," she said last week, adding "that’s going to be positive for demand."

On the European side, O'Neill has more questions than answers.

"Some folks are forecasting recessionary forces, but the [gas] prices have softened enough that we may see industrial activity restart. So probably a bit of a question mark in Europe," she said.

"The fact that the forward curve for the summer is where it is now tells me the market is pretty finely balanced, and any sort of shock on the demand side could cause a yet another price spike," she told Energy Intelligence.

O'Neill recognizes that the Atlantic and Pacific Basins are very much interconnected.

"Demand conditions in one basin can pull supply from the other ... we’ve seen that quite clearly and US LNG tends to be the swing," with large volumes going through the Panama Canal.

Trinidad's Calypso

Woodside continues to study the 3.2 trillion cubic feet deepwater Calypso project offshore Trinidad and Tobago, which could potentially serve as backfill for the underused 15 million ton per year Atlantic LNG export terminal.

The Calypso resource was appraised in late 2021, O'Neill told Energy Intelligence.

"For 2022, the team has been doing our concept selection work, maturing our understanding of the subsurface and evaluating what sort of development plan would be best to progress the resource," she said, adding that "we’re working closely with the government of T&T on how will we get something that will work for all stakeholders."

"The opportunity to bring gas through an existing LNG facility that has capacity to support the Atlantic market is a fantastic opportunity, we’re very excited about that. [But] we need to make sure we’ve got a development that meets our economic targets. That’s what the team has been focused on," she said, reiterating what Calypso's project director told the T&T Energy Conference back in January.
Kathrine Schmidt, Houston and Michael Sultan, Washington

In Brief

Spot LNG Prices Rebound

Spot LNG prices in Northeast Asia jumped by $1.65 week on week to $14.85 per million Btu, according to Energy Intelligence assessments for deliveries four to eight weeks ahead. In Southwest Europe, spot LNG prices rose by $2.40 week on week to $13.50/MMBtu.

Spot LNG prices on both the Atlantic and Pacific Basins jumped from their lowest levels since June 2021 on the back of higher European gas hub prices following a combination of lower French nuclear output and an extended workers’ strike shutting down operations at French LNG import terminals.

Colder weather in Europe also helped drive European gas demand and prices higher.

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

Marc Roussot, Kuala Lumpur and Daniel Stemler, Madrid

Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India11.7912.1711.8612.1511.5111.3612.5511.0912.4811.8811.2311.0011.30
Sodegaura, Japan12.6113.7713.7913.8512.589.6613.4711.6813.3614.1511.9611.2112.72
Zeebrugge, Belgium15.7314.3213.9914.3815.3015.6014.9813.9614.8614.0015.4114.6115.49
Huelva, Spain12.8611.5211.2111.5812.4212.2612.1311.1112.0311.2112.4811.6512.49
Isle of Grain, UK14.5313.1312.8113.1814.1214.4013.8712.7813.6612.8114.2113.4214.29
Everett, US1.820.480.780.541.551.430.011.170.990.181.99----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback10. Oct24. Oct7. Nov21. Nov5. Dec19. Dec2. Jan16. Jan30. Jan13. Feb27. Feb13. Mar10203040Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia13.2014.852.031.65
SW Europe11.1013.500.882.40
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)-0.032.572.612.69
NBP, UK (futures)-1.7713.4715.2413.25
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-1.3014.2215.5214.09
Zeebrugge (Belgium)-1.7610.8912.65--
German NCG-1.6512.6914.3412.04
NBP (UK)-1.0414.6815.7214.62
US Markets
US Spot Prices
Sabine Pass, Louisiana----2.432.52
Corpus Christi, Texas----2.362.40
Cove Point, Maryland----2.712.51
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month-0.032.572.612.69
Second Mth-0.042.692.732.84
Third Mth-0.052.922.973.06
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaApr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '23Feb '23Mar '230255075100125Energy Intelligence