March 16, 2023


PDVSA Pushback Could Rattle T&T Talks

Renewed PDVSA objections to developing Venezuela’s Dragon field via infrastructure in Trinidad and Tobago — instead of via domestic markets — could be an obstacle in landmark negotiations on the project under a rare license from the US Treasury, multiple sources tell Energy Intelligence.

The Venezuelan state oil company and officials have reinforced a long-held view that the internal market should be "defended first,” Energy Intelligence understands, instead preferring plans to connect the Shell-operated Dragon with infrastructure in the town of Guiria on the Paria Peninsula. In that view, separate infrastructure could then carry gas to Trinidad.

But that plan is considered substantially less efficient and could be a nonstarter, given that Dragon is only 17 kilometers from Shell’s existing Hibiscus platform already connected to Trinidad and Tobago’s feedgas-hungry Atlantic LNG.

Those tensions may drive upcoming high-level meetings between Trinidad & Tobago Prime Minister Keith Rowley and Venezuelan president Nicolas Maduro, multiple sources suggested.

In January, the US Department of the Treasury granted a license to Trinidad and Tobago to resume discussions with Venezuela on advancing the project, for which it had signed a term sheet in 2018.

Talks Ongoing

Asked about the rumored tensions, Shell confirmed the ongoing talks but did not provide further details.

“Shell Trinidad and Tobago Limited was invited by the Government of the Republic of Trinidad and Tobago to preliminary discussions with the Government of Venezuela to discuss the development of the Dragon gas field,” a spokeswoman said. “These are very early discussions, and we are not in a position to comment further.”

Energy Secretary Stuart Young at last week’s CERAWeek by S&P Global conference confirmed that negotiations were progressing but declined to discuss specifics. This week he said on social media that he was in Caracas for meetings with a PDVSA team.

Various combinations of partners have been trying for over 20 years to develop the chain of offshore gas discoveries known as Mariscal Sucre, of which Dragon is a part. But various iterations have foundered amid economic and political difficulties.

Path Forward?

It wouldn't be surprising that PDVSA would want to avoid being seen exporting gas when it can’t currently meet domestic demand — especially given internal political pressure to spur economic recovery ahead of presidential elections next year.

As such, Venezuela officials may aim to use others’ urgency as leverage to try and secure either better prices or infrastructure improvements.

“T&T is eager for the gas … and on the Venezuelan side there is no rush,” one source added.

But a push on the project without partner cooperation continues to face major challenges.

“Venezuela currently does not have a place to send, in the short term, that gas for its domestic market,” another source wrote. “Additionally, it does not have the financial resources to complete the project.”

Long-term, Venezuela’s offshore gas could help as a source of adaptation as the world moves towards lower-carbon energy sources, the person said.
Staff Reports

Former Gazprom Unit to Resume LNG Supplies to Gail

Former Gazprom subsidiary, Securing Energy For Europe (SEFE) Marketing and Trading, will deliver two cargoes in March to Indian natural gas distributor Gail under a long-term supply contract, after ceasing supplies last May, a senior Gail official said.

SEFE had delivered its cargoes to Europe as it could sell the fuel at more than $30 per million Btu during the war-induced supply crunch, compared to oil-linked levels of hardly $11/MMBtu to Gail, industry officials said, making a profit despite non-delivery penalties.

SEFE has now agreed to again supply cargoes to Gail because prices of LNG have come down by over 70% from last year's levels to around $13/MMBtu. Moreover Europe does not need spot LNG now because of adequate stocks and warm weather, an industry official said.

SEFE will supply two cargoes each in March and April as compared to a contracted 3-4 cargoes, said Sandeep Gupta, Chairman, Gail. The cargoes will be sourced from projects in the UAE, Egypt and the US.

The 173,400 cubic meter Energy Integrity delivered a SEFE cargo from Cameroon’s liquefaction facility at India's 17.5 million ton per year Dahej terminal on June 27.

SEFE Penalty

SEFE was willing to pay Gail the penalty under the contract, as it was just 20% of the contract value of a cargo, a Gail official said. Even after paying the penalty they could make huge profits selling the cargoes to Europe, the official said.

SEFE has failed to deliver on at least 34 cargoes to Gail under a 20-year, 2.5 million ton/yr contract in the June-February period, industry officials said. SEFE has missed deliveries since late May, with Gail receiving one cargo in June, the company said at an earnings call last year.

Gail had earlier sought to pursue legal measures after receiving force majeure notices from SEFE following Russia’s invasion of Ukraine.

Gail will supply LNG to state-run generator NTPC for 18 days over April and May to help power India's gas generators, Gupta said. Gail is ready to buy additional supplies from the spot market to supply gas-fired facilities this summer, he said.
Dinakar Sethuraman, New Delhi

Petronas Seeks Long-Term Fix to Sabah-Sarawak Pipeline Issues

Malaysia’s Petronas is trying to find long-term solutions to avoid recurring leaks on its Sabah-to-Sarawak Gas Pipeline (SSGP).

An investigation should be completed by the end of June after a landslide due to heavy rains impacted the integrity of SSGP in October last year.

The incident forced Petronas to declare force majeure on its three-train 9.6 million ton per year Malaysia LNG Dua facility in Bintulu.

“We are doing all we can to get it [SSGP] to a level that we can not only rectify the section that needs to be fixed but most importantly to make sure that we can operate this pipeline safely,” said Petronas Upstream CEO Adif Zulkifli during an earnings presentation on Monday.

“It will take quite a bit of time to get it fixed,” Adif added.

Petronas may be considering rerouting portions of the pipeline, a source told Energy Intelligence.

Rough History

SSGP is a 500 kilometer long pipeline designed to transport up to 750 million cubic feet per day of gas from Kimanis in the Malaysian state of Sabah to be processed at Petronas' large LNG plant in Bintulu, Sarawak.

The pipeline has regularly been impacted by leaks since it came online in 2014, mainly due to soil movements.

An explosion also occurred in November last year after a third-party contractor was performing work unrelated to SSGP near the pipeline.

Meeting Obligations

Malaysia LNG Dua remains under force majeure, but Petronas is confident it can meet its contractual obligations in 2023.

“At this point, we do not believe we are unable to service the full contract requirements for the year for all our customers,” Petronas CEO Tengku Muhammad Taufik said.

“All our customers are there with us as partners because we are able to reliably supply, and we source from a portfolio,” Taufik said.

“Despite the announcement of a force majeure, we have made every endeavor to ensure that their supplies are not disrupted,” he also said.

But Japan Feels the Pinch

Energy Intelligence understands that long-term contracts’ downward quantity tolerance and deferral provisions were the main levers pulled to manage the loss of cargoes last year.

Petronas may also have increased production in Sarawak to cover the shortage in supply from Sabah, a source said.

Japanese buyers were the most impacted by the force majeure, having to source cargoes from the spot market at a time of high prices.

The Japan Korea Marker, Asia’s de facto benchmark, was hovering between $35.50 and $25.50 per million Btu in October at the time of the landslide.

Created with Highcharts 9.0.0(million tons)MALAYSIA'S LNG EXPORTSJapanChinaSouth KoreaThailandTaiwanIndiaBangladeshPakistanMyanmarSingapore20182019202020212022051015202530Source: Kpler

Marc Roussot, Kuala Lumpur

Taiwan to Boost LNG Security Reserve

Taiwan's state-owned CPC will boost its LNG security reserve to 14 days by 2027, up from 11.4 days currently, CPC chairman Lee Shun-chin stated during a legislative hearing Mar. 16.

Lee made the statement in front of the Legislative Yuan`s economic affairs committee as it discussed Taiwan's current and future energy supply and storage.

Economic Affairs Minister Wang Mei-hua told the committee that as of February 2022, CPC`s actual LNG reserves amounted to 11.4 days, in line with the eight-day legal requirement.

She added that CPC was expanding the Yung'an and Taichung terminals, constructing a third terminal at Guantang in Taoyuan City and was planning a "Rim" terminal in Kaohsiung City.

With those expansions, CPC aims to maintain an 11-day reserve in 2025 and at least 14 days by 2027.

Wang said that to ensure stable supply, CPC imported LNG from 13 countries last year, including Australia (37%), Qatar (26%) and the United States (11%) and would continue to diversify in the future.

In response to questions by Democratic Progressive Party (DPP) Legislator Chiu Chih-wei, Lee acknowledged that the state-owned utility was having difficulty securing a contractor to build two underground LNG storage tanks at its Yung'an receiving terminal in Kaohsiung City as the putative constructing company's bid was too high.

Lee added that CPC is formulating "alternative plans" to realize the target that would probably increase the number of storage tanks in existing terminals, but provided no further details.

Lee also said that CPC was continuing to base its procurement strategy on its December 2020 forecast for 29.5 million tons of LNG to be imported in 2025. Taiwan imported 21 million tons in 2022, according to Kpler.

In response to a proposal by DPP Legislator Lin Tai-hua to make building Taiwan's own LNG carrier capacity a “national security” priority, Wang said the Bureau of Energy would form a cross-ministerial task force to formulate an appropriate strategy.
Dennis Engbarth, Taiwan

Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustraliaWestAustraliaEastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUSGulfUS EastCoast
Dahej, India11.4011.7711.4711.7611.1310.9912.1410.7312.0711.5010.8610.6410.93
Sodegaura, Japan12.2513.3813.4013.4512.229.3913.0811.3512.9713.7411.6110.8912.35
Zeebrugge, Belgium10.108.798.498.849.709.989.408.459.288.499.809.079.88
Huelva, Spain10.699.409.119.4510.2610.129.999.009.899.1110.329.5310.34
Isle of Grain, UK11.7010.3610.0610.4111.3111.5711.0710.0310.8710.0611.4010.6511.47
Everett, US1.26-
Created with Highcharts 9.0.0($/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 Asia14.8514.440.15-0.41
SW Europe13.5011.32-0.32-2.18
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.072.512.442.54
NBP, UK (futures)+0.3513.2212.8713.27
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-0.2013.2013.4013.07
Zeebrugge (Belgium)0.0510.6710.6210.42
German NCG0.2512.3212.0711.73
NBP (UK)-0.3612.4712.8413.20
US Markets
US Spot Prices
Sabine Pass, Louisiana0.032.452.422.51
Corpus Christi, Texas----2.122.37
Cove Point, Maryland-
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month0.072.512.442.54
Second Mth0.082.632.552.68
Third Mth0.082.842.762.92
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaApr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '23Feb '23Mar '230255075100125Energy Intelligence