LNG

Argentina’s Vaca Muerta basin has seen shale oil production rise 35% yoy in the third quarter to 400,000 barrels per day (bpd) due to productivity gains. To sustain growth, the $2.5 billion Vaca Muerta Sur pipeline is being developed to expand takeaway capacity from the field to global markets.

India is poised to snap up big parts of the substantial volume of uncontracted LNG from the Middle East. Buying interest is on the rise as the Indian government allows utilities to blend LNG with domestically produced gas in a bid to make it more affordable for power generation, compared with coal.

Watch out for uncontracted LNG cargoes, seems to be the motto of Indian commodity traders and large utilities. Looking ahead, Rystad’s Kaushal Ramesh, Vice President Gas & LNG Research, expects savvy buyers to secure large parts of the uncontracted LNG production from Qatar, Oman and potentially Iran – at favourable terms.

“The nation is well-positioned to attract aggressive targeting from Middle Eastern producers and offtakers,” he said, noting nearly 100 million tons per annum (mtpa) of Middle East LNG will remain uncontracted by 2035.”

Flexible, low-cost supply preferred

Some potential pitfalls should, however, be taken into consideration: A key issue is Indian buyers’ history of renegotiating or even abandoning near-complete deals, which creates uncertainty for suppliers.

In Ramesh’s view, “this preference for flexibility and cost-effectiveness over long-term commitments highlights India's focus on securing the best prices for its consumers in a volatile global market – but it could limit LNG growth prospects.”

Delays at infrastructure build-out hampers the development of India’s overall gas and power gen sector. Regasification terminals remain concentrated in the western part of the country, and efforts to expand the gas pipeline network to other regions have been inconsistent.

“Slow progress is due to regulatory hurdles, challenges in securing investments, difficult terrain, and competing priorities,” he criticised, “as India channels significant resources into renewable energy development alongside its gas infrastructure.”

Domestic production can’t meet demand

Come 2040, India’s total gas consumption is forecast to double to almost 114 billion cubic metres (bcm) and despite a 51 percent jump in domestic production to 36.7 bcm by 2025, this will not suffice to meet India’s growing energy hunger. The Asian powerhouse and most populous nation will hence heavily rely on imports to meet its future energy needs.

Long-term contracts, extending way into the 2030s and beyond, help shield India from global price fluctuations and ensure a steady stream of cargoes shipped to Indian shores. Through these LNG offtake accords, India does not only strengthen its energy security but also facilitates a swift exit from more emission-intensive fuels like crude oil, mazut and thermal coal.

Coal still king in India, at least for now

India’s heavy reliance on coal has become apparent during the summer 2024 heatwaves, which temporarily propelled up coal-burn to meet peak power demand. Natural gas, on the other hand, currently accounts for just 2 percent of the country’s power mix – and in fact, coal-generated power is not projected to start falling this side of 2040.

Though gas-burn is unlikely to drive LNG imports, analysts at Oslo-based Rystad Energy believe “the sector could still see growth, however, depending on future policies to promote coal-to-gas switching or introduce carbon pricing.”

Verso Energy has reserved a site for a new plant to produce hydrogen (H2) and biogenic synthetic fuels at the Port of Oulu, in northern Finland. Similar production sites exist in various parts of France, and Verso's synfuels production process combines green H2 with carbon dixoide (CO2) recovered from nearby paper and pulp mills.

Electricity in Finland is among the cheapest in Europe: In the first half of 2024, the price of electricity for non-household customers in Finland was the lowest in the European Union at just €0.0939  per kilowatt-hour (€/kWh), given that most of it is derived from hydropower plants.

Using this electricity to produce H2 and related biogenic synfuels is becoming a lucrative business, not least because offtaker are situated very close to northern Finland - just a short shipping distance away across the Baltic Sea in Germany, Poland and Denmark, as well as in the Netherlands and the UK.

Cheap electricity, large talent pool

Asked why Verso chose Oulo as a location for its latest hydrogen plant, CEO Antoine Huard said "the region around the Finish port town is attractive because it provides an abundance of affordable renewable energy and biogenic carbon dioxide.”

In addition, experienced chemical researchers at Oulo University alongside large R&D investments in the area, ensure a “sufficient talent pool,” the Verso CEO said, and this offers the French company potential customers and subcontractors.

And last but not least, the Port of Oulu, with its rail and road links, provides good connections to the rest of the world.

H2-derivative projects already set up

Several other hydrogen production and H2 derivative projects have already been initiated in the greater Oulu region: Gasgrid Finland is planning to establish a hydrogen transport infrastructure to connect Oulu’s hydrogen production with the rest of Finland and other countries in northern Europe.

Verso Energy is hence keen to get its project off the ground, though Mr Huard cautioned the latest “land reservation is only a preliminary decision,” – a final investment decision (FID) will be taken at a later stage.

Germany's state financing body KfW has agreed a $200 million loan with Indonesia on the grounds of adjustments to fuel and electricity tariffs, e.g. higher tariff-cost-coverage, feed-in tariffs and standards for demand-side response, board member Dr Norbert Kloppenburg said. In parallel, the Asian Development Bank (ADB) and the World Bank are granting loans of $500 million each in a first tranche, while the French counterpart AfD plans a contribution of $150 million.

Egypt’s state energy company EGAS has reduced its LNG imports to the Ain Sokhna regas terminal, chartered from Hoegh LNG, by more than a third to 500 million cubic feet per day (mmcf/d). Situated east of Cairo, the Hoegh Gallon FSRU is on an interim charter from the Norwegian shipping company Hoegh, and had been originally destined for Australia.

Global LNG markets have been pretty unphased by last week’s US election results: near-term demand fundamentals are net bearish as traders await the onset of more severe winter weather. Looking at Q1-2025, uncertainty abounds with regards to Egypt’s LNG demand due to insufficient domestic gas production and escalating tensions in the Middle East.

Nhon Trach 3 & 4, Vietnam’s first LNG-fuelled power stations with 1.6 GW capacity, will be grid-synchronized before the end of this week. Dong Nai's Department of Industry and Trade disclosed the 500 kV Nhon Trach 4/ Phu My/ Nha Be power line – one of four lines built to accommodate electricity from the two plants – is scheduled to start operating by November 15.

Black & Veatch (B&V) will use Baker Hughes’ LM9000 gas turbine and compression technology as part of a standard module capable to produce up to 2 mtpa of LNG. The intention is to utilize PRICO technology to produce up to 2 mtpa of LNG per train.

If tensions between Iran and Israel escalate into a regional war scenario, it could severely impact regional oil and gas exports as well as global shipping routes. Attacks on key facilities could wipe out nearly 1.4 million bpd of Iranian production and a full-blown war would choke the Strait of Hormuz, risking up to 12 million bpd of oil, analysts warn.

Upstream activity in Iran, so far, has stayed steadfast despite fighting following Hamas’ assault on Israel in October 2023. Iran's production rose by 227,000 bpd to 3.27 million bpd in August year-on-year, while Israel’s gas output grew 15% in 2023 and is expected to rise by 5% this year, supported by the Karish field.

Some $2 billion in greenfield investment had been planned for various upstream projects in the coming years. But production at the Karish and Katlan fields could be severely reduced if regional tensions escalate, hence future production and exports are at risk.

Anticipating the future is challenging, Rystad’s Middle East research director, Aditya Saraswat noted. So far – with no direct attacks between Iran and Israel, the conflict is largely a ‘proxy war’. As of today, there have not occurred major assaults on critical oil and gas infrastructure such as pipelines, storage facilities, or refineries.

All eyes on maritime borders

If things get worse, the maritime border agreement between Israel and Lebanon, signed in October 2022, could be torn to pieces. The agreement defines each country's rights over the Karish and Qana fields, with Israel retaining full rights to Karish and Lebanon to Qana.

“Escalating tensions could lead to the nullification of this agreement, affecting Israel's production from the Karish field, which is currently used for domestic supply,” Saraswat reckons, suggesting: “This disruption may also impact Israel's gas exports to Egypt and Jordan, which saw significant growth in 2023.

“Any decline in production and exports from Karish could be offset by increased output from other major fields like Tamar and Leviathan,” he noted.

The fields hold about 88 billion cubic meters (Bcm) of cumulative proven and probable (2P) reserves. Together, they form the independent’s core area of operation – following the divestment of its Croatian, Italian, and Egyptian assets. Production from the Katlan fields (Athena and Zeus) is expected to start by 2027.

All these fields are located near the Karish field near Lebanon’s maritime border, so analyst warn that any significant unrest could delay start-up.

Bickering between US Vice President Kamila Harris and former President Donald Trump in the run-up to the US election is not hampering the steady growth of the shale gas industry and LNG majors. Focus on profitability and shareholder returns – rather than production growth – means the industry is unlikely to be influenced by promises of support or potential regulations from either candidate.