LNG

Novatek, the Russian developer of the Arctic LNG II project on the Gydan Peninsula, has declared “force majeure” to some of the buyers of cargoes based in China because of delays in the start-up of the facility.

The Japan Organization for Metals and Energy Security, a national agency with a stake in the Russian Arctic LNG II project operated by the Novatek natural gas company of Russia, is likely to put Japanese LNG needs over Western sanctions as Japan did when keeping cargo rights from Sakhalin LNG.

“Strengthening mutually beneficial relationships with resource-rich countries is essential for developing oil and natural gas resources,” said the Japanese agency known as JOGMEC.

“As a governmental organization, JOGMEC conducts various projects to support Japan’s resource diplomacy, collaborating with national oil companies and providing technical support for producing countries,” it added in its latest statement on policy.

While Japan like other nations has condemned Russia's invasion of Ukraine it has continued to keep stakes in the Sakhalin LNG plant in the Russian Far East and other energy projects.

Novatek controls 60 percent of the Arctic LNG II project and its other remaining active partners are from China and Japan.

Consortium

They are China National Petroleum Corp., China National Offshore Oil Corp. and a consortium comprising the Japanese trading company Mitsui & Co. and JOGMEC.

Mitsui has said that while it would comply with any sanctions requirements it would take its final guidance from the Japanese Government.

In the case of Russia’s Sakhalin LNG, Japanese companies Mitsui and Mitsubishi maintained their stakes and offtake with the government saying at the time that if Japan ceded its offtake rights they would likely be taken up by China.

Another energy security issue facing Japanese utilities and LNG importers is that Australia could become an unreliable LNG supplier in the future as labor unions begin to exercise control and more hardline policies at LNG plants, readily backed by key members of the governing left-wing and anti-hydrocarbon Labor party.

This action has resulted in a series of strikes and work stoppages at four facilities in Western Australia, raising security of supply concerns in Asia.

Analysts said that crucially the Japanese have a large offtake portion from the Arctic LNG II project on the Gydan Peninsula that is expected to come on stream in early 2024 and they were unlikely to give this up.

Japanese offtake

The Japanese have basic offtake rights from the Gydan venture to 2 million tonnes per annum and could increase that total.

Arctic LNG II will have three liquefaction Trains, each with 6.6 MTPA of capacity.

One of the Trains is already on site after being towed from a construction yard in the Murmansk Region on a gravity-based structure and deployed in the bay where the plant is located.

The biggest Arctic LNG shareholder, Novatek itself, has been signing multiple additional sales and purchase agreements with Chinese LNG players such as the ENN Group and Zhejiang Energy Gas Group.

The ENN SPA stipulates cargoes from Arctic LNG II will amount to a total of 600,000 tonnes per annum will be delivered over a term of 11 years.

LNG deliveries to ENN will be on a ex-ship (DES) basis whereby Novatek supplies the shipping to ENN’s Zhoushan LNG receiving terminal in eastern China. 

NextDecade Corp., the developer of the Rio Grande LNG export project on the Brownsville Ship Channel in Texas, has signed a long-term sale and purchase agreement with Galp Trading S.A. of Portugal.

NextDecade, based in Houston, said that under the 20-year deal Galp would purchase 1.0 million tonnes per annum of LNG indexed to the US benchmark Henry Hub gas price on a free-on-board (FOB) basis whereby the Portuguese supply their own ships.

“We are honored to have Galp, one of Portugal’s largest energy companies and a key player in the Iberian Peninsula, as our customer,” said Matt Schatzman, NextDecade's Chairman and Chief Executive.

“We look forward to helping Galp, as well as other European companies and their customers, meet their energy needs by offering a lower-cost, reliable source of LNG with lower carbon-intensity,” added Schatzman.

FID moves

NextDecade explained that it was targeting a positive final investment decision on the first three Trains of the Rio Grande project for the first quarter of 2023.

Further FIDs on the other permitted liquefaction Trains would follow thereafter for the venture with proposed 27 MTPA of output.

NextDecade has made progress with other SPAs during 2022, including one with ExxonMobil Corp.

The US major signed a 20-year supply deal with NextDecade at the end of July 2022 through its trading subsidiary in Asia.

Under that SPA, the US major’s Asia unit would purchase 1 MTPA of LNG supplied from the first two Trains of the Rio Grande facility.

The first Train is expected to start commercial operations as early as 2026.

NextDecade has also signed three supply agreement with Chinese companies, including a 20-year deal with China Gas Hongda Energy Trading Co., a wholly-owned subsidiary of China Gas Holdings.

That deal was also for 1 MTPA of LNG indexed to Henry Hub and delivered on a FOB basis.

NextDecade in April 2022 signed a 20-year SPA with the Singapore trading arm of ENN Group of China and another with China’s Guangdong Energy Group Natural Gas.

Australia LNG operator Santos with stakes in three Asia-Pacific liquefaction and export plants has issued a statement about speculation on the sale of shares in the company by ENN Group of China that had previously held a strategic stake and board representation.

The South Koreans have swooped to become the fourth customer signed up in foru weeks for Energy Transfer LP’s liquefied natural gas volumes from the Lake Charles LNG terminal on the US Gulf Coast being transformed into a liquefaction and export plant.

NextDecade Corp., the developer of the Rio Grande LNG export project on the Brownsville Ship Channel, has signed its second cargo supply accord in a month with a Chinese company.

Energy Transfer LP, the owner of assets in the Permian Basin and Haynesville Shale as well as the Cushing crude oil delivery system, has signed two LNG sale and purchase agreements with ENN Group for its almost forgotten Lake Charles LNG export project in Louisiana.

Under the two SPAs, Energy Transfer is expected to supply 1.8 million tonnes of LNG to ENN's natural gas subsidiary and 900,000 tonnes of LNG to the ENN Energy unit per annum on a free-on-board (FOB) basis.

Energy Transfer said the purchase price was indexed to the Henry Hub benchmark plus a fixed liquefaction charge.

Both SPAs are for a term of 20 years and first deliveries are expected to commence as early as 2026.

China’s ENN has an annual LNG distribution capacity of over 10 billion cubic metres of natural gas and runs the first large-scale private LNG terminal in China, the Zhoushan LNG facility in eastern Zheijang province south of Shanghai.

The SPAs will become fully effective upon the satisfaction of the conditions precedent by Energy Transfer’s plan and final investment decision to transform the existing Lake Charles LNG import terminal into an export plant.

Almost forgotten

The Lake Charles LNG import terminal once had BG Group of the UK as a main customer. Shell then become a terminal partner before later withdrawing from the export plant joint venture.

The Federal Energy Regulatory Commission has issued permits for the Lake Charles transformation and to produce 16.5 million tonnes per annum of LNG.

Energy Transfer had acquired the Lake Charles terminal in mid-2011 with the takeover of Southern Union Co. for $7.9 billion.

“The signing of these long-term SPAs will further enrich ENN’s LNG resources, expand resource supply channels, and improve ENN’s natural gas supply capacity to meet the rapidly growing natural gas demand in the domestic market,” said Zheng Hongtao, President of ENN’s natural gas unit and Vice Chairman of the Board.

Tom Mason, President of Energy Transfer LNG, said the Dallas, Texas-based company was pleased to have ENN Energy onboard.

“The execution of these two SPAs represents a significant event in moving the Lake Charles LNG project towards FID,” he explained.

“We are experiencing strong demand for long-term offtake contracts for Lake Charles LNG and we are optimistic that we will be in a position to take a positive FID by year-end,” stated Mason.

“The Lake Charles LNG project is expected to be financed primarily through infrastructure funds and strategic partners, with Lake Charles LNG retaining an equity stake and operatorship of the liquefaction facility,” he added.

Lake Charles LNG will be constructed with the existing brownfield site of regasification facility and will capitalize on four existing LNG storage tanks, two deep water berths and other LNG infrastructure.

“Lake Charles LNG will also benefit from its direct connection to Energy Transfer’s existing Trunkline pipeline system that in turn provides connections to multiple intrastate and interstate pipelines,” said Energy Transfer.

“These pipelines allow access to multiple natural gas producing basins, including the Haynesville, the Permian and the Marcellus Shale,” the company declared.

Novatek, the developer of the Arctic LNG II project on the Gydan Peninsula in Northern Siberia, has signed new supply agreements with units of two Chinese companies, the ENN Group and Zhejiang Energy Gas Group.

Cheniere Energy, the largest US liquefied natural gas exporter from plants at Sabine Pass in Louisiana and Corpus Christi in Texas, has signed a sale and purchase agreement with ENN Group, the leading non-state energy company in China with LNG and growing city-gas assets.

The ENN LNG marketing unit based in Singapore will purchases 900,000 tonnes per annum of LNG from Cheniere Marketing on a free-on-board basis for a term of 13 years beginning in July 2022.

The purchase price for the LNG is indexed to the US benchmark Henry Hub price, plus a fixed liquefaction fee.

Acting as guarantor of the agreement will be the natural gas units in the ENN Group, which owns the Zhoushan LNG import terminal in the Zhejiang Free Trade Zone in eastern China.

“We are pleased to announce this long-term LNG contract with ENN, a major player in China’s rapidly growing natural gas market, and we look forward to a successful, long-term relationship with ENN as a customer,” said Jack Fusco, Cheniere’s President and Chief Executive.

“This SPA underscores the strength of the global LNG market, particularly in China, and highlights Cheniere’s role as a leading global supplier,’ added Fusco.

The CEO noted that the deal further advanced Cheniere’s commercial momentum in anticipation of the final investment decision expected in 2022 on expanding the Corpus Christi facility.

Wang Yusuo, Chairman of ENN Natural Gas, was embarked on the cleaner energy path with industry reforms and structural adjustment of energy consumption.

“It is expected that the two parties will seize the opportunity of this cooperation to establish a strategic relationship, to provide clients with high quality resources and services,” said Wang.

ENN, whose shares are listed in Hong Kong, said in its latest earnings that first-half revenues had increased 30 percent to the equivalent of US$6.38Bln.

ENN now has a total of 239 city-gas franchises in 20 different regions and provinces in areas such as in Beijing, Fujian, Guangdong, Shanghai and Tianjin, with a connectable population of 117 million.

Since the start of 2021, ENN has acquired more exclusive operating rights in four more city-gas projects, the Ruyang Industrial area in Henan province, Lvsigang Town in Jiangsu province, the Lantang industrial new town in Guangdong province and the industrial area of Chizhou in Anhui province.

ENN Group, the leading non-state energy company in China with LNG and growing city-gas assets, reported a more than 18 percent jump in first-half profits as revenues soared, boosted by increased business in LNG and in expanding retail, wholesale and industrial gas supply markets.