LNG

Enagás, the Spanish natural gas operator of six large LNG terminals and with gas assets in other European countries and overseas, reported a fall in net profits as Spanish gas and power demand dropped, offset by a one-time gain from the sale of a stake in a gas pipeline in Mexico.

Enagás, the Spanish gas grid and terminals operator, increased profits in the first six months of 2023 helped by one-time items as LNG activities increased to help the European Union’s natural gas shortfall and the utility also boosted future capacity on the Trans-Adriatic Pipeline from Azerbaijan.

The company’s net profits jumped to €172.8M including a net gain of €42.2M from the sale of a stake in the Morelos Pipeline in Mexico and an €133.8M adjustment relating to the Tallgrass Energy operations in the US.

“The Spanish Gas System operated 100 percent availability, Spain increased its total gas exports by 55 percent in the first half of the year and ship reloading has increased by 67 percent, contributing to Europe's security of supply,” Enagás stated.

Italy was a main destination for LNG re-exports to Europe while pipeline gas connections increased by 33 percent to 28.6 terawatt hours. The company already trans-ships LNG to the EU from terminals like Barcelona.

“Spain's underground natural gas storage facilities are at 98 percent capacity, an all-time high for the month of July,” it added.

Revenues up

The Madrid-based company reported first-half revenues of €450.5M, a drop of 5.8 percent from €472.2M registered in the first six months of 2022.

Enagás said it was still on track to meet the full-year earnings target of between €310M and €320M.

Enagás added that in July it closed the agreement announced in January to acquire an additional 4 percent stake from European trader AXPO in the Trans-Adriatic Pipeline (TAP) for €168M, taking its stake in the pipeline bringing Azerbaijan gas to Europe up to 20 percent.

During the first half, Enagás contracted additional transport capacity of 1.2 billion cubic metres from TAP, in addition to the current 10 Bcm starting in 2026.

During an eventful first half, Enagás noted the start-up of the El Musel LNG trans-shipment terminal in the Port of Gijón in northwest Spain and the assignment of its logistics services to the European utility Endesa.

“The terminal has already received two LNG shipments and will start commercial operation on July 31 after a capacity allocation process that has aroused great interest,” the company added.

Another highlight was the agreement with regional gas company Reganosa through which Enagás acquired its 130-kilometres of strategic gas pipelines in northern Spain and Reganosa agreed to purchase a 25 percent stake in the El Musel regasification terminal.

“The closing of the deal was expected in the second half of this year,” said the company.

In LNG activities outside of Spain, Enagás became an industrial partner with a 10 percent stake in the Hanseatic Energy Hub consortium planning an onshore LNG import terminal at the German North Sea port of Stade.

Enagás, the Spanish gas grid and terminals operator, said the El Musel liquefied natural gas re-loading facility in Northwest Spain designated to supply the European Union has awarded the services contracts to utility Endesa after a tender process.

Endesa is the largest Spanish electric utility while being a majority-owned subsidiary of the Italian utility group Enel.

Enagás said the award to Endesa of logistics services for the El Musel terminal at the Port of Gijón on the Bay of Biscay followed a capacity allocation process.

“The open season had aroused strong interest among trading companies. In total, 13 were received between June 5 and 30, the period during which this last part of the process was developed,” explained Enagás.

“The logistics services offered for this infrastructure are LNG unloading, storage and loading operations,” Enagás said.

Regulated régime

“Within the regulated access regime, the El Musel plant contemplates a minimum regasification for the exact management of the terminal, as well as the tanker-loading service,” it added.

Enagás has re-activated the existing El Musel terminal to meet growing LNG needs in the EU after the closure of Russian pipeline gas supplies and a US commissioning cargo was delivered recently by the 174,000 cubic metres capacity carrier “Cool Racer”.

The Spanish terminal will contribute up to 8 billion cubic metres of additional LNG to Europe’s supply when commercial operations start.

El Musel will specialise in the unloading of LNG carriers from various producing countries and the rapid re-loading of ships for different European destinations.

The terminal berthing can accommodate the largest vessels and it has two storage tanks each with capacity of 150,000 cubic metres.

The re-opening of El Musel is part of the Spanish Government’s “More Energy Security Plan” and will add to Spain’s role as an energy hub for Europe as the nation also receives pipeline gas imports from Algeria.

Enagás operates six other LNG regasification terminals on mainland Spain.

Endesa, the largest power company in Spain and the second-largest natural gas operator, has launched a project to expand its port terminal in Los Barrios in the Port of Algeciras to capture the liquefied natural gas bunkering business around Cádiz and in the Strait of Gibraltar.

Flex LNG, the Norwegian-listed company with a fleet of six carriers and seven other under construction and with controlling interests held by shipping magnate John Fredriksen, reported a fourth-quarter surge in net income and revenues.

Flex reported revenues of $52.0 million for the fourth quarter of 2019, compared with $29.8M for the third quarter and $36.1M for the fourth quarter of 2018.

Net income was $23.9M for the fourth quarter versus $500,000 for the previous three months and $15.2M for the fourth quarter of 2018.

“Lower than expected tonne-mile growth due to muted US-Asia trade and limited arbitrage opportunities has been a challenge for the LNG freight market,” said Flex.

“In spite of the lower than expected tonne-mile growth, LNG freight rates performed well in the fourth quarter, suggesting that the recent years fleet growth to a large degree has been absorbed by the market,” the company added.

“The glut of liquefaction volumes continues to affect LNG prices, with the average Asian benchmark prices (JKM) averaging $5.4 per million British thermal units in the fourth quarter compared to $9.1 per MMBtu the year before,” stated Flex.

Flex stated the average the Time Charter Equivalent (TCE) rate was $94,000 per day for the fourth quarter compared with $58,222 per day for the third quarter.

The company in November received firm commitments from a syndicate of 11 banks and the Export-Import Bank of Korea (Kexim) for a $629 million financing for five of the newbuilds scheduled for delivery in 2020. 

Flex also entered into a long-term time-charter with Clearlake Shipping, a subsidiary of the commodities firm Gunvor, for the newbuild “Flex Artemis”. The period under the charter is up to 10 years, whereby the first five years are firm. 

Then in December, Flex entered into a 12-month time-charter with Spanish utility Endesa for the vessel “Flex Ranger”.

Flex noted that it had also strengthened its commercial team with the appointment of Ben Martin  as Chief Commercial Officer, who will join Flex LNG on or about April 1, 2020. 

“The year was eventful and productive year for Flex LNG,” said Oystein M Kalleklev, Chief Executive of Flex LNG Management AS.

“We continue to build our organization with exceptional people, most recently with today's announcement of  the recruitment of Ben Martin who will join us from Trafigura,” added Kalleklev.

“Furthermore, we are taking a greater responsibility of the management of our fleet with Flex LNG Fleet Management currently managing four of our six vessels on the water,” explained the CEO.

“Ship management continues to perform excellently with no loss time injuries recorded for the second year in a row,” he added.

Flex stated that due to the uncertainty and disruptions created by the coronavirus and associated low gas prices, the company had elected to be cautious by maintaining a $0.10 dividend for the fourth quarter, and for the time being rather preserve liquidity, which stood at close to $130M at year-end. 

“While the freight and gas markets are currently challenging, LNG continues to be a long-term story with expected annual growth of around 3 to 4 percent for the next two decades as natural gas, and to a greater extent LNG, is the transition fuel for a cleaner and more sustainable future,” said the company.

GasLog Ltd., the LNG carrier fleet owner with 19 vessels and with another 15 ships held by its US affiliate GasLog Partners, reported annual and quarterly losses as it started cost-cutting measures by moving its headquarters to the Greek port of Piraeus from Monaco and wrote-down some asset values.

GasLog posted a fourth-quarter loss of $119.9 million versus a profit of $30.3M in the same quarter of 2018.

For the year, GasLog’s losses came to $114.6M compared with a profit of $126.4M in 2018.

Annual revenues rose to $668.8M from $618.3M in the previous year, while fourth-quarter revenues slipped to $182.2M from $188.6M in the prior-year quarter.

“GasLog implemented a plan to relocate GasLog’s senior management and more of its employees to the Piraeus, Greece office, to enhance execution and efficiency and to reduce overheads,” said the company.

At the same time, the carrier operator as of December 31, 2019, recognized an impairment loss of $162.1M on its six steam-turbine propulsion vessels built in 2006 and 2007, including five US GasLog Partners LP vessels and one GasLog directly-owned vessel, due to negative market conditions.

Paul Wogan, Chief Executive, said he was pleased with the performance of the company in 2019.

“It represented another year of excellent execution for GasLog. We took delivery of two newbuild LNG carriers and signed long-term charters with the principal LNG shipping entity of JERA Co. (Japan) and a subsidiary of Endesa SA (Spain), both new customers for GasLog,” said Wogan.

“We also chartered two on-the-water vessels to Gunvor Group Ltd. and secured up to 10 years employment for one of our vessels as a floating storage unit,” added the CEO.

Wogan noted that the company also successfully completed a new debt facility for its newbuild deliveries in 2020 and 2021.

GasLog signed an export credit agency-backed debt financing facility in December 2019 for $1.05 billion with 12 international banks.

The newbuild facility covers the balance due to the shipyard on delivery and consequently the final instalments of the seven newbuild are fully funded.

Five of these seven ships are scheduled to deliver from the yards into firm multi-year charters in 2020 and the remaining two into firm multi-year charters in 2021. 

The company said one of its charters was for 10 years for one TFDE ship to act as a Floating Storage Unit for a power project being developed in Panama.

GasLog said that while spot rates for LNG carriers had improved in 2018 and 2019 compared to prior years, the term charter market for on-the-water vessels has not developed as anticipated, resulting in reduced expectations for future vessel utilization and earnings.

The company said this was particularly the case for the five steam vessels owned by GasLog Partners and one owned by GasLog after the expiry of their current term charters.

“As we continue to execute on our efficiency improvements and cost reductions, we will continue to look for further opportunities to enhance shareholder returns, on top of the special dividends paid in 2018 and 2019,” said Wogan.

GasLog said that in the LNG shipping spot market, tri-fuel diesel electric vessel headline rates, as reported by brokers averaged $70,000 per day in 2019, a 23 percent decrease on 2018 levels. 

“Low gas prices during much of 2019 limited the arbitrage opportunities for transporting LNG between the Atlantic and Pacific basins,” said the company.

“However, the market balance remains tight, as evidenced by the quick run up in TFDE rates in the fourth quarter of 2019 when they reached a peak of $140,000 per day in November, following a marked decrease in spot ship availability,” added GasLog.

“While headline spot rates in the first quarter of 2020 to date have fallen from their peaks in the fourth quarter of 2019, current headline rates are in line with or above the comparable dates of recent years,” it stated.

GasLog said that brokers currently assess headline spot rates for TFDE and Steam LNG carriers at $65,000 per day and $43,500 per day respectively. 

Flex LNG, the growing shipping company with six vessels operating and seven others on order and whose largest shareholder is a company controlled by Norwegian magnate John Fredriksen, has entered into a new time charter in what is its second deal in a month.

GasLog Ltd, the Monaco-based LNG fleet owner with 25 ships operating and nine others on order, is building up its solid customer base with prestige charter deals.