LNG

The Turkish Petroleum Pipeline Corporation (BOTAŞ), the nation's main natural gas wholesaler and assets operator, and US energy major ExxonMobil Corp have signed a cooperation deal on liquefied natural gas trading.

The Turkish Minister of Energy and Natural Resources, Alparslan Bayraktar, who was in the US for talks, confirmed the accord in a statement after several months of negotiations.

“With this agreement, which is planned to be long-term, we will take another step in diversifying our resources,” stated Bayraktar.

“We are among the few countries in the world with ample LNG regasification capacity and we will continue to contribute to the energy supply security of both our country and our region,” the minister declared.

Value of deal

Minister Bayraktar had also mentioned last month in an interview that Turkey was in talks with ExxonMobil on a supply agreement worth more than $1 billion.

Bayraktar had said at the time that negotiations were ongoing with ExxonMobil for 2.5 million tonnes of LNG, valued at around $1.1Bln and lasting up to 10 years.

Turkey has varied LNG supply sources and has half a dozen natural gas pipelines bringing in Turkish supplies and traversing its territory to deliver volumes to other nations.

Russia is a big supplier of pipeline gas to Turkey, accounting for more than 40 percent of its consumption in 2023.

The Gazprom BlueStream gas pipeline to Turkey is 1,213 kilometres (754 miles) in length and with design capacity of 16 billion cubic metre per annum, while the Russian TurkStream gas pipeline is about 930km long and with capacity of 31.5 Bcm.

Turkey is additionally the main transit nation for the Trans-Adriatic Pipeline, the final leg of the 3,500km Southern Gas Corridor pipeline network for Azerbaijan gas, which came on stream in 2020 and supplies primarily Greece, the Balkans and Italy.

Main LNG suppliers

Turkey’s main LNG suppliers over the past years have included the US, Algeria and Egypt.

US LNG data shows that the Turks are currently the eighth-largest recipients of US LNG cargoes since 2016 and receive at least six shipments per month.

BOTAŞ, the signatory of the accord with ExxonMobil, builds and operates natural gas pipelines in Turkey and accounts for most of the nation’s wholesale market.

The company runs the Marmara Eregesli LNG import terminal as its main source of cargoes while several floating facilities also operate.

Turkey has received LNG since 1994, first from Algeria and later from countries like Qatar and Nigeria and then from the US as well.

ExxonMobil’s LNG portfolio is wide and varied from Qatar itself to Papua New Guinea.

It is additionally an upstream partner of QatarEnergy worldwide in addition to having supplies from Ras Laffan.

QatarEnergy is also the lead developer of the Golden Pass LNG export project in Texas that will come on stream in 2025 and in which ExxonMobil has a 30 percent stake.

Trafigura, the global commodities trading firm, said its traded liquefied natural gas volumes declined slightly in the past year and while market volatility had eased the energy supply chain remained “brittle” amid changing inventories and continuing geopolitical concerns.

Italian natural gas grid and LNG terminals operator SNAM reported an increase in annual revenues as LNG imports rose along with storage levels to cope with the European gas crisis.

A leading port services provider S5 Agency World with its global headquarters in London and hub operations from Rotterdam to Singapore, has agreed a contract with Deutsche ReGas GmbH, the operator of the German Baltic sea LNG import terminal at Lubmin.

Uniper, the German utility that was saved from bankruptcy by Germany’s Federal Government after the halting of Russian pipeline gas supplies, has imported its first US LNG cargo to the floating import facility at the North Sea port of Wilhelmshaven.

The price cap on Russian crude oil backed by the 27-nation European Union and the G7 group of leading western economies entered into force on December 5 and may have an impact on other energy markets and prices.

In addition to the price cap on Russian crude the EU-G7 coalition will cap prices of petroleum products such as gasoline from February 5 in 2023.

“The cap has been set at a maximum price of $60 per barrel for crude oil and will be adjustable in the future in order to respond to market developments,” said a statement on December 3 from the European Commission in Brussels.

“This cap will be implemented by all members of the Price Cap Coalition (EU and G7) through their respective domestic legal processes,” the Commission added.

The price cap, which comes on top of the EU import ban on Russian seaborne crude oil and oil products and the corresponding bans of the G7, is aimed at reducing the revenues Russia earns from oil as a sanction against the invasion of Ukraine in February 2022.

The G7 nations include the EU countries of France, Germany and Italy in addition to the US, Canada, Japan and the UK.

These measures apply to Russian crude oil falling under CN code 2709 00 and Russian petroleum products falling under CN code 2710.

Exceptions

“There is a 45-day wind-down period for seaborne Russian crude oil purchased above the price cap, provided it is loaded onto a vessel at the port of loading prior to 5 December 2022 and unloaded at the final port of destination prior to 19 January 2023,” the Commission explained.

“Maritime-related services and maritime transport can be provided during this period. There is no equivalent provision for petroleum products,” it added.

The Commission stated that “the EU's sanctions against Russia are proving effective and are damaging Russia's ability to manufacture new weapons and repair existing ones” as well as hindering its transport of material.

“The geopolitical, economic, and financial implications of Russia's continued aggression are clear, as the war has disrupted global commodities markets, especially for agrifood products and energy,” added the Commission.

The statement explained that the crude oil cap did not affect the full EU import ban on Russian crude and petroleum products and the specific exceptions and derogations which were already agreed in previous sanctions packages.

“These exceptions and derogations allow certain EU Member States to continue importing crude oil and petroleum products from Russia due to their specific situation or to import seaborne crude oil from Russia if the supply of crude oil by pipeline from Russia is interrupted for reasons beyond their control,” said the Commission.

“Specific projects which are essential for the energy security of certain third countries may be exempted from the price cap,” it added.

Analysts explained that while the EU's ban on importing Russian seaborne crude oil and petroleum products remains fully in place, the price cap will allow European operators to transport Russian oil to third countries, provided its price remains strictly below the ($60) cap.

“The price cap has been specifically designed to reduce further Russia's revenues, while keeping global energy markets stable through continued supplies,” said the Commission.

“It will, therefore, also help address inflation and keep energy costs stable at a time when high costs - particularly elevated fuel prices - are a great concern in the EU and across the globe,” it declared.

Excelerate Energy, the leading US-based LNG terminal provider in the form of floating storage and regasification units, reported much improved third-quarter results and higher future earnings prospects as projects advanced for Germany and Finland.

Excelerate posted net income for the three months to the end of September of $37.3 million compared with $1.4M in the 2021 quarter.

Revenues for Excelerate in the quarter showed a more than four-fold increase to $803.3M versus $192.1M in the same period last year.

The Texas-based company later confirmed at the end of the quarter the start of the charter process for a project serving Finland and the Baltic state of Estonia.

The Texas-based company also signed a definitive agreement to deploy the FSRU “Excelsior” to Germany for five years.

Excelerate’s “Exemplar’ completed another winter season delivering LNG regasification services to Argentina and in August departed the port of Bahia Blanca and sailed to Europe for maintenance and winterization.

Finland project

The FSRU “Exemplar” was first delivered in 2010 and is 291 metres in length and with a beam of 43 metres and capacity of 151,000 cubic metres.

“Finland’s charter hire commenced in October and winterization upgrades for the ‘Exemplar’ are ongoing,” said Excelerate.

“The ‘Exemplar’ is currently undergoing customer-requested winterization upgrades during a technical stop at the Navantia shipyard in Ferrol (northwest Spain),” said Excelerate

Excelerate and Gasgrid Finland previously announced an executed 10-year, time charter party agreement for Excelerate to provide LNG regasification services, which are expected to commence in the fourth quarter of 2022.

For the German agreement, the “Excelsior” is expected to provide regasification services at Germany’s planned LNG import terminal being developed at the North Sea port of Wilhelmshaven by developer Tree Energy Solutions and the German and French utilities E.ON and Engie.

“Excelerate previously announced that the company and Engie signed a term sheet for the deployment of an FSRU to provide flexible and secure LNG regasification capacity for Germany as it continues to seek alternatives to Russian pipeline gas supply,” said Excelerate.

The US company also recently ordered an FSRU newbuild from Hyundai Heavy Industries of South Korea to be set for hire in the second quarter of 2026.

Earnings overview

The company’s adjusted earnings increased over the prior quarter due to lower idle fuel costs, lower repair and maintenance expenses and higher margins from the Bahia Blanca seasonal charter in Argentina.

Excelerate said this was partially offset by an increase in expenses primarily driven by higher consulting costs to support the company’s transition to a public company structure, along with higher spending related to business development and marketing activities.

“Excelerate delivered another great quarter, demonstrating the strength of our flexible business model against the backdrop of the most significant energy market disruption in decades,” said President and Chief Executive Steven Kobos.

“We are successfully executing our strategy to deploy our flexible LNG infrastructure and pursue downstream opportunities to expand our reach in both new and existing markets,” added Kobos.

“Our portfolio approach to managing our FSRU fleet provides us with a unique ability to deliver the best solutions that scale with our customers’ needs in both developed and emerging markets,” stated the CEO.

The company added that it was increasing its full-year 2022 guidance range.

Adjusted gross earnings are now expected to range between $264M and $274M, up from $249M and $269M.

Natural gas demand growth in China, including LNG deliveries, is forecast to slow considerably, falling to 2 percent per annum between 2021 and 2030 compared with an average growth rate of 12 percent per annum between 2010 and 2021.

Höegh LNG Holdings, the owner of 10 floating storage and regasification units (FSRUs) and two conventional carriers, has agreed to grant a purchase option to Lithuania to buy the FSRU “Independence”.

The FSRU has been in operation at the port of Klaipeda since October 2014.

It was expected to be purchased by the Lithuanians from Höegh LNG and has been chartered since being deployed for around $68 million per annum.

The shipping company said that the charterer of the “Independence”, the Lithuanian, energy storage company Klaipėdos Nafta, had notified Höegh that it would like to exercise and option to acquire the FSRU.

“The transfer of ownership is expected to occur in December 2024,” said Höegh.

“Until then, the existing FSRU contract between a subsidiary of Höegh LNG and Klaipėdos Nafta continues unchanged,” it added.

The Klaipėda LNG terminal is still the main source of gas supply to Lithuania which is building up its already well developed gas transmission infrastructure.

Latvia storage

Klaipėda Nafta is expanding its gas supplies and has gas transmission projects with European Union neighbours, helping Latvia to boost its gas storage volumes.

Höegh LNG Holdings in September 2022 finalised the acquisition Höegh LNG Partners, the affiliate company with five ships and listed on the New York Stock Exchange.

The company's two conventional carriers, each with 147,200 cubic metres of capacity, are the “Arctic Lady” chartered to TotalEnergies and the “Arctic Princess”, chartered to Norway’s Equinor.

Both vessels are mostly on shuttle duty delivering cargoes from the Equinor-operated Hammerfest LNG export plant.

Höegh LNG Holdings revealed the initial merger plan in December 2021 and went on to acquire all outstanding common units not already owned by Höegh LNG Holdings in exchange for $9.25 in cash per common unit.

Germany, the leading European Union economy with plans for about half-a-dozen LNG import projects to replace halted Russian pipeline gas, has seen spot natural gas prices drop by over 55 percent since a government energy package was unveiled and the nation’s gas storage levels jumped to be almost full.