LNG

A fire apparently caused by a drone attack broke out at a Baltic Sea fuel terminal in Russia owned by the largest Russian liquefied natural gas producer Novatek.

“There were no casualties as a result of the fire at the Novatek terminal in the port of Ust-Luga and the personnel were evacuated,” said a statement from the authorities in the Ust-Luga area near the Gulf of Finland and called the Leningrad region.

The Ust-Luga complex is located about 170 kilometres (105 miles) west of the city of St. Petersburg and processes stable gas condensate.

This is a very light oil obtained by separation from natural gas during production and during distillation the condensate at Uist-Luga produces fuels such as heavy naphtha, jet fuel, fuel oil and gasoil..

Novatek in addition to the Ust-Luga complex also owns the Yamal LNG export plant that still ships cargoes to Western Europe and China from the Yamal Peninsula in Arctic Russia.

Condensate

Novatek said in its most recent earnings statement on January 17, 2024, that the volume of condensate handled at the complex in Ust-Luga rose by 0.4 percent to 7 million tonnes.

Russian news agencies reported that two storage tanks and a pumping station had been damaged at Ust-Luga but that a fire had been brought under control with no one was reported injured.

Novatek said in a statement it had suspended some operations after the fire which it said was the result of “external influences”.

Novatek added that the production process at Novatek-Ust-Luga has been suspended and a damage assessment process had started.

Analysts note that Russia and Ukraine have been targeting each other’s energy infrastructure in drone strikes designed to disrupt supply lines and logistics since the conflict began in February 2022 after Russia invaded Ukraine.

The Ust-Luga port area was also well known for its connections to the former Gazprom-operated natural gas Nord Stream pipelines that are no longer in operation.

Nord Stream gas

The Nord Stream pipelines were ruptured in September 2022 in still unexplained sabotage attacks that halted all Russian pipeline gas exports to Germany and the European Union.

The Nord Stream II pipeline bypassed EU members Poland and Lithuania, as well as the traditional pipeline transit nation of Ukraine on its 1,200-kilometres route from Ust-Luga to Greifswald near the Baltic port of Lubmin in northeast Germany and carried 55 billion cubic metres of gas.

The other main Gazprom gas pipeline export route to Germany was the Nord Stream I pipeline which ran from Vyborg port in northwest Russia to the same German landfall near Lubmin, which is now the site of a German LNG import terminal.

Asian liquefied natural gas demand is projected to increase in 2024 led by China even amid competition facing gas-fired power from electricity generated in the region by coal and with more pipeline gas heading for the Chinese border from Russia.

Uniper, the German utility almost brought down by the stoppage of pipeline natural gas supplies from Russia’s Gazprom and which is now importing LNG at Germany’s North Sea port of Wilhelmshaven, has suffered another setback by having to pay €550 ($602M) to a European LNG player after an arbitration ruling.

The Düsseldorf-based company, which had to receive a stabilization package from the German Federal government in 2022 to survive and reported net losses of €19 billion ($20.4Bln) in its most recent annual earnings, said the ruling came from an arbitration court over a contract concluded prior to the group’s spin-off in 2016.

Uniper said that the arbitration proceedings, under the rules of the International Chamber of Commerce, began in early 2021 and related to the pricing provisions of a long-term LNG supply agreement with an undisclosed counter-party.

Proceedings

“Uniper has been notified on 24 November 2023 of an award against a subsidiary in arbitration proceedings under the rules of the ICC which began in early 2021,” said the Uniper statement.

“The proceedings between the Uniper subsidiary and a European energy company relate, inter alia, to the pricing provisions of a long-term agreement for the supply of liquified natural gas (LNG), concluded prior to the spin-off of Uniper in 2016 and which has since expired,” Uniper explained.

“A payment to the opposing party of an estimated €550 million related to the retroactive re-pricing of the long-term agreement would be due under the terms of the award,” it added.

“The additional payment will have a full impact on the annual result of Uniper. Uniper is currently analyzing the reasoning of the decision and reviewing all possible avenues of legal recourse against the award,” stated the company.  

The 2017 report of the International Group of LNG Importers (GIIGNL) showed a 15-year contract under which Italian energy company Eni agreed to supply Uniper with 650,000 tonnes of LNG per annum between 2007 and 2022.

However, Milan-based Eni has so far declined to comment on the issue.

Uniper said in October 2023 that it expected adjusted earnings before interest and tax of between €6 billion to €7Bln and adjusted net profit of €4Bln to €5Bln.

Gazprom issues

Uniper was spun from German utility E.ON in 2016 and has also been involved in lawsuits against Gazprom, the former supplier of pipeline natural gas to Germany. At the time Uniper was under the control of the new owner, the Finnish power company Fortum.

However, Uniper was then formally taken over from Fortum in December 2022 in a deal with the German State that had included clearances from the European Commission to save Uniper from collapse.

Uniper itself had launched legal proceedings in 2022 against Gazprom which first cut and later suspended deliveries, sending Uniper into crisis.

Uniper’s bad luck was compounded in 2022 as it was also a buyer of LNG cargoes from the US Freeport LNG plant in Texas closed for part of 2022 and early 2023 by the June 8 fire.

The Wilhelmshaven LNG terminal commenced regular operations in March 2023, using the floating storage and regasification unit, the “Höegh Esperanza”.

The facility was developed by Uniper in record time and became the first German LNG import terminal to start operations on December 21, 2022, initially in trials. 

Spanish terminals and network operator Enagás loaded Germany's first floating storage and regasification unit (FSRU), the “Höegh Esperanza”, before it arrived on December 15 at the German North Sea port of Wilhelmshaven. 

Germany said Chancellor Olaf Scholz would discuss energy supplies, including possible LNG shipments, when he begins a tour on September 25 of the Arabian Gulf states.

A statement said that Scholz was scheduled to visit three countries Saudi Arabia, Qatar and the United Arab Emirates.

“The gas offering is slowly broadening,” said German Economics Minister Robert Habeck while visiting the Baltic Coast town of Lubmin.

Lubmin is in the German state of Mecklenburg-Vorpommern and came to prominence in the gas business by being a landfall for the cancelled Nord Stream II natural gas pipeline under the Baltic from Russia.

Nord Stream II would have doubled German pipeline imports from Gazprom, though the completed project was blocked by the European Commission and also by Chancellor Scholz’s new coalition government that won the elections in September 2021.

Lubmin will now become one of four coastal hubs for LNG imports from the US, other European countries and possibly Qatar and the UAE.

“We must show that in times like these, we can plan, authorize and build faster than is usually the case in Germany,” said Habeck on the plan to site a floating storage and regasification unit at Lubmin.

Habeck is also Vice Chancellor and a member of the Green Party.

Start-ups

The operators of the Lubmin FSRU to be chartered by the German Government is aiming for an operational start-up by the end of 2023.

Germany’s opposition parties that won power before the events in Ukraine have mostly been against using natural gas.

The country was also one of the few leading European Union economies without LNG infrastructure, though one terminal was planned on the Elbe River but constantly opposed and demonstrated against as recently as last year by Habeck's Green Party and its supporters.

They quickly changed their minds on LNG after the gas crisis erupted and it was deemed to be a “transition” fuel by the panicked European Commission late in the day in 2022.

Other German LNG import terminal plans include a mixture of FSRUs and onshore facilities, though a final project list has yet to be published.

Among those advancing is an FSRU venture and a possible onshore facility at the port of Stade on the Elbe River backed by state government of Lower Saxony and by a development company, Hanseatic Energy Hub GmbH.

German is acquiring at least five FSRUs to move away as fast as possible from dependence on Russian pipeline natural gas from Gazprom.

The Stade seaport is situated on the Elbe sea-lane between Hamburg and the Elbe estuary at Cuxhaven and is close to the North Sea.

Chancellor Scholz said in a speech on September 13 that a series of planned new LNG import facilities would be ready for imports by the end of 2023.

He expected facilities to be developed quickly at the North Sea port of Wilhelmshaven and at Brunsbüttel, located south of Hamburg on the Elbe River and near the entrance to the Kiel Canal.

According to the German government, Wilhelmshaven will become the first LNG hub. Brunsbüttel will be the second to be completed and is backed by the Government, German utilities and the Dutch utility Gasunie.

Fitch Ratings, the New York-based credit ratings agency and financial services company, has just published a report analysing the European Union’s efforts to mitigate the worst effects on gas markets of a cut-off of Russian imports and for their replacement with LNG and other types of energy.

European and Asian LNG cargo prices and natural gas pipeline values remained high even as the Nord Stream I pipeline re-opened on schedule after maintenance, restoring the main Russian gas connection to the European Union, though failing to alleviate long-term gas market supply concerns.

Russian natural gas company Gazprom said exports to countries outside the former Soviet Union were down more than 33 percent year-on-year in the 2022 period from January through July 15 as the Nord Stream I pipeline to Germany was closed for a seventh day of a scheduled 10 days of maintenance.

Norwegian energy major Equinor has awarded Transocean Spitsbergen a firm drilling programme on behalf of licence holders consisting of nine wells and options for another two as Europe awaits further natural gas output from Norway’s pipelines.

April 28 (LNGJ) - Russian natural gas company Gazprom issued a statement from its headquarters in Saint Petersburg saying it had halted gas supplies to Bulgaria and Poland over their refusal to pay for their gas in Russian roubles. “Gazprom has completely suspended gas supplies to Bulgargaz and PGNiG (Polish Oil and Gas Company) due to absence of payments in roubles,” said the Gazprom statement. “Payments for gas supplied from April 1 must be made in roubles using the new payments details, about which the counterparties were informed in a timely manner,” added Gazprom.

   Poland and other members of the 27-nation European Union have refused to pay for their natural gas in roubles as Russia has demanded as a way of stabilizing and supporting the rouble, which has been weakened by Western sanctions. Poland's PGNiG said in a statement it would continue to monitor the situation and was prepared to obtain gas from other connections. Bulgaria's Energy Ministry said state gas company Bulgargaz had received a similar notice from Gazprom. Bulgaria is almost completely dependent on Gazprom for its gas supplies.