LNG

European and Asian liquefied natural gas prices rebounded from three-year lows as cooler weather and the return of government energy policy uncertainties offset high global storage levels and concerns over trade route insecurity.

UK-based major Shell is completing a fourth-month maintenance turnaround of the “Prelude FLNG” production vessel that operates off the northwest coast of Australia and which has suffered shutdown over the last few years because of technical issues as well as industrial unrest among workers.

The FLNG vessel is moored 400 kilometres (250 miles) north of the town of Broome on Western Australia’s Kimberley coast and has 3.6 million tonnes per annum of production capacity.

Shell has attempted to tackle some long-term technical issues at the facility with maintenance and work that started in August 2023.

Demand window

“Prelude FLNG” will be coming back on stream to capture the winter demand surge in Japan, China, South Korea and Taiwan.

The LNG carrier “Symphonic Breeze” is expected at the “Prelude FLNG” production hull early in December.

Shipping data showed that the “Symphonic Breeze” departed from the Japanese port of Naoetsu on November 23 with the destination of the vessel with 145,500 cubic metres capacity given as the Shell export facility.

Prelude FLNG has suffered several outages since it started production in June 2019, including a fire that led to a full power loss in December 2021 and several other automatic shut-downs because of fire alarms going off.

“Prelude is a complex facility in a remote offshore location,” said Shell in a statement.

“This is its first major turnaround and we continue to work through the process methodically taking as much time as required to ensure safe execution of all activities,” said the London-headquartered company.

“During the turnaround, additional scopes of work were identified and a decision made to extend maintenance to complete these scopes ahead of restart,” Shell added.

Feed gas

For the Shell project, the Concerto gas field and the nearby Prelude field provide the feed gas for the LNG and the new Crux field is also being developed.

The “Prelude” joint venture is owned 67.5 percent by Shell and 17.5 percent by Inpex Corp. of Japan, operator of the Australian Ichthys project from where the carrier the “Symphonic Breeze” has lifted many cargoes for Japan.

The Inpex Ichthys plant is located at Bayden Point in the Northern Territory of Australia, close to the Darwin LNG plant operated by Santos.

The Santos facility is seeking to bring on stream more feed gas from the Barossa gas project.

A further 10 percent of “Prelude” is held by the South Korean LNG buyer Korea Gas Corp. and 5 percent by CPC Corp. of Taiwan.

European benchmark natural gas prices dropped on the week as natural gas storage levels almost peaked in the European Union while North Asian front-month LNG spot cargo prices edged higher as more demand was expected in the weeks ahead.

The Japan Bank for International Cooperation, the leading state-owned financial institution, has signed an additional loan deal amounting to 100 billion yen ($675 million) for JERA Co Inc., Japan's biggest LNG buyer and power generation company.

JERA Co. Inc., the Japanese LNG buyer of 35 million tonnes per annum of volumes and with control of a fleet of 20 LNG carriers, has drawn up measures to address supply and demand issues in Japan through the Northern Hemisphere summer season.

Global pricing agency Platts said the Japan-Korea Marker (JKM) price for liquefied natural gas assessed by the US firm rose to a record high of $20.705 per million British thermal units

Asian spot LNG prices are riding at six-year highs, as a cold spell in some countries in North Asia prompted record imports into the region.

While Platts reported the temporary record $20.705 trading level, though the February settled prices were still generally at around $15.550 per MMBtu.

The March price was at $9.550 per MMBtu and April was quoted at $6.500 per MMBtu.

Analysts said demand from Japan has pushed up North Asia spot cargo prices.

Jera Co. Inc., Japan’s biggest power generator and the world’s largest buyer of LNG, as well as other Japanese electricity and gas companies, are competing with LNG buyers in China and South Korea to secure supplies.

Platts said that the situation also meant that fewer cargoes were coming to Europe than is usual for this time of year.

The UK National Balancing Point benchmark gas price had been firm over the past week though has now fallen under $7.00 per MMBtu.

The NBP was last at $6.95 per million British thermal units while the continental European Dutch Title Transfer facility (TTF) price was lower at the equivalent of $6.35 per MMBtu.

“A major demand stimulus for the recent price increase was the cold snap across northeast Asia which has boosted gas consumption and accelerated drastic inventory draw-down in Japan, South Korea and China,” explained Platts.

“On the supply-side, production issues in countries such as Malaysia have depleted availability and led to delayed or deferred deliveries of LNG, as well as reduced volumes stipulated under long-term contracts,” it added.

US Gulf Coast LNG prices were lower. The February derivative contracts for FOB cargoes has declined to $5113 per MMBtu from
$6.400 per MMBtu.

The March price also fell back on the week to $4.883 per MMBtu from $5.929 per MMBtu. The April GCL price was from $4.532 per MMBtu.

Additionally, there have been shipping traffic constraints in the Panama Canal, meaning vessels carrying shipments from the US Gulf Coast have experienced longer shipping times into the Pacific region.

“This has meant more cargoes are expected in Asia in the later weeks of February or in March,” stated Platts.

Platts said it forecast a drop in Asia-Pacific demand through the first quarter. Even if some supply outages continue through March, prices were likely to decline.