LNG

Equinor, the Norwegian LNG exporter and main supplier of pipeline natural gas to Europe, reported a 46 percent drop in net income as oil and gas prices declined, with pipeline gas values falling to under $9.50 per million British thermal units.

Vitol, the world’s largest independent commodity trader and owned by several hundred partners, earned $13 billion in net profits for a second year, much higher than other global commodities traders.

Global shipping chaos is leading to huge additional economic costs for imports and exports and in terms of shipping liquefied natural gas spot charter rates for West of Suez and East of Suez have plummeted.

London shipbrokers said shipping spot charter rates for West of Suez slumped this week because of the Red Sea crisis by $40,000 per day to $105,000 per day.

Rates for East of Suez tumbled by $30,000 per day to be at $75,000 per day because of extra cargo and fuel costs stemming from having to take longer delivery routes around the Cape in South Africa,

Charter demand has also been seriously affected because clauses in time-charter agreements exclude the deliberate entry into “war zones” that would affect hull, cargo and crew insurance.

LNG carriers from Qatar are continuing to use the Suez Canal and one that has just delivered to Italy’s Adriatic LNG import terminal was well on its way back to Ras Laffan.

Vessels carrying LNG from the Atlantic Basin via Suez had been less frequent before the crisis and are not expected to be re-using the Suez route anytime soon.

Containership costs soar

An example of the shipping chaos in terms of financial costs are the measures and cost adjustments having to be taken by companies like France’s Marseille-based group CMA CGM, which runs one of the largest containership fleets and many of whose vessels are powered by LNG.

CMA CGM has been forced to raise its tariffs for customers because of the Red Sea and Suez Canal shipping disruptions caused by terrorism and those on the Panama Canal caused by drought.

CMA CGM is one of the groups that has halted its ships from entering the Red Sea, and thus the Suez Canal, because of the dangers of terrorist missile attacks from Iran-backed Houthi rebels in Yemen.

One of the company’s vessels, the “CMA-CGM Jacques Saade”, the world’s first LNG-powered very large containership with 23,000 twenty-foot equivalent unit containers, normally travels to and from Asia via the Suez Canal on the Asia trade route.

The vessel was heading for the Moroccan port of Tangiers on December 21 after travelling from the East Mediterranean just after the company stopped using the Suez Canal that took its vessels past Yemen on the Red Sea route.

“In continued efforts to ensure the safety of our crew, vessels, and your cargo amid the ongoing developments in the Red Sea region, we would like to provide you with important information regarding the re-routing of several vessels from their intended route to through the Cape of Good Hope (South Africa),” said CMA CGM.

“As highlighted in our previous Customer Advisory, the re-routing of these vessels is a precautionary measure taken to navigate away from potentially unsafe areas,” explained the company.

“This decision is in line with Clause 10 of our Bill of Lading, and while we understand it may impact your logistics and supply chain operations, it is a necessary step which comes with a cost,” stated CMA CGM.

Red Sea ports

“Accordingly, we hereby inform you that, effective immediately and until further notice, a Red Sea Charge will apply to all cargo to and from Red Sea ports unless you decide to accomplish the Bill of Lading at the designated hub ports,” the company explained.

The Red Sea Charge details are as follows: US$1,575 per 20-foot Dry, $2,700 per 40-foot Dry and $3,000 per Reefer container and special equipment.

The scope of these charges relate to routes for already-agreed cargoes that traditionally past Jeddah, the Port of Neom, Djibouti, Aden, Hodeidah, Port Sudan, Massawa, Berbera, Aqaba and Sokhna

“The date of application is December 20th, 2023 for cargo on board or to be loaded/ discharged to/from Red Sea, said the company.

Panama Canal

The company also informed its customers in November 2023 that the severe drought and further transit restrictions affecting the Panama Canal had taken a “severe toll” on operations so that consequently CMA CGM prices had to be increased from January.

The company noted that during the year, and despite several water conservation measures, the Canal draft was reduced from 14.94 metres to 13.41 metres (44 feet).

“The lack of precipitation over the summer months has forced the Panama Canal Authority to reduce the number of vessels transiting per day,” CMA CGM explained.

“As a consequence, by January 1st 2024, the booking windows for transiting the Neopanamax locks will be reduced by 30 percent,” said the company.

“These restrictions combined with an increase in the Canal Tariff implemented earlier in the year, are taking a severe toll on CMA CGM’s operations,” stated CMA CGM.

“Therefore, please note that CMA CGM will apply a US$150 per Twenty-Foot Equivalent unit (TEU) Panama Adjustment Factor starting on January 1st, 2024,” the company told customers.

The International Union of Marine Insurance (IUMI) reported a surge in the annual global premium base with the total reaching $35.8 billion, an 8.3 percent increase on the previous year in a business with liquefied natural cargoes currently valued at around $40 million and LNG carriers, for example, worth $250M.

Equinor, the operator of the Hammerfest LNG export plant in northern Norway, said that a gas leak occurred at the facility on Melkøya Island on May 31 and had been stopped, though it was too early to say when production would resume.

“Equinor’s emergency response organisation has been demobilised and the emergency services have left Melkøya,” said Equinor.

“The leak occurred in connection with a valve in one of the plant’s cooling circuits,” Equinor explained.

“The gas that leaked is used for cooling during production of LNG,” the company added.

Equinor’s emergency response organisation was immediately mobilised to face the incident and it was handled in collaboration with emergency services.

“Relevant authorities were notified. There were 98 people present at the plant when the incident occurred. All personnel are accounted for and no injuries were reported,” stated Equinor.

“It is too soon to say when production at the plant can be resumed,” Equinor added.

Fire recovery

A fire had previously occurred at the Hammerfest plant on September 28 in 2020 and led to a prolonged closure for repairs until mid-2022.

No one was hurt in the 2020 fire and much of the damage to the plant was caused by the sustained use of high-powered hoses to suppress the fire and stop it re-igniting.

Equinor concluded shortly afterwards that a fire had started in the filter housing of a gas turbine generator.

The fire investigation noted that the cause of the fire was spontaneous ignition in the filters in the turbine’s air inlets, caused by excessively high temperatures over a long period of time.

Feed-gas for the single-Train Hammerfest liquefaction facility comes from the Snøhvit gas field in the Barents Sea.

Hammerfest exports around 4.70 million tonnes of LNG and most of the volumes are delivered to European destinations like France, Spain, the Netherlands and Lithuania.

Most feed-gas for Hammerfest comes from a total of 20 wells in the Snøhvit and Albatross fields.

This output is transported to land through a 143-kilometre (89-mile) pipeline.

Equinor has 37 percent of the Snøhvit field and the LNG plant and the other large partners include French major TotalEnergies and Germany’s Wintershall Dea.

Ascenz Marorka, a subsidiary of French storage tanks technology company GTT, has been awarded two contracts by the Chinese natural gas and LNG player, the JOVO Group, to provide two LNG carriers with smart-shipping equipment.

JOVO is based in Guangdong province of southern China where it is one of the main suppliers of LNG and other fuels in the Pearl River Delta area.

The Chinese company is involved in LNG importing, trading and the city-gas business as well as pipeline gas deliveries and natural gas filling stations for vehicles.

GTT smart-shipping unit Ascenz Marorka has emerged from the joint branding of Singapore-based Ascenz and Icelandic firm Marorka, which was acquired by GTT.

These contracts for JOVO’s two LNG carriers cover the installation of automatic data collection systems and software for managing and optimising the energy and environmental performance of the ships.

Voyage management

“Crew on board and personnel ashore will benefit from a comprehensive set of modules such as voyage management, LNG cargo optimisation, machinery optimisation, trim optimisation and fuel monitoring,” said GTT.

“In addition, JOVO will also benefit from exclusive LNG features developed through GTT’s unique expertise such as LNG cargo monitoring, boil-off gas management and heel optimisation,” stated the Paris-based parent company.

“We are honoured by the trust that JOVO places in us to support them on their journey towards digitalisation, operational optimisation and effective decarbonisation,” said Anouar Kiassi, Vice-President of Digital and Information at GTT.

“We are delighted to work hand in hand with a shipowner committed to operational and environmental excellence,” stated Kiassi.

Lu Yuan, Managing Director of LNG International Business for the JOVO Group, said the company was delighted to extend its cooperation with GTT and Ascenz Marorka.

“The deployment of these innovative and unique solutions and services on board our LNG carriers will enable us to better operate our vessels, unload larger volumes of LNG cargoes, improve general safety, assist crews in their demanding tasks and achieve our environmental goals,” Lu declared.

Spain increased its imports of Russian liquefied natural gas in 2022 despite Western sanctions over the invasion of Ukraine and with only the UK out of leading European importers voluntarily ending LNG cargo deliveries from Russia and later joined by the Baltic nation of Lithuania.

Spain, France, the Netherlands have continued to receive LNG cargoes, which are not on the formal Western sanctions list.

The shipments to Spain and other European Union nations mostly come from the Yamal LNG export plant in northeast Siberia and operated by Russian natural gas company Novatek.

Latest Spanish data showed that 12.6 percent of Spanish natural gas was imported from Russia in the form of LNG and regasified to enter the state gas grid or re-exported to other EU nations.

With the start of the war in Ukraine in February 2022, energy supplies from Russia collapsed with oil accounting for just 1 percent of Spanish imports and with only LNG surviving as a seemingly essential Russian commodity.

Regarding LNG imports, the data showed that Spain received 56,021 gigawatt hours (GWh), or 4.24 million tonnes, of LNG from Russia in 2022, which was 54.8 percent more than in 2021 when it imported 37,027 GWh, or 2.80MT of LNG.

Rise in deliveries

As a consequence, Spain’s share of LNG shipments from the Russians increased by 3.7 percentage points in 2022 from 8.9 percent to 12.6 percent.

The data showed that Russia remained the fourth largest natural gas supplier to Spain after LNG deliveries from the US, pipeline natural gas from Algeria and LNG cargoes from Nigeria.

In the last month of 2022, Russian deliveries from the Yamal plant to northwest Spain and other Spanish ternminals surpassed LNG deliveries from Nigeria and consolidated itself in third place.

This meant that in the month of December, 5,453 GWh, or 414,400 tonnes, of LNG were received by Spain from Russia .

This increased the December cargo volumes of Russia’s LNG received by Spanish terminals to 14.3 percent of the total.

The LNG deliveries contrasted with the shipment of oil cargoes to Spanish refineries.

Russia exported 698,000 tons of crude oil to Spain in 2022, which was 72.8 percent less than in 2021 when 2.6 million tons were received.

In this case, Russia’s share of crude deliveries to Spain fell from 4.6 percent of the total to 1.1 percent.

After this collapse, Russia’s became Spain’s 17th largest oil supplier, down nine places from 2021.

Novatek, the Russian energy company and developer of the Arctic LNG II project to double up on the existing Yamal LNG plant, said it was still on track for the first Train to come on stream by year-end 2023 and Japan and China would be key customers.

International law firms are forecasting more dispute resolution cases in the liquefied natural gas business as supply and demand trading contracts increase along with new infrastructure projects.

US major ConocoPhillips and QatarEnergy will combine to provide 2 million tonnes per annum of LNG to Germany’s new onshore import terminal under development at Brunsbüttel on the Elbe River.