LNG

The Japan Organization for Metals and Energy Security, a national agency with a stake in the Russian Arctic LNG II project operated by the Novatek natural gas company of Russia, is likely to put Japanese LNG needs over Western sanctions as Japan did when keeping cargo rights from Sakhalin LNG.

“Strengthening mutually beneficial relationships with resource-rich countries is essential for developing oil and natural gas resources,” said the Japanese agency known as JOGMEC.

“As a governmental organization, JOGMEC conducts various projects to support Japan’s resource diplomacy, collaborating with national oil companies and providing technical support for producing countries,” it added in its latest statement on policy.

While Japan like other nations has condemned Russia's invasion of Ukraine it has continued to keep stakes in the Sakhalin LNG plant in the Russian Far East and other energy projects.

Novatek controls 60 percent of the Arctic LNG II project and its other remaining active partners are from China and Japan.

Consortium

They are China National Petroleum Corp., China National Offshore Oil Corp. and a consortium comprising the Japanese trading company Mitsui & Co. and JOGMEC.

Mitsui has said that while it would comply with any sanctions requirements it would take its final guidance from the Japanese Government.

In the case of Russia’s Sakhalin LNG, Japanese companies Mitsui and Mitsubishi maintained their stakes and offtake with the government saying at the time that if Japan ceded its offtake rights they would likely be taken up by China.

Another energy security issue facing Japanese utilities and LNG importers is that Australia could become an unreliable LNG supplier in the future as labor unions begin to exercise control and more hardline policies at LNG plants, readily backed by key members of the governing left-wing and anti-hydrocarbon Labor party.

This action has resulted in a series of strikes and work stoppages at four facilities in Western Australia, raising security of supply concerns in Asia.

Analysts said that crucially the Japanese have a large offtake portion from the Arctic LNG II project on the Gydan Peninsula that is expected to come on stream in early 2024 and they were unlikely to give this up.

Japanese offtake

The Japanese have basic offtake rights from the Gydan venture to 2 million tonnes per annum and could increase that total.

Arctic LNG II will have three liquefaction Trains, each with 6.6 MTPA of capacity.

One of the Trains is already on site after being towed from a construction yard in the Murmansk Region on a gravity-based structure and deployed in the bay where the plant is located.

The biggest Arctic LNG shareholder, Novatek itself, has been signing multiple additional sales and purchase agreements with Chinese LNG players such as the ENN Group and Zhejiang Energy Gas Group.

The ENN SPA stipulates cargoes from Arctic LNG II will amount to a total of 600,000 tonnes per annum will be delivered over a term of 11 years.

LNG deliveries to ENN will be on a ex-ship (DES) basis whereby Novatek supplies the shipping to ENN’s Zhoushan LNG receiving terminal in eastern China. 

Technip Energies, the leading energy and LNG project company with contracts at leading global ventures including in Arctic Russia, offshore Africa and in Mexico, reported a jump in first-quarter revenues and profits.

Novatek, the Russian natural gas company and operator of Yamal LNG and the developer of the Arctic LNG II project, reported a more than six-fold rise in annual net profits as global prices soared and storage levels dropped.

The Moscow-based company posted 432.9 billion Russian roubles ($5.7 billion) of profits attributable to shareholders compared with 67.8Bln roubles ($893 million) of profits in the previous year.

Novatek is the largest independent natural gas producer in Russia and started up the Yamal LNG export plant in northern Siberia in 2017 to supply Europe and Asia and is currently building the second LNG joint venture on the Gydan Peninsula.

The company, listed on the Moscow and London stock exchanges, said total revenues and normalized gross income, including its share of joint ventures, amounted to 1,156.7 billion roubles ($15.23Bln) and 748.3Bln roubles ($9.85Bln), representing increases of 62.5 percent and 90.9 percent respectively compared with 2020.

Its upstream activities are concentrated in joint ventures in the prolific Yamal-Nenets Region, the world’s largest natural gas producing area, accounting for about 80 percent of Russia’s gas production and around 15 percent of the world’s gas output.

Price rises

“The increases in total revenues and normalized EBITDA were largely due to an increase in global commodity prices for hydrocarbons, as well as the launch of gas condensate deposits within the fields of the North-Russkiy cluster,” said Novatek.

The company explained that European and Asian natural gas markets were impacted by faster than expected recovery of demand after the Covid-19 pandemic, the declared energy transition policy, as well as weather factors and supply disruptions.

“All this caused storage level reductions in key consuming regions and a strong price rally in the second half of 2021,” it added.

Novatek’s natural gas sales volumes totaled 75.8 billion cubic metres, representing a marginal increase of 0.3 percent compared with 2020, though global prices soared.

“An increase in natural gas volumes sold on the domestic market completely offset a decline in natural gas volumes sold on the international markets,” explained the company.

“The increase in natural gas volumes sold on the domestic market resulted from the launch of additional production facilities, as well as higher demand from end-customers due to weather conditions,” added Novatek.

“The decline in natural gas volumes sold on the international markets was due to a decrease in LNG sales volumes purchased primarily from our joint venture OAO Yamal LNG, as a result of an increase in the share of Yamal LNG’s direct LNG sales under long-term contracts and the corresponding decrease in LNG spot sales to shareholders, including the Group,” it stated.

The Moscow-based company produces and sells LNG, crude oil, domestic natural gas, liquefied petroleum gas and other petroleum products.

Novatek’s total hydrocarbon production increased to 626.3 million barrels of oil equivalent from 608.2 million boe in the previous year.

Total production amounted to 1.72 million boe per day versus 1.66M boe per day in 2020.

Jan 31 (LNGJ) - Leading Italian LNG project engineering company Saipem has issued a profits warning because of trouble with wind projects. The Milan-based company said it had initiated preliminary discussions with banking counterparties as well as with shareholders like energy major ENI to ascertain their willingness to support a financing package. Saipem said it experienced problems related to onshore and offshore wind development work in 2021. It has cut gross earnings forecasts for the second half by about €1Bln (US$1.1Bln).

   “As a result, Saipem's earnings are expected to close with losses in excess of one-third of the company’s equity, which triggers the application of Article 2446 of the Italian Civil Code,” it explained. This Code covers a situation whereby losses reduce a company's net worth to be lower than the subscribed share capital by more than one third. In such a case a company needs to be re-capitalized.

Shell, the global oil and gas major, said it was ready to consider future participation in a new liquefied natural gas project in Russia as the company sees growth potential in supplying more natural gas to satisfy increasing demand in Asia.

The modules constructed in China for the first liquefaction Train for the Novatek-led Arctic LNG II project have arrived at the Novatek-Murmansk assembly site in Northern Russian from the Wison shipyard.

Gazprom said it had begun building a small-scale liquefied natural gas facility using coal-seam gas in the Kuznetsk Coal Basin in the country’s Kemerovo region of southwest Siberia, known as the Kuzbass, and a coal-mining area where in the time of Stalin and even later mine workers could become heroes of the Soviet Union.

TechnipFMC, the energy projects and subsea company, said its Technip Energies division had third-quarter revenues of $1.60 billion and benefited from the continued ramp-up of Novatek’s Arctic LNG II joint venture in Russia and gave updates on other projects.

The Gazprom-run Sakhalin liquefied natural gas export plant in the Russian Far East has started maintenance work and has shut down one of its processing Trains.

Sakhalin Energy, the plant operating company, had originally planned for work to be done on both Trains at the same time, but logistical difficulties occurred caused by the Covid-19 pandemic and resulting safety measures.

The main buyers of Sakhalin cargoes are Japanese, South Korean and Chinese energy companies.

The shareholders in the plant are Gazprom with 50 percent plus one share, Royal Dutch Shell with 27.5 percent and Japanese companies Mitsui and Co. and Mitsubishi Corp. with 12.5 percent and 10 percent respectively.

Under its new plans some scheduled maintenance work has now been postponed until 2021.

“Due to current economic downturn and the pandemic challenge, we had to modify the initial turnaround scope,” said a Sakhalin Energy statement.

“To ensure the safety of our people and reliable production, the company has decided to follow the original timeline, but shut down only one Train at the LNG plant,” the company added.

LNG production at the two-Train Sakhalin plant has remained at just over 11 million tonnes per annum in recent years. The plant was Russia's first and came on stream in 2009.

The newer Yamal LNG plant started up in 2017 with output of 16.5 MTPA from three Trains and is operated by independent Russian natural gas company Novatek.

A long-planned expansion at the Sakhalin plant and the construction of a third liquefaction Train has so far failed to take place.

However, Gazprom notes that regular de-bottlenecking and equipment adjustments over the past 11 years has seen output raised to more than 11 MTPA from the nameplate capacity of 9.6 MTPA.

LNG cargoes produced and marketed at Sakhalin are supplied on a free-on-board basis and shipped by the company’s LNG carriers, “Grand Elena”, “Grand Aniva” and “Grand Mereya”.

Two other vessels, the “Amur River” and the “Ob River” carriers are used by the company under long-term charter agreements.

Novatek, the Russian developer of the Arctic II LNG project on the Gydan Pensinsula, said it signed a deal with Franco-US energy contractor TechnipFMC for the engineering, procurement, construction and commissioning of the liquefaction plant to produce 19.8 million tonnes per annum.