LNG

Novatek, the Russian natural gas company and operator of the Yamal LNG export plant and developer of the delayed Arctic LNG II facility hit by Western sanctions on equipment imposed because of the Ukraine invasion, has reported operational results for the first quarter of 2024 as it continued to supply LNG cargoes to the European Union.

Novatek’s results statement showed it had resumed full production at the Ust-Luga complex, the huge Baltic Sea fuel export terminal and condensate processing plant that was damaged by fire on January 21, 2024, after reportedly being the subject of a Ukrainian drone attack.

Novatek resumed gas condensate processing at its Ust-Luga complex on February 11 after fire damage was repaired.

The company said it processed 1.4MT of stable gas condensate at the previously damaged Ust-Luga facility during the first quarter of 2024, which was 22 percent lower compared with the first three months of 2023 when 1.8MT was processed.

Natural gas sales

Novatek’s first-quarter 2024 total natural gas sales volumes to the end of March, including LNG, amounted to 21.47 billion cubic metres, a decrease of 3.8 percent compared with the same three months of 2023 when the total was 22.33 Bcm.

Novatek said its hydrocarbon production totaled 167.4 million barrels of oil equivalent, including 21.12 Bcm of natural gas and 3.5 million tons of liquids comprising gas condensate and crude oil.

This represented an increase of almost 2.5 percent in total hydrocarbons production compared with the first quarter of 2023 when the total was 163.9 million boe.

Novatek said it processed 3.3 million tonnes of unstable gas condensate at the Purovsky Processing Plant, which was 2.8 percent less than the 3.4MT processed in the prior-year quarter.

Preliminary total sales volumes of liquid hydrocarbons amounted to 4.3MT, which was 11 percent higher than in the first quarter of 2023.

Yamal cargoes

Novatek added that it had 0.2 Bcm of natural gas, including LNG, and 1.2MT of stable gas condensate and petroleum products in storage or transit and these were recognized as inventory.

Cargoes from the Yamal plant in the Russian Arctic are still being unloaded in EU nations with the UK being the only LNG importer in Western Europe to formally ban LNG from Russia.

The main EU destinations for Yamal LNG in the first quarter of 2024 have been Belgium, France and Spain.

LNG production started in December 2023 at the first Train at the Arctic LNG II project on the Gydan Peninsula on the Gulf of Ob, though Novatek has failed to ship any cargoes so far after reported problems with the liquefaction processing.

The second and third liquefaction Trains were now delayed as well and are scheduled to begin operations in 2025.

The Arctic LNG II Trains and facilities are being pre-built at a fabrication yard in the Murmansk region of Russia onboard gravity-based structures and are being towed to the Gydan Peninsula project site.

Each Arctic LNG II liquefaction Train installed on the platforms will have production capacity of 6.6 million tonnes per annum to total almost 20 MTPA in nameplate capacity.

During 2023 a total of around 90 gas wells were completed at the Utrenneye gas field to provide feed gas for Arctic LNG II. 

The European Union reduced imports of pipeline gas from Russia five-fold in 2023, while its purchases of Russian liquefied natural gas cargoes increased by around 38 percent from the Novatek-operated Yamal export plant in Northern Siberia and could rise further in 2024.

Moody’s Investors Service, the US credit rating agency, said that record high natural gas storage of almost 98 percent as of end November helped by LNG deliveries positions the European Union well to meet the needs of this winter season with very limited risks of energy shortages.

Cheniere Energy, the owner of the Sabine Pass liquefaction and export plant in Louisiana and the Corpus Christi facility in Texas, has signed another long-term LNG sale and purchase agreement with Equinor, the Norwegian LNG and pipeline gas supplier to Europe.

Under the latest SPA, Equinor has agreed to purchase about 1.75 million tonnes per annum of LNG from the Cheniere Marketing unit of the Houston, Texas-based company on a free-on-board (FOB) basis for a purchase price indexed to the Henry Hub price, plus a fixed liquefaction fee.

Delivery of half of the volume associated with the SPA will commence in 2027 and delivery of the remaining half, which is subject to a positive Final Investment Decision with respect to the first Train of the Sabine Pass Liquefaction Expansion Project, will start at the end of the 2020s. 

The Sabine Pass deal follows an SPA signed with Equinor in June 2022, also for 1.75 MTPA of volumes, from the Corpus Christi LNG expansion.

Half of the Corpus Christi volumes, or about 900,000 tonnes, were subject to Cheniere making a positive FID to construct additional liquefaction capacity at the Corpus Christi facility beyond the seven-Train Corpus Christi Stage III Project

The terms of the Sabine SPA is 15 years from the commencement of delivery of the full 1.75 MTPA of LNG volumes to Equinor, which also operates its own LNG export plant in northern Norway at Hammerfest, supplying European import terminals.

The Equinor Hammerfest plant in Norway had initially been built and started in 2007 to send LNG cargoes to the US before the shale-gas boom began the liquefaction and export build-out in the Lower 48 states of the US.

Project

The Sabine expansion will comprise three large-scale liquefaction Trains, each with capacity of 6.5 MTPA, a boil-off-gas re-liquefaction unit with output of 750,000 tonnes a year and two 220,000 cubic metres capacity storage tanks.

Cheniere has engaged US engineering company Bechtel Energy to complete a front-end engineering and design study of the Sabine Pass project.

“We are pleased to expand our relationship with Equinor, one of Europe’s leading energy companies, building upon the SPA we executed last year,” said Jack Fusco, Cheniere’s President and Chief Executive.

“This SPA underscores Cheniere’s and Equinor’s shared vision of an energy future built upon reliable, flexible, and cleaner energy solutions,” Fusco stated.

“It will provide further commercial support to the SPL Expansion Project, which we continue to rigorously develop in order to meet the world’s growing demand for secure, long-term energy supplies and the economic and environmental benefits of Cheniere’s LNG,” the CEO added. 

Helge Haugane, Equinor’s senior vice president for Gas & Power, said he was very pleased to sign the long-term agreement with Cheniere.

“Europe will need natural gas to ensure flexible energy on demand to support the build-out of more intermittent renewables and LNG will play an important role. In other markets, for example in Asia, demand for LNG is expected to grow as a solution to energy security,” stated Haugane.

FERC process

The Cheniere group in May 2023 entered the pre-filing review process with respect to the Sabine expansion with the Federal Energy Regulatory Commission under the National Environmental Policy Act.

Cheniere has also recently signed a long-term SPA with the South Korean utility company, Korea Southern Power (KOSPO) for the Sabine expansion.

KOSPO agreed to purchase 400,000 tonnes per annum of cargoes, which will be delivered ex-ship whereby Cheniere will supply the transportation.

Cheniere said it would begin delivering a smaller amount to the Koreans in 2024, though the full SPA runs from 2027 through to 2046.

The Houston company is additionally progressing with the expansion at the Corpus Christi plant where three liquefaction Trains currently produce 15 MTPA.

The Stage 3 expansion is adjacent to the existing plant and consists of seven mid-scale Trains with an total production capacity of over 10 MTPA.

It is also proceeding with an additional Corpus Christi expansion known as the Corpus Christi mid-scale Trains 8 and 9 project.

Leading European Union LNG import terminal owner and grid operator, Enagás of Spain, has signed a firm agreement in Albania to help the Balkan nation’s natural gas company AlbGaz develop its markets and infrastructure.

UK LNG imports increased by nearly 50 percent as the country's regasification infrastructure was used to increase natural gas supplies to Europe after the February invasion of Ukraine by Russia and the start of Western sanctions.

Spanish Prime Minister Pedro Sanchez said the European Union should pay for pipeline interconnections with Spain if they wish to have alternative supplies to replace Russian gas from Gazprom.

The Italian and Spanish LNG importers and natural gas pipeline operators, SNAM and Enagás, have signed an accord on establishing a direct offshore gas pipeline connecting Spain with Italy as a way overcoming the European Union energy crisis worsened by the Ukraine conflict.

Fluxys of Belgium, the gas grid and LNG terminal owner, and investment firm EIG Global Energy Partners have acquired the Quintero LNG import terminal in the South American nation of Chile.

Enagás, the Spanish gas grid and LNG terminals operator as well as a shareholder in the Trans-Adriatic Pipeline (TAP), reported a 9 percent drop in profit after tax even as LNG activities increased.