LNG

As earnings season progresses, energy major Shell has outshone the competition with strong LNG performance driving a robust profit of US$6 billion.

The group’s LNG division reported increased LNG sales and heightened production in Asia, bolstered by a hot summer weather increasing use of air conditioning. LNG sales volumes from the group rose from 16.4MT in 2Q24, to 17.0MT in 3Q24.

“Adjusted Earnings were higher than in Q2 2024, due to higher LNG liquefaction volumes,” a spokesperson for the firm said, adding that revenues reflected “strong

operational performance in Integrated Gas, Upstream and Marketing”.

 In contrast, TotalEnergies announced an 82% drop in refining and chemicals earnings, compounded by an unexpected outage at its Australian Ichthys plant. While both companies experienced declines in refining profits, Shell's LNG sales rose by 6.4%, whereas TotalEnergies saw a 9.5% drop in its LNG sales.

Meanwhile, Cheniere Energy, the largest LNG exporter in the US, reported a decline in third-quarter profits, with total revenues of US$3.763 billion, down from US$4.159 billion year-over-year. This included a drop in LNG revenues to US$3.554 billion. This decline was attributed to decreased market volatility and lower international LNG and natural gas prices.

 As more of Cheniere's LNG is being sold under long-term contracts, the company has felt the impact of reduced volumes sold in the short term. The decline was exacerbated by falling Henry Hub pricing, which is linked to many of Cheniere's long-term LNG contracts.

Despite these challenges, Cheniere remains optimistic about the long-term demand for LNG, especially in Asia. Projections indicate that Chinese demand for natural gas is set to increase by over 50% by 2040, with LNG expected to account for 25%-30% of China's total natural gas demand. The firm also exported that it recently reached the milestone of loading its 1,000th LNG cargo for export from the CCL Project, which discharged in Italy.

Japanese power generation venture JERA has strengthened LNG links with Australia having finalised its deal with Woodside Energy to acquire a stake in the Scarborough gas project.

The agreement, valued at approximately US$1.4 billion, was completed on October 31, and will see JERA secure a 15.1% participating interest in the offshore gas field development. As part of the joint venture, JERA will receive an equity share of around 1.2 million tonnes per annum (Mtpa) of LNG from the project's expected peak production of approximately 8 Mtpa.

Imported US LNG will ‘crucial’ to the development of the EU’s Vertical Gas Corridor project, expanding transportation capacity in Southeast, Eastern and Central Europe.

The complex project aims to span nine gas transmission system operators and will allow Europe to reduce dependency on Russian gas. An EU official close to the project told Platts that US LNG is expected to be central to plans for Central and South-Eastern Europe Energy Connectivity (CESEC) as part of efforts t further reduce dependence on Russian gas.

The number of LNG export vessels departing from the US declined slightly in the last week of October, pointing to a slight cooling in activity. The data from the US Energy Information Administration (EIA) shows that twenty-four LNG vessels departed U.S. ports, collectively carrying a capacity of 89 billion cubic feet (Bcf) of LNG in the week to October 30. This compares to twenty-seven LNG vessels between October 17 and October 23, with a higher combined capacity of 101 Bcf.

Average natural gas deliveries to US LNG export terminals also decreased by 0.2 Bcf/d last week, averaging 13.5 Bcf/d, according to data from S&P Global Commodity Insights. Deliveries to terminals in South Louisiana saw a decrease of 2.3% (0.2 Bcf/d) to 7.9 Bcf/d, while those to terminals in South Texas remained relatively stable at 4.4 Bcf/d. Deliveries to terminals outside the Gulf Coast held steady at 1.2 Bcf/d.

The US has strengthened sanctions against Russia, further targeting LNG exports from the Arctic LNG 2 project.

New measures published on Wednesday, sanctioned nearly 400 entities and individuals, and called out several third-country operators that the US State Department believes have been supporting Russia’s energy production and military-industrial base.

US oil and gas firm Coterra Energy has signed a series of new LNG gas supply agreements, linking prices to long-term Asian and European indices. 

In the UK, the firm executed two natural gas sale and purchase agreements with utility firm Centrica LNG. Under the terms of the deals, Coterra will provide 100,000 MMbtu/d of natural gas indexed to European gas prices, such as TTF and NBP, over a 10-year period starting in 2028.

“This major gas deal will reduce the market risk in Centrica’s LNG portfolio by purchasing US gas on the same price indices under which the LNG is subsequently sold,” Chris O'Shea, Group CEO of Centrica, said. “These decade-long deals with Coterra are a further demonstration of the special trade relationship between Great Britain and the United States.”

Separately, Coterra also signed a natural gas Sale and Purchase agreement with Swiss-based Dutch multinational Vitol. This contract will see Coterra deliver 100,000 MMBtu/d of natural gas (equivalent of approximately .7 million tonnes of LNG per annum) to Vitol with the purchase price indexed to LNG Japan/Korea Marker (JKM) for a period of 11 years, beginning in 2027.

Coterra’s Chairman, CEO, and President, Thomas Jorden, hailed the deal as a new step in his firm’s “valuable relationship with Vitol” and noted the abundant, low-cost natural gas resources in the US would “help support energy reliability and energy affordability around the world” and “further strengthen our nation’s standing on the global stage.”

Commenting on the deal, Ben Marshall, Head of Vitol Americas, predicted that US natural gas production will continue to play a critical role in satisfying the world’s energy needs as the energy landscape continues to evolve and “this transaction highlights Vitol’s ability to provide innovative gas and LNG solutions” 

QatarEnergy is reportedly set to award contracts for six new supersized LNG carriers to a joint venture between Japan’s Mitsui OSK Lines and China’s Cosco Shipping Energy Transportation (CSET).

The partners have emerged as favourites to supply the 271,000-cbm LNG carriers that QatarEnergy contracted with Hudong-Zhonghua Shipbuilding in September. 

Many LNG vessels are now operating below breakeven on spot trades with time charter rates seeing steep declines, according to analysts at Jefferies.

The investment bank reports that two-stroke LNG carrier spot rates are now at US$31,000 a day, while TFDE LNG carrier rates sit at US$18,000 a day, placing the sector “under significant pressure”.

investment bank Goldman Sachs has cautioned that the upcoming US elections could introduce downward pressures on the global LNG market, driven by potential shifts in trade relations between the US, Russia, and China. 

"Any significant changes to US sanctions or tariff policies would potentially soften LNG and thus European and Asian gas markets at the margin," analysts at the bank commented.

Sapphire Gas Solutions has received approval from the US Department of Energy to export up to 51.75 billion cubic feet of LNG per year, supporting global energy needs through 2050. 

Utilizing ISO container technology, Sapphire bypasses traditional onshore transfers, enabling rapid deployment of LNG directly to crisis-affected areas, including those impacted by recent conflicts and supply disruptions. 

 “This approval not only strengthens our commitment to expanding the global reach of US-produced LNG but also underscores our ability to deliver innovative energy solutions that contribute to reducing carbon emissions and promoting energy security around the world,” Sam Thigpen, CEO of Sapphire Gas Solutions, said.

With this authorization, Sapphire will be able to provide up to 1.7 million gallons of LNG daily to both Free Trade Agreement (FTA) and non-FTA nations, bringing energy to regions with limited access and high demand.

Sapphire operates under a small-scale exemption that allows it to bypass the current moratorium on large-scale natural gas exports impacting the US natural gas industry. The new authorization extends through December 31, 2050, with flexibility to operate under both long-term and short-term contracts

“Our ability to operate under the small-scale exemption is a game changer for Texas and US natural gas,” Thigpen comments. “While the industry has been constrained by the current moratorium, this approval enables us to expand our proven business model globally.”