LNG exports, gas output sink in quarantined Peru

Spanish Market: Crude oil, Electricity, Natural gas
24/03/20

Peru's natural gas production has been steadily declining and the Peru LNG plant has been idle since the government issued a national lockdown a week ago to prevent the spread of the new coronavirus.

Gas production has fallen from 1.12bn cf/d on 15 March, the day the lockdown began, to 779mn cf/d on 22 March, according to the latest data from hydrocarbons agency PeruPetro.

The most significant upstream decline is coming from Camisea block 88, Peru's top gas block with proven reserves of 8.76 trillion cf. Production fell from 482mn cf/d to 143mn cf/d in the first week of the emergency. Block 88 gas is used for domestic consumption.

Output from Camisea block 56, with 1.67 trillion cf, rose slightly from 389mn cf/d to 407mn cf/d in the same period. Block 56 flows are used domestically and for export through the Peru LNG plant south of Lima.

Peru LNG, which has 4.4mn t/yr of capacity, has sent out 12 shipments so far this year, with 11 going to Asia and one to Europe. Export volume increased by 14pc spread across five shipments in February compared to the same month the previous year, according to PeruPetro. The plant loaded three shipments in the first half of March, with the last one leaving for China on 13 March.

Peru LNG could not be reached for comment. The facility is operated by US-based Hunt Oil and includes Japan's Marubeni, South Korea's SK Innovation and Shell.

Shell is in charge of marketing the LNG cargoes.

Argentina's Pluspetrol, the Camisea upstream operator, said on 17 March that the gas complex, including a gas liquids fractionating plant in Pisco, 200km south of Lima, would operate normally. Pluspetrol produces 1.5mn t/yr of LPG annually, accounting for approximately 80pc of national supply.

Electricity generation has dropped over the past week as well, as industry, particularly mines, have closed. Thermal dispatch using gas is heading down and some plants are likely to go off line in response to the lower demand. Peru's peak demand so far this month was 4,727MW on 23 March, down from a peak of 7,124MW in February, according to data from grid operator Sinac. Ricardo Labo, a partner at energy-focused law firm LQG, said thermal plants would close temporarily as demand drops. "Mining companies represent around 30pc of electricity demand, so it is natural that demand would slow as they close," he said. "Thermal plants will be the first to come off line."

The private-sector Peruvian Hydrocarbons Society (SPH) called on the government to adopt measures to safeguard the oil and gas industry. Before the double hit of coronavirus and collapsed oil prices, Peru's oil production was starting to recover. Output reached approximately 60,000 b/d in the first half of March, up nearly 20pc from the same month last year, and the SPH said this could now be lost.

The SHP wants the government to suspend or postpone tax payments, suspend royalties for 90 days, and free companies from contractual obligations, such as seismic activity and drilling. The government of President Martin Vizcarra has not yet responded with industry-specific measures.

Peru had 416 confirmed coronavirus cases and seven dead as of 24 March, according to government statistics. The national quarantine will be in place at least through 30 March.

By Lucien Chauvin

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22/11/24

Cop: Drafts point to trade-off on finance, fossil fuels

Baku, 22 November (Argus) — The new draft on the climate finance goal from the UN Cop 29 climate summit presidency has developed nations contributing $250bn/yr by 2035, while language on fossil fuels has been dropped, indicating work towards a compromise on these two central issues. There is no mention of fossil fuels in either the new draft text on the global stocktake — which follows up the outcome of Cop 28 last year, including "transitioning away" from fossil fuels — or in the new draft for the climate finance goal. Developed countries wanted a reference to moving away from fossil fuels included, indicating that not having one would be a red line. The new draft text on the climate finance goal would mark a substantial compromise for developing countries, with non-profit WRI noting that this is "the bridging text". Parties are negotiating the next iteration of the $100bn/yr that developed countries agreed to deliver to developing nations over 2020-25 — known as the new collective quantified goal (NCQG). The new draft sets out a figure of $250bn/yr by 2035, "from a wide variety of sources, public and private, bilateral and multilateral, including alternative sources". It also notes that developed countries will "take the lead". It sets out that the finance could come from multilateral development banks (MDBs) too. "It has been a significant lift over the past decade to meet the prior, smaller goal... $250bn will require even more ambition and extraordinary reach," a US official said. "This goal will need to be supported by ambitious bilateral action, MDB contributions and efforts to better mobilise private finance, among other critical factors," the official added. India had indicated earlier this week that the country was seeking around $600bn/yr for a public finance layer from developed countries. Developing countries had been asking for $1.3 trillion/yr in climate finance from developed countries, a sum which the new text instead calls for "all actors" to work toward. The draft text acknowledges the need to "enable the scaling up of financing… from all public and private sources" to that figure. On the contributor base — which developed countries have long pushed to expand — the text indicates that climate finance contributions from developing countries could supplement the finance goal. It is unclear how this language will land with developing nations. China yesterday reiterated that "the voluntary support" of the global south is not part of the goal. The global stocktake draft largely focuses on the initiatives set out by the Cop 29 presidency, on enhancing power grids and energy storage, though it does stress the "urgent need for accelerated implementation of domestic mitigation measures". It dropped a previous option, opposed by Saudi Arabia, that mentioned actions aimed at "transitioning away from fossil fuels". Mitigation, or cutting emissions, and climate finance have been the overriding issues at Cop 29. Developing countries have long said they cannot decarbonise or implement an energy transition without adequate finance. Developed countries are calling for substantially stronger global action on emissions reduction. By Georgia Gratton and Prethika Nair Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Japan’s Taketoyo to resume biomass co-firing in 2027

22/11/24

Japan’s Taketoyo to resume biomass co-firing in 2027

Tokyo, 22 November (Argus) — Japan's largest electricity producer Jera aims to resume coal and biomass co-firing at the 1.1GW Taketoyo plant in 2027's first quarter, after a fire halted plant operations in January. Jera announced on 22 November that the thermal power plant in central Japan's Aichi prefecture would resume co-firing wood pellets with coal at a rate of 8pc, around the end of the 2026-27 fiscal year ending in March. This will come after its safety measures are completed. The plant's co-firing rate was 17pc before the serious fire, which was caused by an explosion of dust from wood pellets. The company will consider increasing the co-firing rate again in the future, provided safety can be ensured. But the plant will restart coal-only combustion in early January 2025, operating mainly during the summer and winter seasons, when electricity demand is high. Jera will keep operation rates low at Taketoyo and other coal-fired plants when electricity demand is low and rely more on gas-fired generation, to achieve its initial plan to cut CO2 emissions through co-firing at Taketoyo. Taketoyo started co-firing operations in August 2022 and burned around 500,000 t/yr of wood pellets imported from the US and Vietnam. It will burn 200,000 t/yr after it resumes co-firing at 8pc. The plant will slow down the speed of wood pellet conveyors to reduce friction as a part of safety measures, which means it must also reduce its coal and biomass co-firing rate. It is also currently working on other safety measures, such as installing air pressure conveying facilities dedicated to wood pellets and explosion suppressor systems to inject fire extinguishing agents. The outage at Taketoyo has encouraged Jera to boost replacement gas-fired generation, with the extra gas-fired costs accounting for most of the estimated cost resulting from the shutdown, which could be tens of billion yen in the 2024-25 fiscal year ending in March. By Takeshi Maeda Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Pemex's lean Zama spending undercuts goals

21/11/24

Pemex's lean Zama spending undercuts goals

Mexico City, 21 November (Argus) — State-owned oil company Pemex's limited budget for developing one of Mexico's most-promising new oil fields is putting Mexico's crude production and refining goals at risk through 2030. First production from the Zama field will likely not start until at least 2028 instead of late next year, as forecast earlier, based on a timeline in a recent presentation from Pemex. Pemex continues to work on the basic engineering for the Zama field because of the lack of cash, staff of hydrocarbon regulator CNH said last week. The latest delay on Zama echoes criticism from when Pemex took over operating the field in 2022 that it did not have sufficient experience or funds to carry on with the project, said industry sources. "Unfortunately, the Pemex budget is always a shadowy mystery," said a person close to the project who asked not to be named. "There is no transparency or certainty regarding when they do and do not honor payment commitments." Zama is a shallow-water field unified in 2022 between Pemex area AE-152-Uchukil and the discovery made in 2017 by a consortium led by US oil company Talos Energy. Pemex holds 50.4pc of the Zama project while Talos and Slim's subsidiary Grupo Carso have 17.4pc, German company Wintershall Dea 17.4pc and British company Harbour Energy 12.4pc. The state-owned company expects to spend $370.8mn to develop Zama in 2025, 64pc less than the original $1.05bn budget proposed by Pemex for next year, according to data from CNH. The regulator cleared the change last week, but commissioners questioned the CNH staff about the new delays. Pemex's original development plan showed that the company forecast the first crude production by December 2025, with 2,000 b/d and about 4mn cf/d of gas. The original plan forecast Zama hitting peak production of 180,000 b/d in 2029, making it Mexico's second-largest crude producer, only under the Maloob field. President Claudia Sheinbaum and Pemex's new new chief executive Victor Rodriguez flagged the importance of shallow-water field Zama and ultra deep field Trion to support Pemex's oil production target of 1.8mn b/d in the upcoming six years in a presentation last week. Pemex's new plan is focused on feeding its own refining system rather than crude exports. The company expects to increase gasoline, diesel and jet fuel production by 343,000 b/d, according to the plan, but it did not give a timeline. Pemex produced 491,000 b/d of gasoline, diesel and jet fuel in the first nine months of 2024. Mexico's proposed 2025 federal budget also shows lower spending for Zama, at Ps3.1bn ($154mn) for 2025, even less than the figure approved by CNH on 14 November. Neither Pemex not Talos responded to requests for additional comment. "Zama is the story of the triumph of ideology over practicality," said a Pemex source who asked not to be named. The state-owned company is studying how to bring in new investors to the project once congress approves secondary laws to implement recent energy reforms, the source said. But uncertainty over the legal framework and the general deterioration of Mexico's business climate will make this more difficult, the Pemex source added. The involvement of Mexican billionaire Carlos Slim, who acquired 49.9pc of Talos Energy share in Zama last year, brought new hopes that work at Zama could finally accelerate. Instead, Slim's entrance slowed the project, as the new partner had to review the project, a former regulator who asked not to be named said. Talos Energy, the lead operator when the field was discovered over seven years ago, is now "frustrated" by the poor progress of the project. "We have Mexico, a great discovery in Zama, we're seven years into it, and still have not made a final investment decision on it," said Talos Energy interim chief executive Joseph Mills, in a conference call with investors last week. "So a lot of frustration there, as you can imagine." By Édgar Sígler Pemex 2024 crude output, throughput '000 b/d Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cost of government support for fossil fuels still high

21/11/24

Cost of government support for fossil fuels still high

London, 21 November (Argus) — The cost of government measures to support the consumption and production of fossil fuels dropped by almost third last year as energy prices declined from record highs in 2022, according to a new report published today by the OECD. But the level of fiscal support remained higher than the historical average despite government pledges to reduce carbon emissions. In an analysis of 82 economies, data from the OECD and the IEA found that government support for fossil fuels fell to an estimated $1.1 trillion in 2023 from $1.6 trillion a year earlier. Although energy prices were lower last year than in 2022, countries maintained various fiscal measures to both stimulate fossil fuel production and reduce the burden of high energy costs for consumers, the OECD said. The measures are in the form of direct payments by governments to individual recipients, tax concessions and price support. The latter includes "direct price regulation, pricing formulas, border controls or taxes, and domestic purchase or supply mandates", the OECD said. These government interventions come at a large financial cost and increase carbon emissions, undermining the net-zero transition, the report said. Of the estimated $1.1 trillion of support, direct transfers and tax concessions accounted for $514.1bn, up from $503.7bn in 2022. Transfers amounted to $269.8bn, making them more costly than tax concessions of $244.3bn. Some 90pc of the transfers were to support consumption by households and companies, the rest was to support producers. The residential sector benefited from a 22pc increase from a year earlier, and support to manufacturers and industry increased by 14pc. But the majority of fuel consumption measures are untargeted, and support largely does not land where it is needed, the OECD said. The "under-pricing" of fossil fuels amounted to $616.4bn last year, around half of the 2022 level, the report said. "Benchmark prices (based on energy supply costs) eased, particularly for natural gas, thereby decreasing the difference between the subsidised end-user prices and the benchmark prices," it said. In terms of individual fossil fuels, the fiscal cost of support for coal fell the most, to $27.7bn in 2023 from $43.5bn a year earlier. The cost of support for natural gas has grown steadily in recent years, amounting to $343bn last year compared with $144bn in 2018. The upward trend is explained by its characterisation as a transition fuel and the disruption of Russian pipeline supplies to Europe, the report said. By Alejandro Moreano and Tim van Gardingen Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Investment funds’ net long on Ice TTF reaches new high

21/11/24

Investment funds’ net long on Ice TTF reaches new high

London, 21 November (Argus) — Investment funds' net long TTF position on the Intercontinental Exchange (Ice) jumped to a new all-time high earlier this month, outstripping the previous record in late August. The latest weekly data from Ice show investment funds' net long TTF position shot up to a new record at just under 273TWh by 15 November, topping the previous all-time high of roughly 268TWh in the week ending 30 August , revised data show. After peaking in August, the position dropped to 192TWh on 20 September, and held broadly stable before jumping 33.6TWh in the week ending 25 October . TTF prices rose in the following two weeks, but funds trimmed their net long position to around 226TWh on 8 November ( see graph ). But in the most recent week of data from Ice, investment funds' net long position shot up to just under 273TWh by 15 November, a new record high. Over the same period of 8-15 November, The Argus TTF front-month contract rose by more than 9pc, and there were similarly large moves for the first-quarter 2025 and summer 2025 contracts. The calendar 2025 price was also up by 8pc ( see table ). Significant price volatility in recent trading sessions has also prompted Ice to increase margin rates by around 20pc on all contracts out to September 2025 , with smaller increases further down the curve. Austrian incumbent OMV announced this week Russia's Gazprom would halt its contractual supply from 16 November , prompting sizeable day-on-day price moves across Europe and possibly encouraging investment funds to go longer and capitalise on the volatility. But central European flows have changed only slightly since then, with roughly the same amount of Russian gas entering the region. Higher TTF prices have also caused LNG diversions from Asia to Europe in recent days, which reached double digits on 19 November . Such a large net long position suggests investment funds may still expect a tight European gas balance this winter. Record-low freight rates have brought the cost of shipping US LNG to Asia closer to the cost of the shorter US-Europe route, meaning European prices have to rise sufficiently high enough to offset this and close the inter-basin arbitrage again in order to attract uncommitted cargoes. Cold weather has also prompted EU firms to draw down storage stocks heavily so far this month . Aggregate EU withdrawals averaged just under 3 TWh/d on 1-15 November, four times the 756 GWh/d average for that period in 2018-22 and sharply contrasting the 965 GWh/d of net injections across the bloc on 1-15 November 2023. Unlike investment funds, the two other major categories of Ice market participant — commercial undertakings and investment/credit firms — boosted their net short positions by a combined 53TWh, leaving the latter with nearly 200TWh in net shorts, the highest since mid-September. Despite significant storage withdrawals, commercial undertakings ‘risk reduct' contracts — generally used for hedging — in the week to 15 November jumped by just under 30TWh to nearly 211TWh, the highest since 24 December 2021. Some of that increase may have been driven by a need to hedge the LNG cargoes diverted to Europe in recent weeks as European hub prices rose. A 9TWh increase in the net long position of commercial undertakings' other contracts slightly moderated the overall net short increase. The gross short and long positions of commercial undertakings totalled 1.95PWh, nearly twice as large as the investments funds' 646TWh and investment/credit firms' 421TWh combined. By Brendan A'Hearn Argus TTF prices 8-15 Nov €/MWh Dec-24 1Q25 Sum 25 Win 25 Cal 25 8-Nov 42.08 42.31 40.81 38.41 40.65 15-Nov 46.02 46.12 44.12 41.00 43.98 % change 9.4 9.0 8.1 6.7 8.2 Argus Net positions on ICE TTF TWh Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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