Up to 25 US LNG cargoes may be cancelled

Spanish Market: Natural gas
28/04/20

As many as 25 LNG cargoes originally scheduled for June loading from US liquefaction facilities have likely been cancelled as European and northeast Asian spot prices have dropped to all-time lows.

Delivered markets at a tight premium or even at a discount to the Henry Hub have incentivised firms with US offtake to turn down some cargoes, potentially tightening supplies in Europe and supporting prices for deliveries to the region and northeast Asia.

Around 10 Asian and European firms may have cancelled loadings for around 16 cargoes from Cheniere Energy's 25mn t/yr Sabine Pass LNG terminal in Louisiana and 10mn t/yr Corpus Christi LNG terminal in Texas, according to industry participants. Another four firms have likely turned down a total of five cargoes from the 10mn t/yr Freeport LNG export plant, also in Texas, they said.

Fob customers had until 20 April to notify Cheniere Energy if they would not be lifting their contractual volumes from Sabine Pass or Corpus Christi in June. The 14 firms — four of which are from Asia, including Indonesia, Japan and Singapore — have confirmed their cancellations with Cheniere.

"We informed Cheniere [about our decision to cancel June loadings] just before the 20 April deadline," said an offtaker with a portfolio supply agreement with Cheniere. "As long as there is a cancellation clause in your contract [with Cheniere], any firm's request to cancel cargoes should be automatically approved." Cheniere did not respond to requests for comment.

Contracts with Cheniere generally give buyers the option to not lift cargoes, but they are required to notify the exporter 45-60 days in advance of the delivery date and pay liquefaction fees.

Cheniere's term offtakers typically pay around 115pc of the final Nymex Henry Hub settlement for the month in which a cargo is loaded for feedgas, on top of $2.25-3.50/mn Btu in liquefaction fees. Most of the contracts are signed on a "take-or-pay" basis, meaning that buyers will still have to pay liquefaction costs even if they cancel purchases.

A narrowing of the price spread between European gas hubs and northeast Asia spot LNG in recent weeks amid a slump in prices has effectively rendered the inter-basin arbitrage closed. This means the delivery of Atlantic cargoes to Europe would be comparatively more economical than to northeast Asia.

US cargo cancellations reduce potential supply pressure on Europe, which is the market to which sellers and traders would likely have sent the cargoes had they not been cancelled. The reduced availability of cargoes could lend some support to European gas prices, with a knock-on effect on northeast Asian spot prices. Market participants have typically referenced European gas hub prices as the floor for spot prices in northeast Asia, although the inter-basin differential has narrowed in recent weeks.

European gas hub prices have come under pressure in the past month and fallen to record lows, weighed down by weak industrial and power sector demand because of the Covid-19 outbreak. The June contracts of the UK NBP and Dutch TTF stood at $1.758/mn Btu and $1.994/mn Btu, respectively, yesterday, putting their discount to the ANEA price, the Argus assessment for spot deliveries to northeast Asia, for July at just 19.6-43.2¢/mn Btu, which would not be sufficient to cover the differential in shipping costs between the two delivery markets. A differential of around $0.90-1/mn Btu is required, market participants said.

The arbitrage was likely last open in mid-March, which led to at least one spot cargo delivery from the US to China in April, following China's waiver of duties on US LNG. China is expected to receive around five LNG cargoes from the US this month. The NBP and TTF April contracts stood at a discount of 93¢/mn Btu and 89¢/mn Btu, respectively, to the ANEA price on 17 March, which was sufficient to incentivise the flow of US cargoes to northeast Asia.

Prices for LNG deliveries to Asia have collapsed and tested new lows every day since last week. The Covid-19 outbreak has exacerbated and added further pressure to the global supply glut, with buyers from Japan, India and South Korea requesting to defer their term deliveries amid weak downstream demand.

The ANEA price stood at what is now an all-time low at $1.810/mn Btu and $1.925/mn Btu for the first and second half of June, respectively, yesterday, having lost 27.5-28.5¢/mn Btu, or 10-15pc, since the start of the previous week. First-half June debuted on 16 March at $3.505/mn Btu, while second-half June debuted on 1 April at $2.345/mn Btu.

By Joey Chua

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12/11/24

Finnish, Baltic gas demand falls on year in October

London, 12 November (Argus) — Aggregate Finnish and Baltic gas consumption dropped by nearly 24pc on the year in October, but still reached a six-month high as the heating season began. Combined demand in Finland, Estonia, Latvia and Lithuania last month rose to 3.19TWh from 2.61TWh in September , in line with the typical seasonal progression, but was well below the 4.18TWh consumed a year earlier and the average of roughly 5.2TWh in 2018-21 ( see consumption graph, data and download ). Demand in all four individual countries was lower on the year, with the biggest drop in Lithuania, where consumption fell by more than 600GWh. In October 2023, the region's biggest consumer Achema had briefly resumed full production at both of its ammonia production units at Jonava , boosting Lithuanian demand that month. Despite the year-on-year drop, this was the fifth consecutive month-on-month increase after demand hit a near two-year low in May. Cumulative demand in the first 10 months of the year totalled 35TWh, well up from 30.3TWh a year earlier. That said, strong demand in the first quarter when the region experienced a prolonged cold snap supported a slightly skewed figure. If only considering April-October, demand of 18.5TWh was slightly below last year's 18.9TWh and well under the 30TWh average in 2018-21. This may indicate a more structural decline in the region's gas demand, particularly with power-sector demand falling as higher nuclear and renewables output cuts into the room left available for gas in the generation stack. Gas-fired power generation in the four countries totalled 186GWh last month, Fraunhofer ISE data show. This was well below 307GWh in October 2023, and the second lowest for any October since at least 2018 ( see gas-fired power graph ). Gas-fired output was lower on the year in all four countries, with roughly 40GWh drops in Lithuania, Finland and Latvia. Onshore wind production in Finland, by far the region's largest overall power producer, jumped by more than 1TWh on the year, more than offsetting lower nuclear and hydro output. This allowed Finland to net export around 150GWh of power, having net imported nearly 300GWh in October 2023, according to Fraunhofer data. Prices on the regional GET Baltic exchange averaged €41.74/MWh in October, up by 3pc on the month but 18pc down on the year. The price on the exchange "increasingly correlates with" the TTF, a correlation that will likely strengthen as GET Baltic trading migrates to the larger EEX platform next year , chief executive Giedre Kurme said. This transition will "create opportunities for competition, more liquid trading and price convergence", and "we are already seeing increased interest from international participants in the Baltic-Finland region", Kurme said. Firms traded 708GWh on the exchange in October, the most for any month since February, and all transactions were on the daily market. The joint Latvian-Estonian market accounted for 43pc of total trades, followed by Lithuania at 31pc and Finland at 26pc, GET Baltic said. Maintenance continues to limit Finnish LNG sendout Extensive maintenance on the Balticconnector pipeline this month, which makes all southbound capacity from Finland towards Estonia unavailable, continues to limit sendout from Finland's Inkoo LNG terminal. After maintenance on the 14-27 October gas days took exit capacity towards Estonia fully off line, this capacity is again unavailable because of further maintenance on 4-17 November. Without southward pipeline capacity, sendout from Inkoo must fall to levels that only the domestic market can absorb. Inkoo received the 145,000m³ Arctic Princess just before the maintenance started on 3 November, and the next scheduled delivery is not until 28 November ( see LNG data and download ). Sendout is likely to remain low even after the end of maintenance so as not to fully deplete stocks before the next arrival. Sendout from Inkoo averaged 23 GWh/d on 4-11 November. In contrast, sendout from Lithuania's Klaipeda terminal has jumped to 104 GWh/d this month, helping to plug the Baltic supply gap left by no southward inflows from Finland. Sendout from Klaipeda has been higher this month than the 85 GWh/d in October and 80 GWh/d on 1-11 October last year. Klaipeda has already received two cargoes this month, on 4 and 12 November, and will receive a further two on 21 and 29 November, the terminal's schedule shows. This suggests that sendout is likely to remain brisk for the rest of this month, helping to meet higher regional demand as the weather turns colder and limits the need for strong withdrawals from storage early in the winter season. By Brendan A'Hearn FinBalt gas consumption by country GWh Gas-fired power generation by country GWh Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop: UK sets ambitious 2035 climate target

12/11/24

Cop: UK sets ambitious 2035 climate target

London, 12 November (Argus) — The UK government has set a target to cut all greenhouse gas (GHG) emissions by at least 81pc by 2035, from a 1990 baseline, the country's prime minister Keir Starmer said today at the UN Cop 29 climate summit in Baku, Azerbaijan. The target, which will form the basis of the UK's next national climate plan, is in line with recent recommendations from the independent advisory Climate Change Committee . Energy minister Ed Miliband sought the committee's guidance shortly after the Labour government was elected in July. Starmer urged all countries to come forward with new national climate plans — known as nationally determined contributions (NDCs) — at Cop 29. Details of the UK's new NDC are not yet clear, but Starmer said his government is "fully committed" to its pledge of zero-emissions power by 2030. He also repeated his promise for a "government that trod lightly on people's lives". "The UK is stepping up as a climate frontrunner at a time when such leadership is critically needed, co-founder of think-tank E3G Nick Mabey said. "We hope to see detailed implementation plans — ideally with sectoral commitments and a supporting investment roadmap — to lend credibility to its submission." The energy transition "is a huge opportunity", Starmer said, pointing to global appetite for renewables investment. And he noted the "advantage of being a first mover". The country's Labour government, elected in July, has diverged substantially from the previous administration on climate issues. The UK government today announced a "clean industry bonus" — a provisional £27mn ($34.6mn) per GW of offshore wind, to incentivise offshore wind developers to invest in industrial areas, many of which are rooted in the oil and gas industry. This will boost "green jobs" and support sustainable industry, the government said. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop: Azerbaijan president criticises ‘petrostate’ label

12/11/24

Cop: Azerbaijan president criticises ‘petrostate’ label

Edinburgh, 12 November (Argus) — Azeri president Ilham Aliyev remonstrated a room packed with world leaders at the UN Cop 29 summit in Baku about calling his country a "petrostate", given its small share of global oil and gas production. He said that it was "not fair" to label Azerbaijan a "petrostate", adding that it might have been "acceptable" when the country produced more than half of global oil output in the 19th century. He said the country accounts for 0.7pc of global oil production and 0.9pc of global gas production today. He also said that Azerbaijan's share of global greenhouse gas emissions is only 0.1pc. Azerbaijan's oil output reached 480,000 b/d in October. "Right after Azerbaijan was elected as a host country of Cop 29 we became a target of co-ordinated, well-orchestrated campaign of slander and blackmail," he said. The Azeri president reiterated that oil and gas is a "gift of god" and that countries rich in natural resources should not be blamed for bringing them to the markets as they are needed. He pointed out again that eight of the 10 countries that are supplied with Azeri gas are in Europe and that the EU asked Azerbaijan to double its gas supply to the bloc by 2027. Natural gas output in Azerbaijan reached a new high of 132mn m³/d in 2023, and the country aims to increase it further. Upping exports to the EU to 20bn m³/yr by 2027, from the current 12bn m³/yr, has been a key government commitment since 2022, when Europe was desperate for alternative gas suppliers. The UAE, Azerbaijan and Brazil — the Cop presidencies Troika — face scrutiny for pushing for increased global climate ambitions, but at the same time seemingly avoiding the question of fossil fuels in relation to their own new climate targets. The Troika countries look at fossil fuels through the lens of their own national circumstances — with their economies being heavily reliant on them. Azerbaijan's increasing gas exports spurred an economic boom, with GDP increasing tenfold over 2003-13. "As a president of Cop 29, I will be a strong advocate for the green transition, but at the same time we must be realistic," he said. He listed green projects in Azerbaijan, either in the pipeline or already operating, including an agreement to be signed at Cop 29 with BP to build a 240MW solar power station. By Caroline Varin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop: UN chief reiterates economic force of transition

12/11/24

Cop: UN chief reiterates economic force of transition

London, 12 November (Argus) — "Doubling down on fossil fuels is absurd", given that solar and wind power are the cheapest forms of new electricity, UN secretary-general Antonio Guterres told the UN Cop 29 climate summit in Baku, Azerbaijan today. The "economic imperative is clearer and more compelling — with every renewables roll out, every innovation, and every price drop", Guterres added. Global investment in renewables and grids last year overtook the amount spent on fossil fuels for the first time, he noted. "The clean energy revolution is here. No group, no business and no government can stop it," Guterres said. Guterres and Simon Stiell, head of the UNFCCC — the UN's climate body — today both gestured to geopolitical challenges. Cop 29 is focused on climate finance — already a fraught topic — and environmental groups have expressed concern about the impact on climate action of Donald Trump's re-election . The UNFCCC process "is strong, it's robust and it will endure", Stiell said today. Guterres and Stiell also emphasised the financial implications of failing to cut emissions or address climate change. "The climate crisis is fast becoming an economy-killer", Stiell said. "Unless all countries can slash emissions deeply, every country and every household will be hammered even harder than they currently are," he added. The G20 group of countries should lead on emissions reduction, Guterres said. And both he — warning against "a tale of two transitions" — and Stiell called for action on climate finance. Countries must decide at Cop 29 on the next stage of a climate finance goal. Developed countries agreed to deliver $100bn/yr to developing countries over 2020-25, but agreement is yet to be reached on the next iteration. Guterres called for more concessional public finance, higher lending capacity for multilateral development banks (MDBs), greater transparency, and for "tapping innovative sources, particularly levies on shipping, aviation, and fossil fuel extraction. Polluters must pay", he said. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Record Permian volumes lift US oil majors

11/11/24

Record Permian volumes lift US oil majors

New York, 11 November (Argus) — ExxonMobil and Chevron are pumping record volumes from the prolific Permian shale basin, spurred on by efficiency gains that have helped drive US oil production to a record high, just as Opec+ gears up to release barrels into the market. ExxonMobil posted Permian output in excess of 1.4mn b/d of oil equivalent (boe/d) in the third quarter, bolstered by the closure of its $60bn acquisition of Pioneer Natural Resources in May. Meanwhile, Chevron's production from the top-performing US shale basin set a new company high of 950,000 boe/d, surpassing expectations and putting it firmly on track to reach a goal of 1mn boe/d next year. Robust results from the Permian, which straddles west Texas and southeast New Mexico, have also been reported by other operators, with leading US upstream independent ConocoPhillips lifting its full-year production outlook after achieving record results from the Lower 48 in the latest quarter. In fact, soaring output from the Permian helped to push overall US production up by 1.5pc to a record 13.4mn b/d in August, according to the Energy Information Administration. ExxonMobil, which will release a new development plan for the Permian at an analyst event next month, already envisages greater savings from the Pioneer acquisition than the original $2bn/yr that was outlined when the deal was announced. The top US major is integrating Pioneer's water infrastructure network to serve the combined assets at a lower cost. It is also taking advantage of a remote logistics operations centre it inherited through the deal. "We just achieved an all-time Pioneer record for drilling performance in terms of lateral feet drilled per day," chief executive Darren Woods says. A stellar performance from Colorado assets acquired through last year's takeover of PDC Energy also lifted Chevron, as did recent US Gulf of Mexico start-ups. ExxonMobil was the only major, apart from Shell, able to cut net debt in the third quarter. That suggests its $20bn annual share buyback plan is sustainable in the current climate without needing to resort to asset sales, HSBC noted. The Permian's outperformance, driven by productivity gains that are helping to bring down costs, bodes well for the US majors at a time of macroeconomic uncertainty, and concerns over an oversupplied market putting oil prices under pressure. While both ExxonMobil and Chevron have ramped up investor returns, analysts say Chevron's share buyback programme could be more vulnerable unless crude prices rebound. But Chevron's Permian spending is set to peak this year, with free cash flow becoming "more of the driver" in 2025 as output reaches a plateau, according to chief executive Mike Wirth. Chevron set a goal of trimming costs by $2bn-3bn by the end of 2026. And ExxonMobil says its $15bn cost savings target by 2027 remains on course, and could even be exceeded. Less stress over Hess Growing oil production abroad is set to enhance the US majors' record output at home. Although ExxonMobil's output from Guyana slipped in the third quarter because of work to complete a gas-to-energy project, it has since recovered."Execution is undoubtedly strong, allowing Exxon to maximise value from its assets," HSBC's head of European oil and gas research, Kim Fustier, says. Chevron's closely watched expansion programme in Kazakhstan remains on track to start operations in the first half of 2025. This should help to offset some gloom over Chevron stock caused by the delay to its $53bn purchase of US independent Hess. A dispute with ExxonMobil over rights of first refusal to an offshore discovery in Guyana will be settled by international arbitration next May. "Uncertainty over the Hess deal will continue to hover in the background for some time, but Chevron is doing well on the elements it can control," Fustier says. By Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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