PetroChina, Sinopec transfer $56bn assets to PipeChina

Spanish Market: Natural gas
24/07/20

China's two biggest energy firms PetroChina and Sinopec have agreed to sell oil and gas infrastructure assets valued at 391.5bn yuan ($56bn) to China Oil and Gas Pipeline Network (PipeChina), paving the way for the new state-run pipeline company to start operations in the next few months.

The transactions, including the transfer of personnel and ownership of assets, are expected to be completed by 30 September. PipeChina is scheduled to start operations on the same date.

State-controlled PetroChina will transfer all 20 of its units that own oil and gas pipelines, which are valued at Yn268.7bn. These include the major 77bn m³/yr West-to-East pipeline network and the Chinese portion of the 38bn m³/yr Power of Siberia 1 gas pipeline from Russia.

In return, PetroChina will receive a 29.9pc stake in PipeChina, worth Yn149.5bn, plus a cash payment of Yn119.2bn. PetroChina will remain China's largest natural gas supplier following the spin-off of its pipeline assets.

Fellow state-run firm Sinopec will sell all of its natural gas and crude/fuel pipeline units to PipeChina for Yn122.7bn. It will receive a 14pc stake in the new firm and Yn52.7bn in cash in return. The sale includes Sinopec's 15bn m³/yr Sichuan-Shanghai and 30bn m³/yr Xinjiang-Guangdong natural gas pipelines, as well as its 6mn t/yr Beihai LNG terminal in Guangxi province.

Sinopec, like PetroChina, intends to focus more on upstream development, downstream gas sales and new opportunities following the spin-off of its assets.

The asset transfers effectively break up the dominance enjoyed by Sinopec, PetroChina and fellow state-owned firm CNOOC over oil and gas upstream and midstream infrastructure, including pipelines and distribution.

The agreements leave PetroChina and Sinopec as the two largest shareholders in PipeChina. The country's third major state-controlled energy firm, CNOOC, will own just 2.9pc of the new company.

CNOOC is the only major firm yet to announce an asset sale to PipeChina. It agreed to an asset management transfer with PipeChina in April but has not revealed details of the transaction.

LNG terminal transfers

Several of CNOOC's LNG receiving terminals are expected to be transferred to PipeChina. These include the 2.2mn t/yr Tianjin floating storage and regasification unit, the 2mn t/yr Yuedong and, 4mn t/yr Diefu terminals in Guangdong, the 600,000 t/yr Fangchenggang terminal in Guangxi and the 3mn t/yr Yangpu terminal in Hainan. Two of CNOOC's under-development terminals, the 3mn t/yr Zhangzhou project in Fujian and the 5mn t/yr Longkou facility in Shandong, will also be transferred to PipeChina after the first phase of construction is completed.

The 3mn t/yr Dalian terminal in Liaoning and the under-construction 4mn t/yr Diefu terminal are also expected to be transferred to PipeChina. These assets are owned by PetroChina subsidiary Kunlun Energy and are not included in today's deal, with Kunlun still in talks with PipeChina on the asset transfer.

Kunlun also owns four Shaanxi-Beijing gas pipelines with a combined capacity of 60bn m³/yr, which are also expected to come under PipeChina's ownership.

The other shareholders in PipeChina are investment firms China Chengtong Holdings and China Reform Holdings, each with 12.87pc stakes; the national social security fund with 10pc; China Insurance Investment with 9pc; regulatory watchdog the State-owned Assets Supervision and Administration Commission (Sasac) with 4.46pc; and sovereign wealth funds CIC International and the Silk Road Fund with 2pc each. All are state-owned.

PipeChina's diversified shareholding structure is an attempt to foster greater market competition and boost access to import and distribution facilities. Third-party access to terminals and pipelines has previously been restricted, or unavailable, to independent Chinese firms, including second-tier firms in the city gas and power sectors.

PipeChina was established in December 2019 as part of broader reform of China's domestic oil and gas industry, to create greater transparency, liquidity and competitiveness by liberalising the transmission system.

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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.

Cop: Talks in Baku torn between mitigation and finance

21/11/24

Cop: Talks in Baku torn between mitigation and finance

Edinburgh, 21 November (Argus) — Developing and developed nations remain at loggerheads on what progress on climate finance and mitigation — actions to cut greenhouse gas emissions — should look like at the UN Cop 29 climate summit. But Cop 30 host Brazil has reminded parties that they need to stick to the brief, which is finance for developing countries. Concluding a plenary where parties, developed and developing, listed grievances, environment minister Marina Silva recognised "the excellent progress achieved" on mitigation at Cop 28. She listed paragraphs of the Cop 28 deal, including the energy package and its historic call to transition away from fossil fuels in energy systems. "We are on the right track," she said, talking about mitigation, but "our greatest obligation at this moment is to make progress with regard to financing". "This is the core of financing that will pave our collective path in ambition and implementation at Cop 30," Silva said, adding that $1.3 trillion for developing countries should be "the guiding star of this Cop". Parties are negotiating a new collective quantified goal (NCQG) — a new climate finance target — building on the $100bn/yr that developed countries agreed to deliver to developing countries over 2020-25. But developed countries insist that a precise number for a goal can only be produced if there is progress on mitigation and financing structure for the NCQG. "Otherwise you have a shopping basket but you don't know what's in there," EU energy commissioner Wopke Hoekstra said. Some developing nations said they need the "headline number first". Some developing countries, including Latin American and African nations as well as island states, have also complained about the lack of mitigation ambition. Cop is facing one of the "weakest mitigation texts we have ever seen," Panama said. But they also indicated that financial support was missing to implement action. Developed countries at Cop 29 seek the implementation of the energy pledges made last year. "What we had on our agenda was not just to restate the [Cop 28] consensus but actually to enhance and to operationalise that," but the text goes in the opposite direction, Hoekstra said, talking about the latest draft on finance. Whether hints that Brazil has mitigation in focus for next year's summit will be enough to assuage concerns from developed countries at Cop 29 on fossil fuel ambitions remains to be seen. The communique of the G20, which the country hosted, does not explicitly mention the goal to transition away from fossil fuels either. The developed countries' mitigation stance grew firmer after talks on a work programme dedicated to mitigation, the obvious channel for fossil fuel language, was rescued from the brink of collapse last week. Discussions have stalled, but another text — the UAE dialogue which is meant to track progress on the outcomes of Cop 28 — still has options referring to fossil fuels. But in these negotiations too, divisions remain. "The UAE dialogue contains some positive optional language on deep, rapid and sustained emissions reductions and the [Cop 28] energy package, E3G said. But Saudi Arabia has made clear that this was unacceptable, while India, which worked to water down a coal deal at Cop 26, is pushing back on the 1.5°C temperature limit of the Paris Agreement. Negotiators are starting to run out of time. Draft after draft, the divide fails to be breached with no agreement on an amount for the finance deal. "We cannot talk about a lower or higher number because there is no number," noted Colombia's environment minister Susana Muhamad. The next iteration should have numbers based on the Cop 29 presidency's "view of possible landing zones". The fact that the draft text on finance has no bridging proposal is a concern, non-profit WRI director of international climate action David Waskow said. Finance was always meant to be the centrepiece of Cop 29. Parties have not formally discussed the goal in more than 15 years, and have been trying to prepare for a new deal through technical meetings for the past two years. But the discussion needs to end in Baku. By Caroline Varin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop: EU, four countries commit to 1.5°C climate plans

21/11/24

Cop: EU, four countries commit to 1.5°C climate plans

Baku, 21 November (Argus) — The EU, Canada, Mexico, Norway and Switzerland have committed to submit new national climate plans setting out "steep emission cuts", that are consistent with the global 1.5°C temperature increase limit sought by the Paris Agreement. The EU and four countries made the pledge at the UN Cop 29 climate summit in Baku, Azerbaijan today, and called on other nations to follow suit — particularly major economies. Countries are due to submit new climate plans — known as nationally determined contributions (NDCs) — covering 2035 goals to the UN climate body the UNFCCC by early next year. The EU, Canada, Mexico, Norway and Switzerland have not yet submitted their plans, but they will be aligned with a 1.5°C pathway, EU climate commissioner Wopke Hoekstra said today. The Paris climate agreement seeks to limit the global rise in temperature to "well below" 2°C and preferably to 1.5°C. Canada's NDC is being considered by the country's cabinet and will be submitted by the 10 February deadline, Canadian ambassador for climate change Catherine Stewart said today. Switzerland's new NDC will also be submitted by the deadline, the country's representative confirmed. Pamana's special representative for climate change Juan Carlos Monterrey Gomez also joined the press conference today. Panama, which is designated as carbon negative, submitted an updated NDC in June. It is planning to submit a nature pledge, Monterrey Gomez said. "It is time to streamline processes to get to real action", he added. The UK also backed the pledge. The UK announced an ambitious emissions reduction target last week. The UAE — which hosted Cop 28 last year — released a new NDC just ahead of Cop 29, while Brazil, host of next year's Cop 30, released its new NDC on 13 November during the summit. Thailand yesterday at Cop 29 communicated a new emissions reduction target . Indonesia last week said that it intends to submit its updated NDC ahead of the February deadline, with a plan placing a ceiling on emissions and covering all greenhouse gases as well as including the oil and gas sector. Colombia also indicated that its new climate plan will seek to address fossil fuels, but it will submit its NDC by June next year . By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

LNG diversions to Europe reach double digits

19/11/24

LNG diversions to Europe reach double digits

London, 19 November (Argus) — At least 11 LNG carriers have likely diverted to Europe from Asia and Egypt over the past week, as European delivered prices now offer higher returns than Asian delivered prices, and operational issues delay deliveries in Egypt. Of the 11 cargoes, seven have diverted away from sailing for Asia round the Cape of Good Hope towards Europe, and four have diverted from Egypt, judging by shiptracking data from Vortexa (see table) . This does not include the 173,400m Myrina , which was idling in the mid-Atlantic today. One carrier — 174,000m³ Aristos I — had already passed the Cape of Good Hope, before turning back towards the Atlantic basin. Assuming all carriers are holding full cargoes, this totals around 860,000t, or 13.2TWh of LNG. Northwest European delivered prices rose above corresponding northeast Asian prices last week , prompting diversions from Asia to Europe. The inter-basin arbitrage was already closed, although firms with surplus shipping capacity that they viewed as a sunk cost because of long open vessel lists were still willing to send Atlantic basin cargoes to Asia as the opportunity cost of the longer journey time was limited to the cargo loss through higher boil-off during the voyage. But Europe's discount to Asia has narrowed, and even inverted late last week, with the spread between the two markets less than the boil-off cost difference between US deliveries to Europe and to Asia, incentivising diversions to Europe. The extra boil-off losses amount to around 39¢/mn Btu when shipping a cargo from Sabine Pass to Incheon via the Cape of Good Hope instead of Rotterdam, assuming a northeast Asian delivered price of $14.05/mn Btu, a sailing speed of 17 knots and a 160,000m³ cargo with a 0.1pc daily boil-off rate. The Argus Northeast Asia (ANEA) January delivered price closed at a 49¢/mn Btu premium to the northwest European December des price on 7 November, enough to incentivise deliveries to northeast Asia instead of Europe for firms with sunk shipping capacity as the spread was wider than boil-off losses. But the ANEA January price on 14 November fell to a discount to prompt northwest European des prices, incentivising diversions to Europe. And four carriers have diverted away from Egypt, where delays to a tight delivery schedule have been created by operational issues at the country's 6mn t/yr Ain Sukhna terminal, according to market participants. One of the terminal's two regasification trains has been experiencing operational difficulties, halving the terminal's regasification capacity, they said. The country last imported a cargo on 16 November — nine days after the previous delivery. The terminal's Hoegh Galleon floating storage and regasification unit has a peak regasification rate of 750mn ft³/d (7.7bn m³/yr), equivalent to about 16,500 t/d, meaning that it could regasify a 72,000t standard-sized cargo in 4-5 days when operating at full capacity. By Martin Senior Diversions to Europe m³ Carrier Capacity Diversion date Approx diversion location Diversions from Asia BW Lesmes 174,000 13-Nov West Africa Gaslog Windsor 180,000 14-Nov West Africa Vivirt City LNG 174,000 15-Nov West Africa LNGShips Empress 174,000 18-Nov Carribean Diamond Gas Crystal 174,000 14-Nov Carribean Flex Vigilant 174,000 14-Nov Carribean Aristos I 174,000 18-Nov Madagascar Diversions from Egypt British Listener 173,000 13-Nov Mediterranean LNG Harmony 174,000 14-Nov Mid-Atlantic Axios II 174,000 14-Nov Mid-Atlantic Pacific Success 174,000 16-Nov South of Suez — Vortexa, Argus Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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