Can Europe avert an energy crisis?

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The UAE Port of Fujairah's growing profile as an energy hub is set for another boost, with Abu Dhabi National Oil Co.'s plans to build a 9.6 million mt/year LNG plant in the eastern emirate. The project, currently in the design phase, is expected to be complete between 2026 and 2028, sources told S&P Global Commodity Insights – not in time to ease the current gas crunch, as the world scours for new supplies to replace Russian volumes. But analysts say it could be well-poised to capture growing demand for the fuel, if high prices do not set long-term consumption back and environmental regulations in Europe do not close off that market. Fujairah, which is already the world's third largest oil bunkering hub, is hoping to benefit from the project, with new stakeholders expected to be attracted. The facility, which will include two 4.8 million mt/year trains, will raise ADNOC's LNG production capacity to 15.6 million mt/year, giving neighboring Qatar – currently the world's largest LNG exporter – a formidable regional rival. ADNOC, which declined to comment on the project, owns a 70% stake in the ADNOC LNG joint venture, which has a current capacity to produce 6 million mt/year at Das Island in the Persian Gulf. Other shareholders in ADNOC LNG are Mitsui & Co. with a 15% stake, BP with 10% and Total with 5% ADNOC is in talks with those partners to take part in the Fujairah facility, sources said, and Japan's INPEX intends to consider participating, its CEO told S&P Global. ADNOC's new project comes at a time when the world's demand for LNG is high as Russia restricts piped gas supplies to Europe and countries around the globe seek gas as a transition fuel to replace dirtier crude. Gas prices in Europe and Asia have soared to record highs in 2022 as Europe wrestles with Asia over LNG cargoes in a tight market. The JKM spot LNG price for delivery into northeast Asia hit a record $84.76/MMBtu in March and was last assessed at $41.65/MMBtu July 4, according to Platts assessments from S&P Global. Asia destinations ADNOC has traditionally sent its LNG to Asia and up until 2018 supplied around 90% of its volumes to Japan under long-term agreements but has sought since to diversify its customer base by signing multi-year contracts. Adding Europe as a potential new destination for ADNOC's LNG will depend on several factors, including the ability to lock in long-term contracts. The destination for LNG "will depend on which parties want to sign contracts for the LNG (most likely Asia), the state of the global LNG market and prices when the plant comes on stream," said Jonathan Stern, a research fellow at the Oxford Institute for Energy Studies. However, he added, "it will be difficult for European companies to make long-term commitments because of their emission targets." Since 2019, India has been the UAE's top LNG customer, based on Kpler shipping data. Platts Analytics, in a June 13 report, noted that none of ADNOC LNG's term customers sent any cargoes to Europe, despite lucrative LNG spot prices. The last time ADNOC LNG sent any volumes to Europe was in June 2009, it said. However, as demand destruction from high LNG prices seeps into Asia, Europe may become a more attractive destination. "Europe's need to replace 160+ Bcm of Russian gas will create huge need for additional LNG in the medium term," said Robin Mills, CEO of Qamar Energy. "Sellers can name their terms at the moment and buyers are realizing the danger of exposure to volatile and potentially very high spot prices. The question is what 'long term' means for European buyers given their decarbonization targets, 10 years or longer?" Platts Analytics has revised its Indian LNG demand forecast down an average of nearly 10 billion cu m/d from 2022 through 2025 on the back of higher prices expected during this period. "South Asia, once thought to be one of the key drivers of global demand in the medium term, could disappoint to the downside amid lingering elevated spot prices and limited cover by long-term contracts," Platts Analytics said in an April 29 report. New gas The expansion of ADNOC's LNG capacity comes as new gas developments are set to increase alongside its expansion of oil production capacity to 5 million b/d by 2030 from about 4 million b/d currently, which will yield higher associated gas. ADNOC had announced in December a rise in national gas reserves of 16 Tcf, bringing the UAE's gas reserves base to 289 Tcf. The location of Fujairah for the new LNG production will also be of added value to ADNOC, given the aging facilities at Das Island, located far offshore. The fact that Fujairah lies outside the problematic Strait of Hormuz in the Persian Gulf reduces its geopolitical risk profile. "For the UAE this [project] is very important and may replace the Das Island plant in future, as that plant is now very old dating from the late 1970s," said Stern. Fujairah will also gain from the growing number of LNG tankers that will call on the port, which is considering adding LNG bunkering services, its managing director, Captain Mousa Murad, said. "Fujairah can also benefit that available gas will attract industrial companies that will use gas instead of, for example, diesel to set up projects," said Murad.

Japan's Ministry of Economy, Trade and Industry expects no immediate disruption to imports from Russia’s strategically important Sakhalin 2 LNG project following a decree transferring ownership of the operator -- hitherto led by Shell and Gazprom -- to a new entity, METI minister Koichi Hagiuda said July 1, adding that contingency planning was underway. Russian President Vladimir Putin issued a decree June 30 transferring all rights and obligations held by Sakhalin Energy, the operator of the Sakhalin 2 project, to a new Russian company citing unspecified “actions by the US and linked foreign countries and organizations that are unfriendly and incompatible with international law.” It comes after Shell, Gazprom’s main partner in the project with a stake of 27.5% minus one share, announced its withdrawal from Russia on March 8 in light of the invasion of Ukraine. "We are currently in the midst of scrutinizing the impact on Japanese companies' stake holdings in the Sakhalin 2 project as well as on Japanese companies' LNG imports from the project based on this presidential decree," Hagiuda told reporters. "We believe we are not in a situation where Sakhalin 2 LNG cannot be imported immediately," Hagiuda said. "To be prepared for various contingency situations, we will need to take carefully thought-out measures.” Japan had already warned in June of a rising risk of disruption to Russian LNG supplies, vital for power generation in the country, amid rising tension and global competition for LNG as Europe tries to reduce its dependence on Russia. The two-train Sakhalin 2 LNG facility -- which was launched in 2009 -- produced and shipped a record volume of LNG in 2020, reaching 11.6 million mt. It had an original design capacity of 9.6 million mt/year, but upgrades have seen output consistently exceed capacity. The operator also produced over 100,000 b/d of Sakhalin Blend crude in 2020. Shell has had a rocky history at Sakhalin, where it was originally the majority stakeholder before being obliged to surrender part of its stake in 2006. Analyst George Voloshin of Paris-based Aperio Intelligence said the decree came after inconclusive efforts by Shell to sell its stake, reportedly involving Chinese counterparties. Operational 'paralysis' Voloshin described the decree as a “clear and unambiguous expropriation,” but went on to say it was also intended to “normalize the production situation” amid a state of “paralysis” following Shell’s decision to exit. The decree stipulates existing stakeholders, also including Japan’s Mitsui and Mitsubishi, with 12.5% and 10% stakes respectively, have a month to submit their approval for the transfer of stakes to the newly created company, after which the government will rule on the admissibility of the submissions. It was unclear on what grounds the government would or would not allow the existing shareholders to hold proportional stakes in the new company. In the event of refusal or the deadline being missed, the corresponding stakes are to be sold, with the proceeds transferred on behalf of the shareholders to government-designated Russian bank accounts, from which any expenses incurred to date can be deducted. A Shell spokesperson said: “As a shareholder, Shell has always acted in the best interests of Sakhalin 2 and in accordance with all applicable legal requirements. We are aware of the decree and are assessing its implications.” However, Voloshin questioned the likelihood of the foreign stakeholders assenting to the transfer on the terms set out and suggested the eventual buyers would most likely be from China or India, potentially at steeply discounted prices and leading to an “inevitable” switch of LNG exports away from Japan. “Shell's plans to withdraw from Sakhalin 2 have resulted in a paralysis at the operating company. Its inability/unwillingness to sell its stake quickly enough [reflecting] the geopolitical and economic context… and the prospect of steep losses suggests the paralysis will last for as long as Shell is a shareholder,” Voloshin said, adding Shell had been the “driving force” behind operations. Japan’s Hagiuda, however, was more moderate. "We recognize that this presidential decree is not about a seizure. It is questioning existing stakeholders’ consent to move to a new entity after having transferred all of the rights and obligations from Sakhalin Energy to the newly establishing entity," Hagiuda said. "Either way we will give rigorous consideration from a standpoint of ensuring stable supply for Japan's power and gas," he said, adding the country currently has two to three weeks’ worth of LNG inventory held by power and gas companies. Japan exposure Russia accounted for 9% of Japan's total LNG imports of 74.32 million mt in 2021, its fifth-largest supplier, according to data from Japan's Ministry of Finance. Almost all of Japan’s Russian LNG imports come from Sakhalin 2. Officials from Mitsui and Mitsubishi said they would consider their response following discussions with other stakeholders and Japan’s government. A Mitsubishi spokesperson added that Sakhalin 2 was producing as normal. Tokyo Gas does not currently see any impact on its Sakhalin 2 LNG procurement, a company spokesperson said.

The US LNG sector has seen a flurry of activity this week, with a handful of new supply deals agreed and US LNG pioneer Cheniere Energy taking a final investment decision on the expansion of its Corpus Christi export facility. US LNG suppliers Venture Global and Cheniere both announced separate sales deals with Chevron, while Venture Global also signed the first binding supply deal with a German company. Sempra Infrastructure, meanwhile, agreed a preliminary supply contract with the energy arm of chemicals giant Ineos, which came on the back of a similar deal announced with Germany's RWE in late May. And with its positive FID for phase 3 of Corpus Christi, Cheniere said it planned to bring new US LNG volumes to market by the end of 2025. Following Russia's invasion of Ukraine in February, international gas buyers have been increasingly looking to the US to lock down long-term LNG volumes. It comes as spot LNG prices remain at sustained highs given the continued tight global market conditions. The benchmark Platts JKM price for spot LNG into northeast Asia reached a record-high $84.76/MMBtu in early March, according to S&P Global Commodity Insights pricing data. The JKM has averaged $28.95/MMBtu so far in 2022 and was last assessed at $36.89/MMBtu on June 24. Supply deals Venture Global on June 22 said it had agreed two 20-year sales agreements with Chevron for a total of 2 million mt/year -- 1 million mt/year from the Plaquemines LNG facility and 1 million mt/year from CP2 LNG. Plaquemines LNG has been under full construction since August 2021 and the construction of CP2 LNG is expected to start in 2023, Venture Global said. On June 21, Venture Global also signed a 20-year deal with German utility EnBW for the supply of 1.5 million mt/year of LNG from the Plaquemines and CP2 LNG export facilities, starting from 2026. The agreement is the first direct binding offtake agreement for long-term US LNG signed by a German company. Germany's RWE in late May signed a heads of agreement with Sempra Infrastructure for the negotiation of a 15-year deal for the supply of 2.25 million mt/year of US LNG, but has yet to finalize the agreement. Chevron, meanwhile, also signed June 22 separate US LNG sales deals with Cheniere for a combined 2 million mt/year of supply at plateau from Cheniere subsidiaries. Under the first agreement, Chevron agreed to buy 1 million mt/year of LNG on an FOB basis from Cheniere's Sabine Pass facility. Deliveries are set to begin in 2026 and reach the full 1 million mt/year during 2027, continuing until mid-2042, the companies said. Under the second deal, Chevron agreed to take 1 million mt/year of LNG from Cheniere Marketing on an FOB basis with deliveries beginning in 2027 and continuing for 15 years. This agreement with Cheniere Marketing is subject to Cheniere taking FID on the further expansion of Corpus Christi beyond the Corpus Christi phase 3 project. The purchase price for LNG under the agreements is indexed to the Henry Hub price, plus a fixed liquefaction fee, they said. Cheniere's chief commercial officer Anatol Feygin said the new long-term agreements "underscore the growing demand for reliable LNG supply beyond 2040 and further support investment in additional LNG capacity beyond our Corpus Christi stage 3 project." Corpus Christi FID FID on Corpus Christi phase 3 was also announced on June 22 by Cheniere, which said it had also issued full notice to proceed to contractor Bechtel Energy for the more than 10 million mt/year project. "Reaching FID on Corpus Christi stage 3 represents an important milestone for Cheniere as we move forward on this significant growth project," CEO Jack Fusco said. He said the expansion would provide "much-needed" volumes to the global LNG market by the end of 2025. Fusco added that the project was supported by a global portfolio of long-term customers and reflected the call for investment in gas infrastructure to support long-term energy security.

QatarEnergy said June 19 it signed up Italy's Eni as its second partner in the world's largest LNG expansion program after the Gulf state cemented its lead as the largest global exporter of the fuel, with buyers chasing to replace supplies from Russia. QatarEnergy will own 75% of the shares of the joint venture, and Eni the remainder, for the North Field East project, QatarEnergy CEO Saad al-Kaabi said at a press conference in Doha, marking the first time the Italian company will be involved in Qatar LNG. The joint venture will own 12.5% of the LNG project, equal to half a train, he added. Financial terms of the deal were not disclosed. Qatar took over as the world's largest LNG exporter in April and remained top in May, beating the US and Australia, according to S&P Global Commodity Insights data. Qatar had lagged both countries in March deliveries and was behind the US in February. QatarEnergy said on June 12 that TotalEnergies had become its first partner for the project, winning a 25% stake in a new joint venture company that will be 75% controlled by QatarEnergy. It is equal to one train for TotalEnergies, Kaabi said. That JV will own a quarter of the entire North Field East project, which includes four LNG trains with a combined nameplate LNG capacity of 32 million mt/year. Asian buyers are expected to make up half the market for the project, and buyers in Europe the rest. Kaabi declined to say if the partnerships include rights to sell some of the expanded LNG production. "We're not worried about the market," he said. Qatar enjoys some of the lowest production costs in the world, with an estimated long-run breakeven cost of new expansions at less than $5/MMBtu landed into Asia , according to S&P Global estimates. Eager buyers Both European and Asian gas prices remain high, with the Dutch TTF first month price assessed by Platts from S&P Global Commodity Insights on June 17 at Eur118.50/MWh, up 82% since the end of 2021. The Platts JKM Asian LNG price for August, meanwhile, was assessed June 17 at $37.889/MMBtu, up 31.6% this year. Prices have surged due to Russia's invasion of Ukraine, which has prompted many European buyers of Russian gas to seek alternatives, including from Qatar. Kaabi and other Qatari officials have held several talks with European and Asian counterparts in recent months, though analysts say the country's ability to boost exports in the short-term is largely limited, until the expansion projects come along. The North Field Expansion includes six LNG trains that will ramp up Qatar's liquefaction capacity from 77 million mt/year to 126 million mt/year by 2027, consolidating its status as the world's largest exporter. QatarEnergy is expanding capacity at the four-train North Field East Project to raise production capacity to 110 million mt/year in the first phase. The second phase expansion, which is also known as the North Field South Project, will raise the LNG production capacity to 126 million mt/year. The country is targeting a 2027 timeline for the completion of the two-phase project. In all, four trains for 32 million mt/year of capacity for North Field East will cost $28 billion, Kaabi has said. QatarEnergy will be announcing three gas deals and one in petrochemicals this week alone, is working on another solar project and plans a tender for a gas turbine power plant for electricity in the country, all involving some $80 billion to $100 billion of investment over the next seven years to 2030, Kaabi said. "We're going to need the private sector," he said. "After all this construction, it will greatly enhance the GDP of the country and total revenue stream coming into the state."

Singapore has chartered vessels to be used as LNG floating storage to ensure fuel supply and hedge against disruptions due to the war in Ukraine, according to the operator of its main LNG import and storage terminal Singapore LNG Corp, shipping fixtures and vessel-tracking data. Vessels are used for temporary fuel storage when access to onshore terminals is limited or too costly, and they also provide flexibility in moving cargoes around. While floating storage has been a popular tool for traders looking for optionality, importers have found it useful to make up for insufficient storage infrastructure. SLNG has chartered LNG ships to use as floating storage units on a short-term basis to enhance energy security, a company spokesperson said June 17, but declined to provide more details. On June 16, the energy regulator Energy Market Authority said Singapore had "established a standby LNG facility (SLF), which power generation companies can draw from to generate electricity when their natural gas supplies are disrupted", without providing further details. Shipping fixtures showed at least two vessels on short-term charter, although not whether the vessels were currently loaded or were loaded in recent months. There was a likelihood they could be used for restocking in the months before the coming winter, according to market participants. In early March, the Bermuda-flagged LNG carrier Gaslog Singapore was signed up for a 12-month charter, fixtures showed. The 155,000 cu m capacity tri-fuel diesel electric ship arrived in Singapore March 20, according to Platts cFlow. It entered the Sudong Special Purpose Anchorage off southern Singapore April 13 and has remained there. The 263,000 cu m Bauhinia Spirit, one of the world's largest floating storage regasification units was also fixed in March for about 6 months, according to fixtures. The Bahamas-flagged vessel arrived in Singapore April 11, and has been there for 67 days, according to Platts cFlow. The Bauhinia Spirit was previously named MOL FSRU Challenger and deployed at an LNG terminal in Turkey in 2017, after which it moved to Hong Kong where it was renamed Bauhinia Spirit. According to MOL's specifications, the vessel has LNG re-shipment and gas transfer capabilities and its specifications allow for the re-export of LNG and supply of LNG to neighboring regions where the vessel is located". The has regas discharge capacity of 540 MMcf/day, making it as large as the Q-Max vessels operated by Qatar, which are the world's largest. On Feb. 25, SLNG was seeking a March delivery LNG cargo, with the tender closing on the same day. More recently, on June 13 SLNG had closed a tender for an LNG cargo for delivery in the first half of August. Typically Singapore's LNG imports are met by designated suppliers like Pavilion Energy while SLNG has played the role of an infrastructure operator. However, even before the demand surge last winter, SLNG was looking in mid-October 2021 at options to boost LNG inventory at its terminal due to market disruptions at the time. Pavilion Energy and EMA declined to comment on the floating storage.

Qatar, one of the world's biggest exporters of liquefied natural gas, has chosen TotalEnergies as among partners to develop its massive offshore North Field East project, the country's energy minister said June 12 in the wake of growing demand for the fuel in Europe and around the world after Russia's invasion of Ukraine. The value of the deal was not disclosed but it was the "biggest" between the French energy major and QatarEnergy, Saad al-Kaabi said. He didn't name other partners, but did say the selection process for other partners is finished and details will be announced later. First liquefied gas production will begin in 2026, he said. Other partners are reportedly ExxonMobil, Shell and ConocoPhillips. TotalEnergies will have a 25% interest in the North Field East project, equivalent to one LNG train with capacity of 8 million mt/year, the company said. QatarEnergy will have the remaining 75% stake in the project that will run for 25 years, Kaabi said. The other partners will not have the same percentage stakes, he said. Qatar may do projects with TotalEnergies in other parts of the world, he added. QatarEnergy is expanding capacity at the four-train North Field East Project to raise production capacity to 110 million mt/year from 77 million mt/year in the first phase. The second phase expansion, which is also known as the North Field South Project, will raise the LNG production capacity to 126 million mt/year. The country is targeting a 2027 timeline for the completion of the two-phase project. In all, four trains for 32 million mt/year of capacity for North Field East will cost $28 billion, Kaabi said. "The LNG market will need the extra volumes as there is very little coming until 2025 and there will be even more required to replace Russian pipeline gas into Europe," Robin Mills, CEO of Qamar Energy, said. State-backed QatarEnergy awarded the engineering procurement and construction contract for the North Field East Project to a joint venture between Spain's Tecnicas Reunidas and China's Wison. Qatar said in early 2021 that it would announce the international partners for the first phase of the project within a six-month timeframe. 'High volatility' Deciding on the partners has likely been delayed due to "high volatility in the LNG market [that] would have led to protracted negotiations," said Mehrun Etebari, associate director, global LNG, at S&P Global Commodity Insights. The company's latest announcement comes amid the backdrop of Russia's invasion of Ukraine, which has forced the EU to consider cutting off supplies from Moscow. "Market tightness and demand for new LNG volumes has only risen since Russia's invasion of Ukraine, so it is likely that QatarEnergy has aimed to take advantage of the current market conditions by securing more favorable terms in its negotiations with partners and offtakers," Etebari said. The EU has pledged to reduce demand for Russian gas by two thirds by the end of 2022 through higher LNG supplies from the global market, increased biomethane production and energy efficiency. Lower Russian pipeline gas flows have contributed to the recent European price strength, while Europe also faces competition from Asia for LNG cargoes. Both European and Asian gas prices remain high, with the Dutch TTF day ahead price assessed by Platts from S&P Global Commodity Insights on June 10 at $24.452/MMBtu, more than double the price of a year earlier. The Platts JKM spot Asian LNG price, meanwhile, was assessed June 10 at $23.561/MMBtu, up almost double on the year. "The announcement keeps Qatar on pace to complete the six-train North Field expansion on or close to its target of 2027," Etebari said. Accelerating expansion at the North Field will allow the gas producer to overtake Australia, which has the lead in LNG export capacity, he said. "The tight market is also boosting the prospects of proposed new liquefaction in the United States, and we forecast that US exports will remain just ahead of Qatari exports. However, Qatar has spoken of potentially expanding beyond six new trains, potentially adding one or more new trains to the North Field South phase, and the partnership selection at North Field East only helps its progress," Etebari added. Rising European demand There is currently more demand for gas in Europe, Kaabi said. It is not clear if the Ukraine-Russia dispute will end in months or in years, but Kaabi said he didn't think Russia would be cut off forever. "Our view is that approximately after we finish all of our gas investments, we will have about half of our markets in Asia and half in Europe. This is what we aspire to in the future. "We aspire to distribute our gas to as many countries as possible," Kaabi said.

Spain received more US LNG than any other country in May, tripling the number of American cargoes it imported versus a year earlier, as gas-for-power demand surged, and it seized opportunities to send some volumes to neighboring France, S&P Global Commodity Insights data showed. As a bloc, Europe, plus Turkey, continued to buy an outsized portion of US LNG, importing almost two-thirds of the US cargoes delivered during last month. Because demand has ebbed and flowed in recent months across major population centers in Europe, including in Spain, there have at times been more LNG cargoes on the water in the Atlantic than have been needed. Arbitrage opportunities have been limited by weak interbasin spreads, rising shipping costs and, until recently, tepid demand in Asia. Those dynamics, coupled with uncertainty over the availability of pipeline gas supplies due to Russia's war in Ukraine, have helped spur deep discounts for delivered Northwest Europe LNG versus the inland Dutch TTF gas hub – although, those discounts have narrowed since record levels in mid-May. Spain received 15 US LNG cargoes in May, versus 11 in April and five in May 2021. France, which was the top destination for US LNG in March and April, was No. 2 in May, with 11 cargoes received. The Netherlands was third, with eight cargoes, followed by the UK, with seven cargoes, and South Korea, with five cargoes. Europe, plus Turkey, received 58 of the 91 US LNG cargoes delivered during last month. Total gas-for-power demand in Spain was recorded at 39.14 million cu m/d on the May 31 gas day, surging by over 63% on the week and reaching its highest level since April 26, S&P Global data showed. On May 31, LNG import levels into Spanish terminals reached 89 million cu m/d, rising from approximately 40 million cu m/d on the year and hitting their highest level since April 27. The country continues to see strong LNG export opportunities to France, as well as robust gas storage injection demand across Europe. Amid the supply impact from the war, Europe has been trying to wean itself off Russian gas and increase inventory levels, ahead of the next winter season. Gas in storage was approaching 48% full in the latest reading available June 3, versus 38% at the same time a year earlier. The European Commission wants EU countries to reach 80% capacity for gas storage volume by the beginning of November. In the Atlantic, Platts DES Northwest Europe, the delivered price of LNG into Northwest Europe, and the Platts Gulf Coast Marker for US FOB cargoes loading 30-60 days forward were not assessed June 3 due to a London holiday. Platts JKM, the benchmark price for spot-delivered LNG into Northeast Asia, was assessed at $23.543/MMBtu June 3, up 47.5 cents/MMBtu on the day.

A resurgence in LNG contracting is expected to result in many more deals being signed in the coming months as LNG importers in Asia and Europe, portfolio players and trading houses look to lock in long-term LNG prices before they start to rise again. Asian LNG importers are seeking the protection of long-term contracts due to the volatility of spot markets, while European energy companies and utilities are looking to tie up gas supply to replace Russian volumes in the years ahead. The market has decidedly moved in favor of LNG sellers. The narrative being pushed by LNG producers, both US LNG exporters and oil-linked producers like the Middle East, is that if Asian buyers do not lock in volumes in the next few months for post-2025 supply, they will lose out to Europe. Some deals between South Korean importers and US LNG suppliers were announced at the World Gas Conference 2022 in Daegu last month, but several more purchases by Asian firms have not been made public. Counterparties are in various stages of negotiating more sale and purchase agreements, both new deals as well as old ones that are being finalized and which are likely to materialize in the coming months. Japan’s gas buyers are being driven by the need to switch out Russian volumes and expiring contracts, Chinese firms are covering spot exposure and securing demand from new LNG terminals, Indian companies need affordable gas to replace spot imports and some Southeast Asian firms are looking to enter the gas market for the first time. Keeping natural gas prices low and affordable will be key to creating new demand and ensuring the role of gas in decarbonization, several executives said at the recent World Gas Conference in South Korea Long-term prices European buyers are hesitant to lock-in firm 20-year SPAs. Their gas requirement is focused in the short- to medium-term, with an eye on accelerating their switch to renewables in the long-term. They are worried both about the impact of gas on net-zero goals and whether they will even need large volumes of gas for longer than 10 years. Portfolio players and traders have proposed to step in and assume the volume risk in long-term deals by shifting supply to Asia, but they are likely to demand much lower prices and price slopes than are being offered. Meanwhile, pricing for long-term contracts appear to be on the rise. So far, US LNG projects linked to Henry Hub, which have some of the largest LNG expansion capacity to bring onstream from 2025 onward, have benefited the most and signed the most number of SPAs with Asian buyers. The flexibility and optimality of US LNG cargoes, geographical diversification and the competitiveness of Henry Hub-based prices compared to both oil-indexed and spot LNG in the current market are working strongly in their favor. While US project developers are just happy to be in a sweet spot, Qatar and other oil-linked LNG sellers are making the most of their strong negotiating position and are pushing hard for higher price slopes. Offers in the market are in the vicinity of 15% Dated Brent, although no deals have been made public at these record levels. Although US LNG prices may have set the price floor for long-term contracts, assuming oil and spot LNG prices remain high, traditional producers like Qatar and Australia still enjoy a distinct shipping advantage and supply certainty at a time when energy security is paramount. Spot vs long-term Any Asian buyer looking for short-term contracts before 2024-2025 is in a precarious situation. Southeast Asian utilities said they had been offered one-year contracts at slopes of as much as 25% Dated Brent for the next couple of years, much higher than their pain threshold of around $15/MMBtu. Several executives admitted they were unsure how long the market will remain in favor of producers and argued that keeping natural gas prices low and affordable was key to creating new demand and ensuring the role of gas in decarbonization. A sustained period of $20/MMBtu LNG will either incentivize the energy transition to renewables, or a reverse fuel switching to coal, depending on the policy framework of local economies. LNG markets had to eventually tighten as part of the traditional commodity cycle after several years of rock-bottom LNG prices that even saw cargo cancellations to balance supply. The Ukraine crisis has only served to speed up the upward price trajectory to peak price levels, several long-term market observers pointed out. With the number of liquefaction projects going into FID and the amount of new LNG production expected post-2025, the market is quite likely to slip into another period of low spot prices and high LNG supply, exacerbated by the shift to renewables. This leaves importers with the age-old predicament: if a country has to introduce gas into the energy mix or a utility is planning a large wave of gas-fired power generation after 2025, should it lock in an SPA in the current market or just wait till prices fall again?

Platts, part of S&P Global Commodity Insights, has begun publishing a daily assessment reflecting the spread between Platts Japan/Korea Marker (JKM) (AAOVQ00) and Platts West India Marker (WIM) (AARXS00) from May 17, 2022. The new assessment is time stamped to the 4:30 pm Singapore close (0830 GMT) and follows the Singapore publishing schedule. The launch of this spread assessment complements Platts existing suite of LNG assessments. This assessment appears on Platts LNG Alert fixed pages 888, 889, 830, 831, Platts Natural Gas Alert pages 1020, 1042, 1043, 1044, on the Platts Dimensions Pro and Platts Market Center, in Platts LNG Daily and in the Platts database under the following price database codes: Assessment Code LNG DES JKM vs WIM Spore 16:30 LDJWS00 LNG DES JKM vs WIM Spore 16:30 MAvg LDJWS03 Please send all feedback, comments and questions to LNGeditorialteam@spglobal.com and pricegroup@spglobal.com. For written comments, please provide a clear indication if comments are not intended for publication by Platts for public viewing. Platts will consider all comments received and will make comments not marked as confidential available upon request.

May 10-11, 2022 | Hilton Houston Post Oak, Houston, TX Transforming the future of LNG together The S&P Global Platts LNG Conference welcomes back industry leaders, decision-makers, and market-movers to Houston, TX, for an in-depth look at global LNG markets and networking opportunities. We'll bring together industry experts to discuss Carbon Neutral LNG, pricing, market outlooks, financing large-scale projects, and more. Topics of discussion will include: — Project Expansion: Increasing Export Capacity — Carbon Neutral Fireside Chat — LNG Bunkering: Building Capacity — 2021 Pricing Retrospective — 2022 Market Outlook — Financing Large Scale LNG Projects — Market Dynamics: The Changing Pricing Formula and its Impact on Industry REGISTER NOW MORE INFO

The current European energy crisis is a "stark reminder" of the vital role of LNG in ensuring energy security and economic stability, Jean Abiteboul, the president of industry group GIIGNL, said May 5. In the latest GIIGNL annual report, Abiteboul said the group would monitor the "paradigm shift" in the sector over the coming year as governments and public institutions become increasingly involved in the LNG business. Europe in particular is looking to LNG to replace Russian gas imports and is rushing to install new LNG import infrastructure. Abiteboul said that additional investments "in all stages of the gas and LNG supply chains" would need to be made to meet expected demand growth According to the report from GIIGNL -- which represents the world's LNG importers and import infrastructure operators -- global LNG imports in 2021 rose 4.5% year on year to 372.3 million mt. Growth was driven by economic recovery in China, rising gas demand for power generation in South Korea, lower-than-expected pipeline supplies to Europe and reduced availability of hydropower in Brazil. The increase in global LNG demand came despite spot LNG prices moving higher throughout 2021. The benchmark Platts JKM spot Asian LNG front-month price averaged $18.60/MMBtu last year, compared with an average of just $4.39/MMBtu in 2020. Spot LNG prices have remained at sustained highs in 2022, with the JKM last assessed May 5 at $23.70/MMBtu. Of the total imports last year, 136.3 million mt -- or 37% of the total -- was imported on a spot or short-term basis, short-term meaning under a contract of four years or less. "True" spot volumes -- those delivered within three months of the transaction date -- accounted for 31% of total imports last year, or 116 million mt, GIIGNL said. Re-exports of LNG increased to 3.5 million mt, compared with 2.6 million mt in 2020. GIIGNL said that LNG demand would remain buoyant in the future due to the "much-needed" substitution of coal and polluting liquid fuels as well as the geographical mismatch between gas production and consumption regions. New importing markets Asia, GIIGNL said, remained the main demand center for LNG, growing by 7.1% to 272.5 million mt in 2021, with China overtaking Japan as the world's top LNG importing country. Chinese imports rose by 15% to 79.3 million mt last year. India, however, experienced the greatest decline in LNG imports, falling 9.8% due to the high spot LNG prices and the increase in domestic gas production. Global regasification capacity rose by 46 million mt/year last year, reaching 993 million mt/year, GIIGNL said. Four new large-scale terminals were brought into operation in Brazil, Croatia, Indonesia and Kuwait, while five expansion programs were completed -- four in China and one in Japan. Croatia last year became the 44th LNG importing market, while at least six new markets could start importing in 2022 -- El Salvador, Ghana, Hong Kong, the Philippines, Senegal and Vietnam, the industry group said. While demand growth remained strong, GIIGNL said LNG production had been struggling to keep pace, which contributed to the spot LNG price strength. Some 7.4 million mt/year of new capacity came onstream, of which 5 million mt/year in the US. "Global LNG exports were affected by unscheduled maintenance and shortfalls in feedgas," it said. Increased output from the US, Egypt, Malaysia and Russia was partly offset by lower exports from Angola, Indonesia, Nigeria, Norway, Peru and Trinidad. Only two final investment decisions on new liquefaction capacity were taken in 2021 -- the North Field expansion project in Qatar and Pluto LNG Train 2 in Australia. By 2025, more than 120 million mt/year of new liquefaction capacity is planned to progressively come online, "which should partly relieve tensions in the LNG market," GIIGNL said. Long-term contracts The LNG market has also been marked by a revival in long-term contracts given the ongoing supply uncertainties, mostly around risk to Russian pipeline deliveries. "In an environment marked by geopolitical tensions, risks of energy shortages and price volatility, last year saw a strong return of long-term contracts," GIIGNL said. "Asian buyers, notably Chinese NOCs and independent importers, played a leading role in securing new term purchases from the US, Qatar and Russia," it said. GIIGNL also said 68 new LNG vessels were delivered during the year, with the LNG shipping fleet reaching 700 vessels, including 48 FSRUs and 31 LNG bunkering vessels, representing a 9% increase in cargo capacity. Freight rates remained strong throughout the year and the orderbook at year-end was "remarkably high", with 196 units to be delivered by 2025, it said.

The current European energy crisis is a "stark reminder" of the vital role of LNG in ensuring energy security and economic stability, Jean Abiteboul, the president of industry group GIIGNL, said May 5. In the latest GIIGNL annual report, Abiteboul said the group would monitor the "paradigm shift" in the sector over the coming year as governments and public institutions become increasingly involved in the LNG business. Europe in particular is looking to LNG to replace Russian gas imports and is rushing to install new LNG import infrastructure. Abiteboul said that additional investments "in all stages of the gas and LNG supply chains" would need to be made to meet expected demand growth According to the report from GIIGNL -- which represents the world's LNG importers and import infrastructure operators -- global LNG imports in 2021 rose 4.5% year on year to 372.3 million mt. Growth was driven by economic recovery in China, rising gas demand for power generation in South Korea, lower-than-expected pipeline supplies to Europe and reduced availability of hydropower in Brazil. The increase in global LNG demand came despite spot LNG prices moving higher throughout 2021. The benchmark Platts JKM spot Asian LNG front-month price averaged $18.60/MMBtu last year, compared with an average of just $4.39/MMBtu in 2020. Spot LNG prices have remained at sustained highs in 2022, with the JKM last assessed May 5 at $23.70/MMBtu. Of the total imports last year, 136.3 million mt -- or 37% of the total -- was imported on a spot or short-term basis, short-term meaning under a contract of four years or less. "True" spot volumes -- those delivered within three months of the transaction date -- accounted for 31% of total imports last year, or 116 million mt, GIIGNL said. Re-exports of LNG increased to 3.5 million mt, compared with 2.6 million mt in 2020. GIIGNL said that LNG demand would remain buoyant in the future due to the "much-needed" substitution of coal and polluting liquid fuels as well as the geographical mismatch between gas production and consumption regions. New importing markets Asia, GIIGNL said, remained the main demand center for LNG, growing by 7.1% to 272.5 million mt in 2021, with China overtaking Japan as the world's top LNG importing country. Chinese imports rose by 15% to 79.3 million mt last year. India, however, experienced the greatest decline in LNG imports, falling 9.8% due to the high spot LNG prices and the increase in domestic gas production. Global regasification capacity rose by 46 million mt/year last year, reaching 993 million mt/year, GIIGNL said. Four new large-scale terminals were brought into operation in Brazil, Croatia, Indonesia and Kuwait, while five expansion programs were completed -- four in China and one in Japan. Croatia last year became the 44th LNG importing market, while at least six new markets could start importing in 2022 -- El Salvador, Ghana, Hong Kong, the Philippines, Senegal and Vietnam, the industry group said. While demand growth remained strong, GIIGNL said LNG production had been struggling to keep pace, which contributed to the spot LNG price strength. Some 7.4 million mt/year of new capacity came onstream, of which 5 million mt/year in the US. "Global LNG exports were affected by unscheduled maintenance and shortfalls in feedgas," it said. Increased output from the US, Egypt, Malaysia and Russia was partly offset by lower exports from Angola, Indonesia, Nigeria, Norway, Peru and Trinidad. Only two final investment decisions on new liquefaction capacity were taken in 2021 -- the North Field expansion project in Qatar and Pluto LNG Train 2 in Australia. By 2025, more than 120 million mt/year of new liquefaction capacity is planned to progressively come online, "which should partly relieve tensions in the LNG market," GIIGNL said. Long-term contracts The LNG market has also been marked by a revival in long-term contracts given the ongoing supply uncertainties, mostly around risk to Russian pipeline deliveries. "In an environment marked by geopolitical tensions, risks of energy shortages and price volatility, last year saw a strong return of long-term contracts," GIIGNL said. "Asian buyers, notably Chinese NOCs and independent importers, played a leading role in securing new term purchases from the US, Qatar and Russia," it said. GIIGNL also said 68 new LNG vessels were delivered during the year, with the LNG shipping fleet reaching 700 vessels, including 48 FSRUs and 31 LNG bunkering vessels, representing a 9% increase in cargo capacity. Freight rates remained strong throughout the year and the orderbook at year-end was "remarkably high", with 196 units to be delivered by 2025, it said.

China’s LNG and natural gas markets are unique. Unlike in other North Asian countries, only one-fifth of China’s natural gas consumption is for power generation. Its collective industrial consumption (including fertilizers) accounts for 50% of total gas consumption * . China's natural gas demand by sector Sector 2022* (Bcm) 2021 (Bcm) % Growth Power generation 73.3 66 11.1% Industrial sector 159.9 145.2 10.1% City gas 124.4 116.4 6.9% Fertilizer and chemicals 37.9 37.9 0.0% Total 395.4 365.4 8.2% Note: * Calculation volume based on the growth rates provided by CNPC ETRI Source: CNPC Economics & Technology Research Institute China’s trucked LNG is a much-followed part of this unique market. There are a few reasons for this: LNG that leaves import terminals by truck – totalling around 22 million mt in 2021 – accounts for around 30% of China’s LNG import volume, which was the largest in the world in 2021. It is also a very prompt market and not price-regulated. Therefore, it can give an indication of the immediate prevailing fundamentals in the region of China the trade takes place. In this sense, China’s trucked LNG market is similar to the port stocks trade that takes place for other major bulk commodities, such as iron ore or coal. Like these commodities, the trade takes place off the back of imported cargoes, and it happens in many locations around China – each with different local market dynamics – making it hard to have a unifying “trucked LNG price”. For instance, in south China, there’s less connectivity to pipeline gas from than the north and east China, so it is relatively more reliant on LNG and therefore the demand for trucked LNG comes from power generation, industrial and city gas. In northern China, trucked LNG demand comes mainly from the industrial sector. The regional imbalances can be so big that they can attract, occasionally, trucked LNG from one part of the country to another, as what happened in April 2022, when there were sales of trucked LNG from north to south China. Cargo benchmarks solve this issue by reflecting a whole seaboard or multiple locations, meaning that the fundamentals of the whole are reflected, rather than the minutiae of the local. Unlike these other commodities, in some ways trucked LNG trade is taking place due to a lack of infrastructure: pipelines. Nearly always it would be more cost-effective in the long run to regasify and transport the gas by pipeline to demand sources, rather than ship in individual trucks. Indeed, market participants noted that trucked LNG trade has declined in the last couple of years, especially in areas where alternative infrastructure has been installed. As a difficult-to-store fuel, LNG – unlike many other commodities – is also rarely stockpiled in the expectation (or hope) of upward market movements. Chinese importers slow spot LNG procurement activity in winter Trucked LNG prices have recently diverged from LNG import prices, causing difficulties for importing companies, which are faced with a higher LNG spot import price than their sales price in trucks. This situation is historically unusual: in 16 of the last 24 months, LNG spot prices (represented by the JKM) were below trucked LNG prices, allowing for profitable import and on-selling. There are several reasons for the decoupling that took place in winter 2021. Industrial users of gas in China started to consume less because of high prices caused by fierce competition for the marginal spot LNG cargo between the Pacific and Atlantic basins. This reduction in demand caused an imbalance at terminals in China because cargo imports are agreed several months before trucked LNG sales take place, due to the mismatch in lead times. It therefore took some time for LNG import volumes to react to the sudden sharp reduction in demand from more elastic end-users, leaving an ongoing imbalance in fundamentals. Moreover, China’s LNG importers pulled back from spot purchases as these were more expensive than long-term contract formulas linked to Brent crude oil. This temporarily weakened the pricing link between spot LNG prices and China trucked LNG. Given spot purchases typically accounted for 30%-40% of the country’s LNG imports in the past few years, this also meant that China’s overall LNG imports started to significantly drop year-on-year in Q1, falling over 15% to around 16.5 million mt. Indeed, such was the lack of demand that importers began to sell cargoes in the spot market from both long-term supply and strip tenders. Unipec, CNOOC, ENN and Guanghui all sold cargoes during the winter period. China’s LNG importers were the biggest participants in signing long-term contracts in 2021, in light of the higher spot prices at the time, but only around 6 million-7 million mt of the 35+ million mt of term contracts signed are commencing in 2022. Chinese firms rush to sign new long-term LNG contracts Buyer Seller Volume (mil mt/year) Start date Duration (years) Guangdong Energy Qatar 1.0 2024 10 Suntien Energy Qatar 1.0 end-2022 15 Zhejiang Hangjiaxin Pavilion Energy 0.5 2023 5-7 ENN Novatek 0.6 - 11 Beijing Gas Shell 1.5 2023 10 Henan Investment Group Novatek - 2025 - Guangdong Energy NextDecade 1.5 2026 20 ENN Energy Transfer 2.7 2026 20 ENN NextDecade 1.5 2026 20 Sinopec Venture Global 4.0 2026 20 Unipec Venture Global 2.5 2023 1 Unipec Venture Global 1.2 2022 3 Sinochem Cheniere 0.9-1.8 July 2022 17.5 Foran Energy Cheniere 0.3 2023 20 China Gas Vitol 0.8-5.0 2023 5 ENN Cheniere 0.9 July 2022 13 Guangzhou Development Sinochem 0.4 2023 10 Foran Energy Sinochem 0.2 2023 17 CNOOC Venture Global 3.5 2023-2026 20 CNOOC Qatar Petroleum 3.5 2022 15 CNOOC Petronas 2.2 mid-2020s 20 Guangzhou Development BP 0.7 2022 15 Shenergy Total 1.4 - 20 Shenergy Novatek 3.0 - 15 Guangzhou Development Mexico Pacific 2.0 2026 20 Source: S&P Global Commodity Insights If China’s importers maintain the current strategy, at least one of the following will likely happen: LNG imports will be curbed in 2022 – because term demand only covers circa 15 million mt less than the total import demand from 2021, LNG spot prices will come down and allow for elastic Chinese industrial demand to return, or local prices will rise to meet the international market. Judging from the recent price progression, it looks like south China trucked LNG prices are coming up to meet (and exceed) LNG import prices. This could lead to the situation seen in previous years where spot LNG prices allowed for profitable trucked LNG sales. In fact, the average ex-terminal trucked LNG price in south China has risen to $25/MMBtu, according to domestic market participants. However, the price and timing risks are still there for importers, who are generally buying on an index-linked basis for the future delivery of cargoes and selling in the trucked LNG market on a fixed price basis for very short-term delivery. Chinese spot LNG importers enjoyed an average positive margin of Yuan 1,500-2,000/mt over 2020 from ex-terminal trucked LNG sales, as the JKM fell to a record low of $2/MMBtu in the year as gas demand dwindled significantly due to lockdowns across major cities in North Asia. However, fast forward to winter 2021, and China’s importers faced an almost continuously negative margin for on-selling spot-procured LNG, and hence pulled back from the market. How can importers manage this time and price risk? Greater linkage between upstream and downstream markets required They could be resolved by linking downstream markets like trucked LNG to the international spot cargo price, the main feed-in cost, and the market price China contends with to import LNG. Even though a lot of LNG is invoiced to other benchmarks, LNG spot prices remain the opportunity cost for China’s importers, and are being used in downstream price negotiations or contracts in countries as diverse as Brazil and Japan. In fact, the model of using international LNG prices in Chinese gas contracts already exists. China’s Sinopec introduced spot LNG pricing in its downstream trucked LNG sales by referencing the JKM in its ex-terminal trucked LNG offers from April to October 2021, after procuring spot LNG cargoes through a strip tender on a JKM-linked basis earlier in 2021. BP China signed multiple regasified LNG supply contracts with buyers like ENN for pipeline gas from the Guangdong Dapeng terminal linked to the JKM. This pricing model allows sellers like BP China to import LNG at international spot prices and on-sell gas to the downstream markets via a back-to-back method, ensuring that a positive margin is locked in. Furthermore, state-owned PetroChina also announced its plans to pass through its cost of spot LNG to downstream buyers of its spot natural gas volumes. China’s Shandong province had also allowed city gas distributors to sell their spot LNG cargoes at market prices to non-residential users in October 2021. Because LNG is the glue that links together regional gas markets, LNG price benchmarks are also being used in contracts between upstream suppliers and LNG liquefiers. Multiple 15-year term US feedgas agreements have been signed by Cheniere with American gas producers Tourmaline, EOG and Apache, all referencing the JKM. As China’s gas consumption is forecast to reach 430 Bcm-450 Bcm by 2025 from 395 Bcm in 2022, spot LNG imports will continue to play an important role in the country’s efforts to decarbonize and transition to cleaner fuels. The ability to pass down import costs to downstream markets like trucked LNG would hold the key to ensure sufficient, stable gas supplies to non-residential users at times of peak residential demand, as LNG importers in China would be incentivized to make additional spot LNG cargo purchases, hence reducing margin pressure for them. This would also allow China’s power sector to move toward more market-oriented balancing mechanisms. *According to CNPC’s Economics and Technology Research Institute

French utility Engie has agreed to a 15-year deal to buy 1.75 million mt/year of supply on a free-on-board basis from NextDecade’s proposed Rio Grande LNG export facility in Texas, while Swiss commodity trader Gunvor has agreed to a 20-year FOB deal to buy 2 million mt/year of supply from Energy Transfer's proposed Lake Charles LNG export facility in Louisiana. The two separate agreements were announced May 2, reflecting renewed interest in relatively cheap US LNG supplies amid a surge in spot end-user prices since 2021. There has been a flurry of commercial activity in 2021 and during the first several months of 2022 tied to current and proposed US LNG export terminals, which offer fixed fees and destination flexibility. More than half of the supply from Rio Grande LNG’s first phase is now covered under long-term agreements that are either firm or preliminary. An offtake deal between Engie and NextDecade fell through in November 2020 amid Engie’s environmental concerns about expanding its commitment to US shale gas. The turnabout in the market shifted the dynamics, as has Europe’s efforts to wean itself off Russian pipeline gas in the wake of the war in Ukraine. In a statement announcing its deal with Engie, NextDecade said it aims to reduce CO2 emissions from its facility in Brownsville by more than 90%. NextDecade has proposed a carbon capture and storage project that it would launch after making a final investment decision on the liquefaction terminal. Its current FID target on a minimum of two trains is the second half of 2022, with commercial operations expected to start as early as 2026. With the Engie sale and purchase agreement, under which LNG would be lifted from Rio Grande LNG’s first two trains, NextDecade has now secured long-term agreements covering 6.75 million mt/year of supply that would be produced by the terminal. The project's first phase is expected to account for around 11 million mt/year of capacity. Ultimately, NextDecade has proposed building five trains with total capacity of 27 million mt/year. NextDecade’s other customers are European energy major Shell and China’s Guangdong Energy and ENN. Energy Transfer's deal calls for the LNG it will supply to Gunvor to be indexed to the US Henry Hub benchmark plus a fixed liquefaction charge. First deliveries are expected as early as 2026. The deal will become fully effective upon the satisfaction of certain conditions, including Energy Transfer taking final investment decision on the Lake Charles project, the companies said in a joint statement. In March, ENN and affiliates agreed to 20-year FOB deals to buy 2.7 million mt/year of supply from Lake Charles LNG. Those were the first firm offtake deals announced for the US facility. The purchase price of those deals also will be indexed to the US Henry Hub, plus a fixed liquefaction charge. Energy Transfer, which lost Shell as a joint venture partner in 2020, has proceeded with the development of Lake Charles LNG. Energy Transfer may reduce the size of the project to two trains with 11 million mt/year of LNG capacity, from three trains with 16.45 million mt/year of capacity, the company said in a US regulatory filing in February. Engie said in November 2020 it halted talks over a potential long-term supply agreement with NextDecade amid pressure that European utilities faced from environmental interests to refrain from signing new long-term deals for importing US shale gas. Platts DES Northwest Europe for June was assessed at $22.464/MMBtu April 29. NWE is the delivered price of LNG into Northwest Europe. Platts JKM, the spot-delivered price of LNG into Northeast Asia, was assessed at $21.900/MMBtu. The Platts Gulf Coast Marker for US FOB cargoes loading 30-60 days forward was assessed at $21/MMBtu. The LNG markets were closed May 2. Engie agreed in June 2021 to an 11-year deal with Cheniere Energy tied to the US LNG exporter’s Corpus Christi Liquefaction terminal in Texas. Under the original agreement, a range of about 400,000 to 1.2 million mt/year of LNG was to be delivered to Engie free on board from the Cheniere terminal. The Engie-Cheniere deal was amended in March, with the term extended to around 20 years and the volume adjusted to include a higher average of about 900,000 mt/year over the life of the deal.