FEATURE: Germany key to near-term European LNG import capacity build-out

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Freeport LNG delayed its restart target until the end of the year, about two weeks beyond its previous estimate, as it works with US regulators to secure all approvals necessary to resume production, the operator said Dec. 1. The three-train, 15 million mt/year capacity terminal in Texas, which serves about 15% of US liquefaction output, has been offline since a June explosion and fire. The operator estimated Nov. 18 that it would resume production in mid-December, which represented a delay of about a month from its previous target. The latest timeline reflects some progress on the regulatory front, although work continues to secure all necessary clearances. Freeport LNG has approval from agencies to complete critical repairs and commence reinstatement of certain systems, spokeswoman Heather Browne told S&P Global Commodity Insights in response to questions. Based upon current progress and subject to the operator continuing to meet necessary requirements, Freeport LNG now anticipates that "restart of liquefaction to be achieved around year-end," Browne said. Freeport LNG has long-term offtake deals with South Korea's SK E&S, Japanese utilities JERA, and Osaka Gas, as well as French energy major TotalEnergies. Some counterparties have had to rely more heavily on the spot market for LNG supplies during the outage. Freeport LNG has said its three liquefaction trains will be restarted and ramped up in a slow and deliberate manner, with each train starting separately before restarting a subsequent train. It previously said it expected that about 2 Bcf/d of production would be achieved in January. The terminal's capacity is around 2.3 Bcf/d. Full production utilizing both docks remains anticipated to be achieved in March, Freeport LNG said. Investigators with the US Pipeline and Hazardous Materials Safety Administration have been present at the site throughout the course of the probe and planned to be there to consider restart approval, said a person familiar with the situation.

The message from LNG industry leaders gathered at the annual World LNG Summit & Awards wavered between wariness and optimism Nov. 30 as they discussed changes in contracting, the unprecedented challenges facing the industry and a new pricing mechanism for hedging Atlantic cargoes. Politicians, administrators and trading managers recapped 2022 across various panels and presentations during the 22nd World LNG Summit & Awards, organized by DMG events and taking place in Athens. They were near universal in noting the unprecedented challenges presented by record-high LNG prices, the war in Ukraine and European energy security. "Was it a black swan event [in 2022]? No, it was a flock of black swan events, "said Pat Roberts, Managing Director of LNG Worldwide, who described 2022 as one of the most tumultuous years for the LNG industry. "We clearly have a major crisis as an industry," said Steve Hill, Shell's Executive Vice President for energy marketing. Discussed across several panels were how the war and other factors have caused record high natural gas and LNG prices and an unprecedented decoupling between the Dutch TTF natural gas hub and the Northwest European LNG price. Platts assessed Northwest Europe LNG at a record high of $74.486/MMBtu on Aug. 26 alongside a similarly bullish TTF second-month price of $98.96/MMBtu. On Oct. 3, the difference between the two markets reached a record spread when LNG fell to a $29.55/MMBtu discount to TTF. While many panelists were candid in the challenges facing the LNG market, there was also praise for the speed in which Germany has brought import capacity online as well as other market solutions put forward. "This crisis has revealed there are diverse European indexes and, of course, they have reacted differently," said Patrick Dugas, Vice President LNG Trading in TOTAL Gas & Power Limited (TGP) and Global Head of LNG Trading. "We realized we have been misled in that pipeline gas no more reflects the price of an LNG Cargo." "We will have to find a way to move away from the pipeline gas TTF index to a Northwest Europe LNG index." The LNG North West Europe Marker (Platts) Futures Contract was launched by the CME on Oct. 24 and traded on opening day. The contract is cash settled against the Platts DES Northwest Europe physical assessments, has a size of 10,000 MMBtu and monthly contracts are listed for the current year and the next five calendar years. "We have an LNG marker that we hope will move to gather the liquidity and activity of the LNG players in Europe," Dugas said. "This is an index that reflects the market in Northwest Europe." Panelists were mixed on the viability of short versus long-term LNG contracting, with spot activity strained during high price environments. Hill said the combination of long-term and spot contracting is unconventional but works for LNG. Jonathan Westby, Jera Senior Vice President LNG said his company relies on the spot market to manage their business. ADNOC LNG's Senior Vice President of commercial Rashid Al Mazrouei said a shift to long term contracts are needed to secure countries' energy supplies and ensure capital commitments for long term liquefaction projects.

Asian LNG importers are experiencing high inventory levels and tank-tops, which refers to storage terminals reaching full capacity, on the back of a mild start to the winter season that has slowed downstream natural gas consumption, according to several traders and market participants. The tank-top situation is expected to be bearish for spot LNG prices and is resulting in LNG importers taking measures to delay shipments by extending the waiting time for LNG carriers or asking suppliers to push delivery dates further out until terminal capacity is available. Asian spot LNG prices have eased from recent highs when it was trading at over $50/MMBtu in August. Platts assessed JKM for December at $24.330/MMBtu Nov. 10. While it is still elevated, it's dropping to a range where more importers could be incentivized to boost procurement. South Korea's key LNG importer Kogas is facing tank-top, market sources in the country said. If the weather remains warmer than usual in Asia and demand in Europe does not pick up soon, the vessel congestions could get worse, they added. Some entities may need to defer the delivery window or rent other terminals to receive the term volumes in the event of a tank-top, a South Korean market participant said. At least one Japanese power utility said that it has chosen a later delivery window for its December delivery cargo because there's a high chance that high inventory levels will continue into next month. A second Japanese utility confirmed that its supplier had agreed to its request to delay the delivery of its cargo until December as downstream demand has not been that strong so far. Japanese month-end LNG stocks have been hovering above both year-on-year and the five-year average since May, according to the Ministry of Economy, Trade and Industry and latest data showed that Japanese power utilities had 2.53 million mt LNG stock at the end of October, compared with 2.66 million mt at the end of September. "We have a cargo discharging in late December, but a buyer is requesting to have it delivered in January instead," a Japanese trader said separately. China and India China used to be the last resort for most Asian LNG buyers who purchased surplus LNG cargoes ahead of the peak winter season, to sell cargoes at discount, but this outlet may not emerge this year as demand has been sluggish. On Nov. 9, PipeChina posted data showing spare LNG receiving capacity at its seven affiliated LNG terminals for December would be 6.5% higher than previously estimated, indicating underutilized terminal capacity. While lower Chinese LNG imports have been due to weak downstream demand and regulated gas prices, traders said December could see high inventory levels as well. "We are facing tanktop now because of some issues at Tianjin terminal, and cannot afford to add any more injections to our underground storage tanks. We want to issue a sell tender or offer cargoes but are concerned that weather remains mild and deferred cargoes arrive earlier [when storage is not available]," Chinese traders said. Other Chinese traders indicated that natural gas storage tanks in central and north China were high, but not to the extent of tank top. "Weather is warmer, so domestic downstream consumption is quite slow, but it could be colder towards late winter. A lot more cargoes being offered for the prompt in December could be floated into January," one of the traders said. Meanwhile, even in India, which has seen a sharp drop in spot LNG imports this year, importers have reported a tank-top situation at some terminals. Petronet LNG's Dahej LNG terminal and Shell's Hazira terminal are requesting end users to evacuate gas at a higher rate and postpone cargo deliveries by 3-4 days, Indian traders said.

The concern over Malaysia LNG supply has receded among buyers in Japan amid emerging prospects of receiving alternative supplies from the seller following the recent force majeure on some of its supply, sources familiar with the matter told S&P Global Commodity Insights Oct. 27. The change in sentiment comes as a number of Japanese buyers of Malaysia LNG have recently been informed by the seller about the likelihood of ensuring their scheduled supply including from other sources in coming months, sources said. "Now I am hearing that all affected [cargoes] from the force majeure will likely be supplied until March," one source said. "This was an unexpected move by Malaysia." However, some Japanese off takers noted that there is uncertainty over the size of alternative cargo deliveries beyond January. Multiple Japanese buyers of Malaysia LNG have recently been told that they now expect to receive scheduled shipments in the coming months, including alternative supplies from the Petronas Floating LNG Satu, PFLNG Dua plants and the Gladstone LNG in Australia, sources said. "It remains unclear to see whether those cargoes will actually be supplied but at least we have been told about such talks," one source said. Petronas did not immediately respond to an Oct. 27 request for comment on the supply impact to Japanese buyers from Malaysia LNG's recent force majeure. The news of the Japanese buyers' increased prospects of receiving alternative cargoes to Malaysia LNG supply comes to light after at least a few Japanese buyers have already purchased their supplementary cargoes recently. In a signal of ensuring alternative supply to affected Japanese buyers of Malaysia LNG, one Japanese buyer was receiving a cargo from Petronas following changes in its annual delivery program, said a source familiar with the matter. The seller's move to ensure supply affected by the Malaysia LNG force majeure is decreasing some Japanese buyers' appetite for spot LNG procurements during the upcoming winter demand months, sources said. "This appears to be Petronas' maximizing efforts in its response to a request from the Japanese government seeking alternative supplies to Malaysia LNG," said Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National Corp. "Should such moves continue, Japanese end users' needs to procure incremental LNG from other sources will be reduced to make up a supply shortfall from Malaysia LNG following its declaration of force majeure, with the approach of winter heating demand season," Nogami said. Requested substitution The Japanese government has demanded Malaysia's Petronas secure alternative LNG, including from its other supply points, to cover the loss from its recent force majeure on gas supply to MLNG Dua, Minister of Economy, Trade and Industry Yasutoshi Nishimura said Oct. 11. "We have made a strong request to the company [Petronas] from the government for a speedy restoration as well as to minimize the impact from the supply suspension through securing alternative supply for Japan," Nishimura told a press conference in Tokyo. "We are requesting [the company] to minimize the impact by securing alternative supply from its several LNG supply points," Nishimura said. Malaysia LNG has declared force majeure on supply to several customers, including Japanese buyers, following the suspension of supply from the Sabah-Sarawak Gas Pipeline, a spokesperson for Mitsubishi, which has stakes in Malaysia LNG's Satu, Dua, and Tiga projects, said Oct. 6. Malaysia's Petronas declared force majeure on gas supply to MLNG Dua due to a pipeline leak, impacting gas supply to Petronas LNG Complex in Bintulu and subsequently impacting delivery commitments to some LNG buyers, the national oil company said in a statement on Oct. 8. Petronas said the force majeure was due to a pipeline leak caused by soil movement in the vicinity of the exploration block KP201, at the SGP, that occurred on Sept. 21. The bulk of Malaysia's LNG cargoes are exported from the Bintulu LNG complex comprising three trains each at MLNG and MLNG Dua, two trains at MLNG Tiga, and a ninth train operated by Petronas LNG 9. Bintulu LNG boasts nearly 30 million mt/year of capacity, which is among the largest LNG export capacities of its kind at a singular location. The PFLNG Satu has a 1.2 million mt/year capacity at the Kebabangan Gas Field, 90km offshore Kota Kinabalu, Sabah, with the PFLNG Dua at a 1.5 million mt/year capacity at the Rotan Gas Field, 140km offshore Kota Kinabalu. Petronas also has a 27.5% stake in the Gladstone LNG project in Australia. Malaysia was Japan's second-largest LNG supplier in 2021, accounting for roughly 14% of the country's total imports of 74.32 million mt, according to the finance ministry data.

LNG markets are in the spotlight after the Russia-Ukraine war, with Asia and Europe competing for limited cargoes. A harsher than expected winter may trigger unprecedented changes in LNG trade flows and force many Asian governments to implement contingency measures to tackle power outages. In a discussion ahead of the Asia LNG & Hydrogen Gas Markets Conference , S&P Global Commodity Insights' experts Surabhi Sahu , Kenneth Foo and Jeffrey Moore talk about Asia’s LNG winter procurement, benchmark market activity and strategies like fuel switching to mitigate shortages. Subscribe to Platts Dimensions Pro for access to assessments and premium content covering Platts LNG Japan/Korea DES Spot Cargo ( AAOVQ00 ), LNG West India Marker ( AARXS00 ) and many more. More listening options: No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).

As gas supply disruptions send shockwaves across the world, the ability and capacity to store energy has come under close scrutiny. Associate Director Paul Hickin discusses with gas and power editors Stuart Elliott and Kira Savcenko whether Europe has enough energy in reserve to get through the winter, the challenges of providing sufficient back-up from both fossil fuels and alternative sources, the knock-on effects to the rest of the world, and whether we might experience déjà vu this time next year. Useful price assessments: Dated Brent: PCAAS00 UK baseload front-month (GBP/MWh): AADGP00 TTF front-month (Eur/MWh): GTFTM01 More listening options: No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).

Development of the Greater Sunrise gas and condensate fields, first discovered in the Timor Sea in 1974, has been stalled for decades. With a maritime border dispute between the Southeast Asian island country of Timor-Leste and Australia solved, the project continues to be held up over a disagreement on whether the gas should be piped to Timor-Leste or Australia for processing and eventual export. The head of Timor-Leste’s national oil company recently came to Washington to garner both technical expertise and strategic support from US policymakers. While in town, Timor Gap President and CEO Antonio de Sousa joined the podcast to share his hardline position that gas from Greater Sunrise must be pumped to Timor-Leste; his optimism that a path forward is within reach, as a deadline has been set to finalize a legal framework and production sharing contract for the offshore project; and his outlook for future growth in the LNG market. Stick around after the interview for Starr Spencer with the Market Minute, a look at near-term oil market drivers. Related content: Shell sells 26.56% stake in Greater Sunrise to East Timor for $300m South Korean LNG importers eye infrastructure expansion for supply security Global scramble for LNG tankers likely to boost gas prices further More listening options: No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).

The UAE's Abu Dhabi National Oil Co. will supply German companies with LNG and diesel cargoes in 2022 and 2023 as Europe's biggest oil consumer seeks to diversify energy sources amid reduced supply of Russian gas and upcoming European Union sanctions on crude and oil product imports from Moscow. As part of a new Energy Security and Industry Accelerator agreement signed between the UAE and Germany, ADNOC will supply RWE with an LNG cargo in late 2022 to be used in the country's floating LNG import terminal in Brunsbuttel, state-run WAM news agency reported Sept. 25. ADNOC has also earmarked several other LNG cargoes for German customers for delivery in 2023, the agency said, without disclosing further details. The agreements were signed during a state visit by German Chancellor Olaf Scholz to the UAE, the second stop on a three-country trip that started in Saudi Arabia and will take him next to Qatar, where other energy deals are expected to be signed. ADNOC, which completed its first ever direct diesel delivery to Germany in September, has agreed to the terms with Wilhelm Hoyer GmbH & Co. on the supply of up to 250,000 mt of diesel per month in 2023, WAM said. German LNG demand As Russian gas deliveries dwindle from Nord stream, German utilities are working to diversify gas import portfolios and build up the limited import capacity for LNG. Uniper, RWE and EnBW on Aug. 16 signed a memorandum of understanding for gas supplies into the Wilhelmshaven and Brunsbuttel floating storage and regasification units, which are set to start operations this winter with a capacity of 12.5 Bcm/year. Germany is developing a total of five state-backed FSRU projects, but the focus is initially on supplying LNG into the Wilhelmshaven and Brunsbuttel sites. The FSRUs in Brunsbuttel and Wilhelmshaven are to be operated by RWE and Uniper. The reduction in Russian flows to Germany via Nord Stream since mid-June and then the complete halt in deliveries at the end of August have helped keep European gas prices at sustained highs. Platts, part of S&P Global Commodity Insights, assessed the Dutch TTF month-ahead price at an all-time high of Eur319.98/MWh on Aug. 26. It was last assessed on Sept. 23 Eur179.20/MWh, almost three times higher than at the end of 2021. Oil products supply Before Russia's invasion of Ukraine in February, Germany was the world's second-biggest buyer of Russian crude after China, importing 687,000 b/d of crude and 149,000 b/d of oil products from Russia in November 2021, according to the International Energy Agency. Most of the crude was delivered via the northern branch of the Druzhba pipeline system from Russia, with smaller amounts arriving via tanker to Rotterdam and its North Sea ports of Wilhelmshaven and Brunsbuttel. Germany had already seen most of its refiners and oil importers switch away from Russian supplies since March. By mid-April, the government said the country had slashed its dependence on Russian crude to 12% of its imports from 35% before the invasion of Ukraine. The UAE energy producer has also signed agreements with German customers, including power plant operator Steag and copper producer Aurubis for the supply of low-carbon ammonia. The first cargo of low-carbon ammonia from ADNOC arrived in Germany Sept. 15 on its way to Aurubis, which will use the low-carbon ammonia as a feedstock in its wire rod plant. The demonstration cargo, produced by Fertiglobe, an ADNOC unit that produces fertilizers, is the first of several test cargoes to be sent from the UAE to Germany as the UAE energy producer expands its strategic energy partnership. Low-carbon ammonia delivery ADNOC plans to work with several German companies on hydrogen projects and signed deals with companies including Uniper, Aurubis and RWE as it looks to expand into Europe after having establishing export markets in Asia. ADNOC signed an agreement with German companies Hydrogenious and Uniper on March 21 on imports to Wilhelmshaven, covering 7,000-10,000 mt/year of green hydrogen shipments from 2025, as part of a demonstration project. ADNOC aims to supply up to 25% of Germany's imported clean hydrogen and derivatives such as ammonia. The UAE is also targeting a 25% share of the global green and blue hydrogen market by 2030. As part of agreements signed on Sept. 25, UAE's renewable energy firm Masdar will also explore opportunities to develop as much as 10 GW in offshore wind in the North Sea and Baltic Sea in Germany by 2030, WAM said.

2022 has seen the specter of government interventions envelop gas markets: whether it’s price caps, encouraging benchmark diversification, pooling procurement in a centralized platform or using state-owned banks to directly buy LNG cargoes, all ideas appeared to be on the table. While pipeline gas and LNG share several fundamental attributes, they are also different in many aspects. In this flurry of policy proposals and announcements, there are significant changes taking place in the LNG industry itself. These changes relate to price indexation, market participation and trade flows. This piece, as part of a series of articles on LNG industrychanges, will tackle the first point: price indexation. LNG price markers are being used in the spot market, while long-term contracts are still prone to utilizing substitute oil or pipeline gas prices. As substitute prices diverge significantly from the LNG market, a hybrid solution in long-term contracts, combining both mechanisms, is seeing some adoption. Price indexation Price benchmarks used in LNG trade have been in great flux over the last 12 months, triggering large changes in relative values between them. While LNG has always been a difficult market to analyze from a pricing perspective, 2022 has seen this complexity deepen. Here are some broad points to start with, based on data collected by market reporting teams at Platts, part of S&P Global Commodity Insights, and the IHS Connect contract database from January to August: 1. Fixed price trade has globally been in retreat for some time, but North Asia’s usage of fixed prices significantly slumped in 2022; 2. As LNG cargo prices have converged and gas hub prices have diverged an increasing amount of trade referenced LNG-based benchmarks; and 3. Contracts signed for long-term volumes are on course to surpass 2021’s total with ease while crude oil-linked contracts have dropped significantly as a proportion of total trade. Fixed price trade has dropped to around 43% of total spot and short-term trades, or cargoes for delivery within the next two years or so, in 2022 versus 65% of trade in 2021. Digging deeper, fixed price trade in North Asia has fallen from 52% in 2021 to under 20% so far in 2022. Fixed prices now largely appear in tenders issued by state-owned companies in South Asia, Thailand, and Argentina. These locations account for 75% of fixed price trades in 2022. The significant drop in fixed price trades is due to increased market volatility and more developed futures markets. It has been well documented that LNG prices ( JKM , Platts West India Marker , Platts Northwest Europe , Platts Gulf Coast Marker ) have been moving in a tight band while gas hub prices on either side of the Atlantic (represented by Henry Hub and the Dutch Title Transfer Facility, or TTF) have been at record differentials. Added to this, LNG prices have been trading at large discounts to TTF in 2022. Platts Northwest Europe LNG benchmark reached a record discount of $24.475/MMBtu against Dutch TTF on Aug. 26. It is in this context that the amount of JKM-indexed trade in the spot and short-term market globally increased to some 33% in 2022, more than double the 2021 figure. Also apparent from this data is that within Europe itself there is greater variety of indexation being used for LNG cargoes. For example, a recent tender issued requested pricing against the French PEG gas hub for 12 cargoes delivered between 2023 and 2025. Activity reported in the Atlantic LNG Market on Close assessment process of S&P Global indicates this, with almost 40% being reported against the UK’s NBP in 2022. There was no NBP-indexed activity reported in the process in 2021. A peculiarity specific to LNG is the appearance of substitute prices in the long-term contract space. It is also surprising that these substitute prices very rarely appear in the short-term contract space. Henry Hub and Brent, widely used in long-term contracts ex-US and within Asia respectively, are each used less than 5% in near-term trade. While Henry Hub has appeared considerably more in long-term Sales and Purchase Agreements (SPAs) in 2022 – largely due to most of the projects seeking a final investment decision being based in North America – Brent-linked long-term contracts have foundered. According to IHS Connect’s LNG contract database just 0.675 million mt of purely Brent-linked SPAs have been signed so far this year, compared to nearly 18 million mt of such SPAs in 2021. Companies involved in negotiations for contracts that may conclude on a Brent-linked basis have complained that the relationship between LNG prices and Brent slope levels used in historical contracts has become a moving target. Because LNG prices are elevated relative to historical Brent slopes, buyers see a risk in agreeing to contracts now that would leave them at historically high slope levels with a risk of downwards LNG price movement. Sellers also do not want to leave value on the table given the potential to sell LNG in the next few years at considerably higher prices – based on current forward curve values – than historical Brent slope levels would imply. After having a reasonably steady relationship for many years the LNG price-Brent term slope relationship started to crack from 2019 onwards. However, the differences between the two have been greatest since 2021. The few purely Brent-linked term contracts signed this year were agreed in January. Platts has heard of several companies having protracted negotiations for term contracts with a proposed Brent pricing basis, but there is little breakthrough yet on these. For the few short-term tenders concluded on Brent-linked pricing, from winter season strips of cargoes to agreements for deliveries up to two years ahead, the slopes have reportedly been between 20%-35%. This reflects the difficulty of using substitute price benchmarks, as they do not share the same market fundamentals as the LNG market. The current impasse is probably unhelpful for the industry given that consumers are keen to tie down volumes for the next few years when the market is expected to be tight, and producers are also trying to secure regular offtake for production planning purposes and financing collateral. Hybrid contracts, where either Brent makes up a proportion of the deal formula, or a Brent slope is agreed that is subject to an LNG price cap and/or collar, could be one way to resolve the standstill. With both contract structures seen adopted recently, a compromise could be emerging for midterm contracts.

Before skyrocketing gas prices encouraged Norwegian supply and LNG imports, Russia had been the largest single source of gas supply for Europe. However, it was Russia's invasion of Ukraine —followed by Gazprom reducing and then halting deliveries to Germany via Nord Stream— that signaled a tipping point in Europe's gas supply. The following interactive chart illustrates the fast-changing paradigm of European gas imports.

European power prices fell heavily in late August after European Commission President Ursula von der Leyen announced plans for an emergency intervention in electricity markets. This was the latest intervention in a long sequence of policy measures aimed at limiting the damage of unsustainable wholesale energy costs. This infographic captures the major decisions taken so far. Click to see the full size

Platts, part of S&P Global Commodity Insights, will launch daily spot cash differential assessments for JKM LNG physical cargoes Oct. 17, 2022. This follows industry feedback and data observed for an expanding proportion of floating price transactions taking place in the Asia-Pacific LNG spot market. Cash differentials, also known as premiums or discounts, represent the prices counterparties trade against benchmark values published. Platts will publish spot cash differentials for the daily JKM assessment (AAOVQ00), which will reflect the spread between the JKM assessment against three derivative assessments as below: LNG Japan/Korea Spot Crg DES (AAOVQ00) vs LNG Japan/Korea derivatives Balance-Month Next-Day (LJKMB00) LNG Japan/Korea Spot Crg DES (AAOVQ00) vs LNG Japan/Korea derivatives Pricing Month (LJKMO00) LNG Japan/Korea Spot Crg DES (AAOVQ00) vs LNG Japan/Korea derivatives Mo01 (LJKMO01) These cash differential assessments will reflect values at the close of the Asia LNG Market on Close assessment process at 4:30 pm (0830 GMT) in Singapore and will follow the Singapore publishing schedule. Please send all feedback, comments, or 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 to the public upon request.

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.

Europe's gas market enters Q3 2022 on the edge of a precipice, with curtailed Russian supplies prompting emergency plans, a first step towards rationing. In the power sector, efforts to reduce gas-for-power demand have been compromised by record-low nuclear availability and sub-par hydro resource. As a result, gas and power prices across Europe are more than four times higher year on year, while EUA carbon prices have climbed 47% over the same period. Related story: Europe on the brink going into Q3 as Russian gas cuts bite, prices surge Click here for the full-size infographic