Interactive: Russian gas market share in Europe on the wane as LNG, Norway step up

December 14, 2021 8:30 am - 3:30 pm CST Online Pricing: Complimentary Where energy connects The South American Virtual Forum offers attendees an in-depth look at the South American commodities markets, with a particular emphasis on Argentina and Colombia. We’ll examine oil and gas, LNG, biofuels, petrochemicals , and the impact of the energy transition on these industries. Join us from the comfort of your desk, to explore the issues impacting the markets today, and projections for the future, in topical sessions featuring Platts’ methodology, assessments, and pricing. What's included You can expect live presentations, real-time interaction, and the opportunity to engage in questions and answers with the speakers throughout, right from your desk. Key topics we'll cover -Latin American economic overview-South American upstream-Refined products markets-Shipping and freight markets-Petrochemicals demand and outlook-Biofuels and biodiesel in regional markets-Natural gas and LNG outlook-South American metals outlook  REGISTER NOW MORE INFO

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.

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

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

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.

As part of its commitment to open and transparent pricing and product specifications, Platts, part of S&P Global Commodity Insights, would like to invite feedback on its Global LNG specifications guide, specifically the guidelines described in the methodology guide posted online at https://www.spglobal.com/commodityinsights/PlattsContent/_assets/_files/en/our-methodology/methodology-specifications/global_lng.pdf. Platts reviews all methodologies annually to ensure they continue to reflect the physical markets under assessment, and regularly assesses the relevance of methodologies through continuous contact with the market. Feedback on methodologies is always welcomed by Platts. 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 upon request.

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?

The new geopolitical scene is shaking up the outlook for LNG globally. The club of LNG suppliers has greatly expanded, with the US and others looking to increase their export capacity. This has created an environment for more favorable prices and contracts for importers as the desire for energy transition and energy security is boosting global demand, including in countries that have historically not had natural gas, according to AG&P CEO Joe Sigelman . AG&P is a private LNG and infrastructure solutions platform based in Singapore. The company is focused on fast-tracking development of LNG import terminals, and was able to turn around a major import facility in the Philippines from conception to commissioning in 17 months. Sigelman joined senior editor Jasmin Melvin on the podcast to give his take on the future demand picture for LNG and share his thoughts on how geopolitics and US domestic policies are playing into business decisions for those operating in the sector. Stick around after the interview for Chris Van Moessner with the Market Minute, a look at near-term oil market drivers. This podcast was produced by Jasmin Melvin in Washington and Jennifer Pedrick in Houston. Related content: Japan, US back 'initiative' to help Asia wean itself off Russian energy Midstream eyes adding Haynesville, Gulf Coast gas delivery capacity on bright LNG demand prospects Freeport seeks 26-month extension at FERC, well ahead of construction deadline 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).

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.