Is a new gas deal with Gazprom Azerbaijan’s way of meeting its obligations to Europe?
Following a much heralded agreement between Baku and Brussels to increase Caspian gas flows to the EU as part of the bloc’s Russia diversification strategy, doubts have persisted over where the extra gas would come from, and now Gazprom is sending significant new volumes to Azerbaijan, writes David O’Byrne in Eurasianet.
Gas lobby blocks progress at climate summit
A “phase down” of all fossil fuels was on the table for inclusion in the final COP27 deal, but was knocked down in favor of an increase in “low-emission and renewable energy” to make up part of countries’ climate plans, writes Emily Atkin in Heated.
China presses on with all-of-the-above energy strategy for now
With security remaining its top priority, the recent 20th Party Congress confirmed that the expansion of oil and gas reserves and production will continue to be goals within China’s all inclusive energy mix, write Michal Meidan and Anders Hove for the Oxford Institute for Energy Studies.
A gas price cap that doesn’t cap
Eager to be seen to be doing something, the European Commission’s proposal for a gas price cap mechanism is largely symbolic and will allow some Russian gas imports to keep flowing for at least two more years, writes Ben Aris in Business New Europe.
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Campaigners celebrate shelving of San Miguel Corporation gas plant and LNG terminal in the Philippines
A string of recent successes by an alliance of Filipino communities and groups resisting major gas infrastructure buildout across the archipelago continues to grow following the announcement by San Miguel Corporation that one of its subsidiaries will not be pursuing environmental clearance for a 300 megawatt LNG combined cycle power plant in San Carlos City, Negros Occidental. The project, with estimated costs of P18.5 billion (US$325 million), would have also involved the construction of an LNG import terminal facility adjacent to the power plant. “This is a victory for Negrosanons, who have made their voice clear that they preferred renewable energy to LNG in sourcing their power for the island,” said Avril de Torres, deputy executive director of the Center for Energy, Ecology, and Development. (Eco-Business, Rappler)
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“High prices will have to compress demand largely every month of next summer. It’s not a good thing – it’s an absolutely awful thing for European businesses and that’s the genesis of the recession,”
said Russell Hardy, chief executive of international energy trader Vitol, on the challenging outlook for Europe’s gas market and economy.
Doubts emerge over Colombia’s gas phaseout pledge: Despite talking tough at COP27 on the need for wealthy nations to “create a global plan to disconnect hydrocarbons immediately,” there are signs that Gustavo Petro Urrego and his government are rethinking election pledges from earlier this year to halt new oil and gas exploration projects. Colombia’s finance minister José Antonio Ocampo, who differs from President Urrego on the speed at which the state’s gas exploitation and reliance should end, has told The Financial Times that there will first have to be an assessment of 180 existing oil and gas contracts before a decision on stopping further exploration projects can be made. (The Financial Times, BBC)
Japanese government warns that tight global LNG supply situation is set to intensify until 2026: A survey of Japanese companies released by the trade ministry METI has found that long-term LNG supply contracts that start before 2026 are sold out, raising concerns that the international scramble for new supplies will intensify and that spot market prices, currently three times higher than long-term contract prices, may go higher still. METI is also forecasting that if Russian pipeline gas to Europe is cut completely, this could result in a global shortage of 7.6 million tons of LNG in January 2025, the equivalent of one month’s worth of imports to Japan. (Bloomberg)
Costs balloon for new floating terminals in Germany: Controversial planning shortcuts for five new floating storage and regasification units (FSRUs) along Germany’s North Sea coast have now been joined by a massive cost overshoot, as confirmed by the Federal Ministry for Economic Affairs and Climate Action. The official estimate from earlier this year of €2.94 billion (US$3 billion) for the purchase and maintenance of the FSRUs has more than doubled to €6.56 billion in total. Germany’s parliamentary budget committee is reported to have already approved the additional money required for the terminals. (Reuters)
Nordic banks step on the Arctic oil and gas financing: “Banking on thin ice,” a new report from a group of European NGOs, has exposed how ten major Nordic banks are maintaining significant levels of financing for companies such as Aker BP and Equinor that are expanding oil and gas production in the fragile Arctic region. Norway’s DNB, Sweden’s SEB, and Finland’s Nordea were the heaviest lenders to the sector, extending, respectively, US$9.5 billion, US$4.4 billion and US$3.2 billion in loans since July 2020. The report also notes that while this year Sweden’s largest bank, Handelsbanken, has announced an end to financing for companies expanding oil and gas extraction, the region’s other banks have so far failed to clamp down on corporate activity that the International Energy Agency, among others, has said has to stop in order to limit global warming to 1.5°C. (BankTrack, BankTrack) [Pdf]
Russia threatens to cut gas flows to Europe via Ukraine next week: Gazprom has threatened to cut its gas flows to Europe via Ukraine as soon as next Monday, claiming that some pipeline gas flows destined for Ukraine’s neighbor Moldova were being blocked and hoarded by Kyiv. The Gas Transmission System Operator of Ukraine has denied the allegations, saying that all the gas volumes bound for Moldovan consumers have been transferred “in the full amount.” European gas prices rose 4% in reaction to the threat which, if carried out, would see the TurkStream pipeline running through Turkey to Bulgaria become the last remaining transit route in operation for piped Russian gas to the EU. (CNN, Al Jazeera)
Major pipeline expansion OKed by U.S. federal agency: A 150 million cubic feet of gas per day expansion of TC Energy’s Gas Transmission Northwest pipeline between Idaho and Oregon has received environmental approval from the U.S. Federal Energy Regulatory Commission (FERC). In spite of challenges from environmental groups that expansion of the project, operating since 1961, will lead to increased greenhouse gas emissions, FERC concluded that any adverse impacts would be “temporary or short-term” and not significant. (U.S. FERC, Politico, GEM.wiki)
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Nigeria: Shell has broken ground on a gas development and distribution project, scheduled to come online in 2024, in Oyo, Nigeria’s most populous state.
Pakistan: The foreign ministry and petroleum ministry have written to Moscow to express an interest in buying cheap oil and gas, according to sources.
Poland: LNG shipments into the Świnoujście LNG terminal have increased by almost 70% so far this year, with more than half of the cargoes coming from the U.S.
UK: Industry group Offshore Energies UK has warned that UK oil and gas companies are facing a bill of US$24 billion to decommission roughly 2,100 unused wells and platforms in the North Sea over the next ten years.
U.S.: A recent Texas regulators’ decision to approve Entergy’s Orange County Advanced Power Station gas plant and remove a judge’s recommended cost cap has drawn criticism that conservative officials are not concerned about lowering prices or pollution impacts.
U.S.: An earthquake in Texas, the third largest in the state’s history, has drawn attention to the spike in recent years of seismic activity in the Permian Basin, which scientific studies are linking to oil and gas operations.
U.S.: A massive leak at an Equitrans Midstream gas storage well in Western Pennsylvania was finally sealed shut by the company after two weeks of venting an estimated 1.4 billion cubic feet of methane.
Uzbekistan: The country’s gas export volumes have been slashed in an effort to overcome widespread domestic power outages.
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Norway’s fourth Arctic field to start producing in 2026: Equinor, together with partners Petoro, Wintershall Dea, and Shell, are investing US$1.4 billion to develop the Irpa field in the northern reaches of the Norwegian Sea to supply European markets. Production of the field, which has an estimated 20 billion cubic meters of recoverable reserves, is scheduled to start in 2026 and last until 2039. Separately, Equinor and Shell have reacted negatively to the UK government’s decision to increase its windfall tax (the “Energy Profits Levy”) on North Sea producers from 25% to 35%. Both companies said they were reviewing their UK expansion plans as a result, including Equinor’s Rosebank oil and gas project for which a final investment decision has been expected in the first quarter of 2023. (Reuters, Reuters)
Gas market with the U.S. set to grow but LNG exporting remains a big challenge for Mexico: Guillermo Turrent, a former senior official at Mexico’s power utility Comision Federal de Electricidad who spearheaded the development of more than 5,000 gas pipelines between the U.S and Mexico over the last decade, believes that gas will play an increasing role in the country over the next ten years despite continued reliance on fuel oil hampering progress. Turrent points to the greenlighting last year of a US$5 billion extension of the Sur de Texas pipeline as a statement of intent from the Mexican government. However, hopes of creating an LNG export hub are likely to struggle to attract financing, believes Turrent, on security of supply grounds as inevitable domestic supply emergencies will always make LNG contracts with overseas buyers a very risky prospect. (Energy Intelligence)
China’s Sinopec signs US$60 billion LNG deal with QatarEnergy: Following a string of long-term supply contracts announced in the last 12 months, China has made another major LNG move by tying up a 27-year sales and purchase agreement for 4 million tons per year (mtpa) from QatarEnergy’s North Field East project starting in 2026. In January, state-owned Sinopec began receiving 2 mtpa from QatarEnergy under a ten-year LNG deal signed in March 2021. (Bloomberg, LNG Prime)
Another German floating terminal steams ahead thanks to glaring approval gaps: Germany’s only privately financed floating LNG terminal project, the Lubmin FSRU terminal being developed by Deutsche ReGas, has been granted an exemption from tariff and network access regulation for 20 years by federal authorities. Already under construction, the first phase of the Lubmin facility is set to introduce 4.5 billion cubic meters per year of new import capacity as soon as next month. German environment and consumer group Deutsche Umwelthilfe has warned that the Neptune FSRU, earmarked for Lubmin and being provided by TotalEnergies, will shortly arrive in the small German port before the completion of a mandatory approval process. (LNG Prime, Deutsche Umwelthilfe [German])
Lakach field and floating LNG project move forward in Mexico: U.S. LNG company New Fortress Energy (NFE) has finalized agreements with state-owned energy company Pemex to develop a floating LNG export terminal connected with the country's Lakach offshore gas field. NFE said it will send its 1.4 mtpa Sevan Driller FLNG unit, currently undergoing conversion in a shipyard in Singapore, to the Lakach field. (Reuters, GEM.wiki)
“We are not totally convinced about the benefits and advantages that can be achieved by bundling the gas procurement on a European level,”
said a spokeswoman for RWE, adding that the German utility is urging government officials to support long-term gas contracts.
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International Gas Contracts, Oxford Institute for Energy Studies, November 2022. (Pdf)
This 22-page paper outlines the fundamentals of contract agreements for both pipeline gas and LNG, and identifies the key challenges for international gas contracting: flexibility, security, decarbonization, as well as the market’s refocus on long-term LNG contracting as a result of Russia’s invasion of Ukraine.
EU Energy Deals Tracker, European Council on Foreign Relations, November 2022.
This online tool provides details of intergovernmental and private sector energy agreements made between EU27 countries and the rest of the world since January 2022.
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