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July 28, 2022
Issue 7  |  View Past Issues
Inside Gas
Published by Global Energy Monitor

Editor's Note

Inside Gas returns with a new expanded focus. The newsletter will be arriving in your inbox every week with coverage of the most significant developments affecting the global gas industry and highlighting the efforts of groups around the world working on gas-related issues.

The repercussions of the EU’s belated decision to free itself from dependence on Russian gas continue to play out globally. A regular drumbeat of new gas partnerships and deals reverberates every day now, though the officials involved can appear tone deaf at best. In trying to turn away from one despot who invades his neighbors, senior EU officials have chosen to deepen ties with the regime in Azerbaijan, which does the same. A success of sorts has, however, been achieved in Brussels with agreement reached on an EU-wide gas rationing regulation. This commitment may be put to the test even sooner than expected if Russian posturing over supply cutoffs intensifies further. 

A clear trend has emerged as a result of the market convulsions witnessed since February: drastically elevated import prices are exposing the shakiness of the “gas as bridge fuel” proposition for developing countries such as Pakistan, the Philippines, and others. Communities and local environments around the world, on all sides of the gas nexus, are bearing the brunt of the rush for more molecules as the climate breakdown timetable counts down. And together they are organizing on gas more than ever. 

Grieg Aitken

Features

Fossil fuel lending like there’s no tomorrow

A recent US$13.2 billion financing package for a proposed LNG export terminal in Louisiana demonstrates that big banks are still prepared to support the creation of “sacrifice zones” across the U.S. Gulf Coast, write Roishetta Ozane and Adele Shraiman in the Louisiana Illuminator

Half-baked Baku-Brussels gas deal

A new strategic energy partnership with Azerbaijan will have little impact on Europe’s short-term gas supply woes, while top EU officials heap more praise and legitimacy on an unsavory regime, writes Eldar Mamedov in Responsible Statecraft.

Developing world gas importers are being hung out to dry by global markets

Shorter five-year LNG supply contracts may help to offset Pakistan’s fuel shortage crisis, but domestic renewables are the best hedge against global LNG price volatility and supply insecurity, write Haneea Isaad and Sam Reynolds of the Institute for Energy Economics and Financial Analysis in The Diplomat.

Campaigns

U.S. groups’ lawsuit challenges federal permitting for Louisiana LNG terminal

Sierra Club and Healthy Gulf filed a federal lawsuit on July 19 requesting a review of a U.S. Army Corps of Engineers “dredge and fill” permit issued to the Driftwood LNG Terminal in Louisiana, at which initial site preparation work has been underway since March despite the promoter Tellurian’s failure so far to secure billions of dollars in bank loans and other project financing. The environment groups said in a joint statement that the Corps permit for the project “falls short of legal requirements to avoid and compensate for impacts to wetlands,” and that Driftwood would impact 718 acres of land and “permanently destroy” more than 319 acres of sensitive wetlands, which serve as natural barriers to storms and floods. (The Advocate, LNG Prime, Dangerous Driftwood)

Top News

Sky high prices, public pressure hampering LNG buildout in the Philippines: Only one of seven currently proposed LNG projects in the Philippines, Atlantic Gulf & Pacific Company’s import terminal in Batangas, is set to commence operations this year, with postponements and delays affecting other potential terminals in the archipelago. The continuing high level of global LNG prices is viewed as a major factor hampering the ambitions of project developers across southeast Asia. A further proposal in the Province of Bataan has also recently seen its public scoping process canceled by the authorities for the third time following concerns raised by local residents and civil society groups that the project promoter was proceeding in violation of environmental laws. (Natural Gas Intelligence, Philippine Movement for Climate Justice)

Compromise reached over EU gas rationing plan: Despite major fears of a rebellion from south-European member states, EU energy ministers have agreed on a 15% gas savings regulation which nonetheless provides exemptions and loopholes for a host of countries. The savings amount to a collective cut of 45 billion cubic meters (bcm) of gas over the next eight months and on a voluntary basis, which could become mandatory if the European Council declares an emergency situation. The compromise deal was reached just hours after Gazprom announced further maintenance work on its Nord Stream 1 pipeline which will further halve its gas flow to Germany from the 40% capacity level of recent weeks. Market reaction to the EU-Russia gas tug of war continues to be shrill, with future European gas prices reaching near record highs. An analyst at Canadian bank RBC commented to the Financial Times that U.S. government officials increasingly believe that over summer “Putin will probably seek to keep Europe in a state of perpetual panic by deploying a rolling cutoff strategy to prevent sufficient storage from being built.” (Euractiv, Energy Monitor, Financial Times)

Dutch-German legal action launched against drilling plans off North Sea island: The groups Deutsche Umwelthilfe, Mobilization for the Environment, and Clean Air East Friesland have together filed a lawsuit at the Court of The Hague against proposed new gas drilling in the North Sea off the island of Borkum. Earlier this year the Dutch government signed off on a proposal from energy company ONE-Dyas to install a new production platform 1.5 kilometers from the German sea border and in the immediate vicinity of the UNESCO World Heritage Wadden Sea and several Natura 2000 areas, with the aim of extracting 13 bcm of gas from 2024 at the earliest. (Deutsche Umwelthilfe)

Tensions mount in Ireland over fracked gas terminal proposal: Ahead of a final decision in the coming months to decide the fate of the Shannon LNG terminal, in planning since 2007, Irish media have depicted a potential “tense stand-off” in early August between local backers of the project and participants to a six-day protest event being organized by Climate Camp Ireland close to the proposed site of the fracked gas terminal. Ireland’s deputy prime minister Leo Varadkar has stoked controversy over the summer by defending his intention to meet with U.S. billionaire Wesley Edens, owner of the project promoter New Fortress Energy, while the planning application procedure for Shannon is ongoing. (Irish Independent, Irish Independent) 

Eni advancing in Mozambique, TotalEnergies stuck: As Eni gets ready to start up its Coral South floating LNG export terminal in the Rovuma Basin by this October, there has been unconfirmed speculation that the Italian major is now considering the possibility of deploying a second floating liquefaction vessel in Mozambique. The company has not confirmed or denied the rumors, stating only that with its partners it is “actively evaluating all technical solutions to allow timely production of Mozambique’s considerable gas resources.” TotalEnergies’ US$20 billion Mozambique LNG project remains under force majeure, and the company has said it is unlikely to restart construction this year due to the continuing precarious security situation in Cabo Delgado Province. (Upstream, Africa Intelligence) 

Portugal and Spain move to plug Europe’s gas connection gap: Separate developments are moving forward aimed at addressing the EU’s lack of gas infrastructure connectivity from the southwest to the heart of the continent, a vulnerability which has provoked extensive debate since Europe’s gas crisis intensified following Russia’s invasion of Ukraine. Talks have been advancing this summer between the Portuguese, German, and Polish governments about the feasibility of trans-shipping LNG cargoes from Portugal’s Sines LNG import terminal within 6 to 12 months, with a possible capacity expansion at Sines also under discussion. Spain’s previously mothballed El Musel LNG terminal in Gijon also looks set to receive full government approval to enable it to bring 8 bcm per year (bcm/y) of import capacity online in the first half of 2023, with onward shipment of LNG to other European ports to then follow. (VesselFinder, Upstream) 

The Gas Graph


(Via Bloomberg)

News

Bangladesh: Utilities have started power rationing due to a gas shortage, as the government has announced it is not able to afford to buy hugely expensive LNG cargoes.

Cyprus: The government and Chevron have restated their commitment to develop the 4.5 trillion cubic meters offshore Aphrodite gas field to supply Egypt and European markets. 

Czech Republic: State-owned energy company ČEZ has jointly booked 7 bcm of capacity with Shell Western LNG at Gasunie's under construction Eemshaven FSRU Terminal in the Netherlands. ČEZ has also secured pipeline capacity from Eemshaven to allow the Czech Republic to import up to 3 bcm/y of LNG, roughly one-third of the country's gas consumption.

Egypt: LNG exports to Europe ramped up in the first six months of 2022 to 72% of Egypt’s overall exports, and may increase further following a preliminary agreement signed in June with the EU and Israel. 

Hungary: Minister of Foreign Affairs and Trade Péter Szijjártó travelled to Moscow to directly request the supply of an additional 700 million cubic meters of Russian gas on top of a long-term supply contract arranged with Gazprom in September last year.

Italy: During a visit to Algiers, Prime minister Mario Draghi confirmed a gas deal involving an additional 4 bcm, which sees Algeria dislodging Russia as Italy’s biggest gas supplier.  

Lithuania: Klaipėdos Nafta is technically assessing the potential to almost double the regasification capacity of its floating LNG import terminal in the Baltic Sea.

Mongolia: Prime minister Oyun-Erdene Luvsannamsrai has told the Financial Times that construction of the proposed 2,600km Power of Siberia 2 pipeline, to deliver gas from western Siberian fields to China via Mongolia, will start in 2024.

Nigeria: A senior European Commission energy official has claimed that the 14% of total LNG import volumes which the EU currently receives from Nigeria can be more than doubled in the short-term. 

Papua New Guinea: Total Energies has said it is advancing technical work on its delayed US$13 billion LNG export terminal in Caution Bay.

“Everybody has pretty much given up on ever doing another long-haul pipeline anywhere outside of Texas and, maybe, Louisiana,” 

said 
Bradley Olsen, lead portfolio manager at energy infrastructure company Recurrent Investment Advisors, describing the investment climate for the U.S. gas pipeline sector.

Companies + Markets

Cheniere inks two long-term supply deals with China and Thailand: Taking the number of LNG deals signed between US and Chinese companies in the last year to well over a dozen, the Houston-based LNG company has agreed a 24-year contract to supply Petrochina with up to 1.8 million metric tons per annum (mtpa) from 2028, with initial supplies beginning in 2026. PTT Global LNG, a subsidiary of Thailand’s biggest state-owned energy company, has agreed the country’s first deal to buy LNG directly from the US. Cheniere will supply it with 1.0 mtpa from 2026 for 20 years. (Houston Chronicle, Cheniere Energy)

Unclear prospects for Novatek’s Arctic LNG 2 as sanctions bite: The refusal, in compliance with western sanctions against Russia, by US energy services firm Baker Hughes to supply gas turbines to Novatek’s Arctic LNG 2 project in June has thrown completion of the huge three train terminal into doubt. The onus has fallen instead on domestic manufacturers to supply an array of complex technical equipment, some of which is reportedly already experiencing delays in delivery and is likely to be substantially more expensive. (Upstream)  

Japanese LNG player optimistic amidst turmoil: INPEX is remaining bullish about its involvement in multiple markets in spite of uncertainties caused by Russia’s invasion of Ukraine and climate change-related decarbonization efforts, and is considering involvement in both new LNG projects and the expansion of its existing interests. Key markets going forward, according to its president and CEO Takayuki Ueda, will continue to be Asia, Australia and the United Arab Emirates, as well as potential growth in the US, where the Japanese government has been signaling renewed interest to provide public finance support for new export terminal projects. (S&P Global) 

Energy consultancy predicts unprecedented decline in Chinese LNG imports this year: Picking up on a 5% year on year fall in Chinese gas demand in the second quarter of 2022, analysis from Wood Mackenzie is tipping China to relinquish its status as the world’s top LNG importer by year end. The consultancy is forecasting a 14% decrease (69 mtpa) which it says would be the sharpest drop since China started importing LNG in 2006. The key drivers behind the import decline are weakening demand, increased domestic gas production, energy security concerns which have reinforced coal’s position in the Chinese energy mix, and extremely high spot LNG prices which more exposed European buyers have been prepared to stomach. (Wood Mackenzie)

Second fundraising round for Baltic coast energy hub: Belgium’s Tree Energy Solutions (TES) has raised €65 million to develop its “green energy hub” project, including up to 20 bcm/y of LNG import capacity, in the German port of Wilhelmshaven. Among the investors in the hydrogen start-up company are HSBC, Unicredit and the German utility E.ON. TES said it is aiming to take a final investment decision on the Wilhelmshaven hub by the end of 2023. (LNG Prime, Gem Wiki)

European Commission approves first public billions for hydrogen projects: Under the “Important Projects of Common Interest” scheme, aimed at enhancing the EU’s hydrogen value chain, in mid-July the European Commission announced €5.4 billion in funding for 41 hydrogen projects. This initial funding is earmarked to support 35 companies in 15 member states involved in hydrogen generation (21 projects), fuel cells (17 projects), storage, transportation and distribution (nine projects), and end-user applications (13 projects). (European Commission, ICIS)

“Looking from a short term view, we are in a situation, where we see mixed moves toward decarbonization because of climate change and inevitable dependency on hydrocarbons for the time being,"

said INPEX of Japan’s president and CEO Takayuki Ueda, referring to the recent shift to hydrocarbons from some European countries in the wake of the Ukraine crisis.

Resources

False fix: The hidden health impacts of Europe’s fossil gas dependency, Health and Environment Alliance, Europe Beyond Coal, Ember, Food & Water Action Europe, Centre for Research on Energy and Clean Air, May 2022. (PDF)

This 16-page briefing calculates €8.7 billion in health costs caused by air pollution from the burning of gas for power and heat generation across the EU-27 and the UK in 2019 and finds that the heaviest health burden fell on Italy, Germany, the UK, France, the Netherlands, and Spain.

Africa Gas Tracker, Global Energy Monitor, July 2022.

This open access dataset and map provides continent-wide information on projects in development involving 65 gigawatts of gas plants, 75 million tonnes per annum of LNG terminal capacity, and 22,600 kilometers of gas pipelines.

Gas production in Senegal: Dirty deals for Germany’s energy hunger, Deutsche Umwelthilfe, urgewald, July 2022. (PDF, in German; a media release on the fact sheet is here.)

This 6-page fact sheet outlines how German government intentions to subsidize plans for gas export infrastructure expansion off the coast of Senegal clash with Berlin’s commitments to curb state financing for new fossil fuel projects and its current efforts to decarbonise its public financing.  

Europe Gas Crisis 2022, Global Energy Monitor.

This resource page provides key reference material and rolling coverage of national and Brussels-level developments as Europe’s gas crisis shows no signs of easing.