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May 23, 2024
Issue 83  |  View Past Issues
Inside Gas
Published by Global Energy Monitor

Editor's Note

The comings, goings, and delays in global gas keep on coming. Senior Chinese officials have provided forecasts about an expected peak in the country’s demand for gas by 2040. Of course, long-term predictions have to remain precariously bullish for industry incumbents faced with the plunging cost of renewables. It's a trend taking effect globally and increasingly turning the heads of policymakers willing to stand up to propaganda and industry desire for publicly-backed fossil fuel handouts.

An inter-state tussle over an EU-funded LNG terminal in Cyprus involving Chinese contractors continues to play out, a stand-out example of the gas-driven energy transition that is going wrong. Another is Germany’s attempt, via untried hydrogen, to navigate and ameliorate — some say greenwash — new-found dependency on U.S. gas imports while serious technical and financial questions continue to go unanswered.

Grieg Aitken

Features

Without a carbon price, Australian gas industry’s CCS hype is a mirage

Buoyed by the newly released national gas expansion strategy, Australian companies are bullishly pointing to the potential of carbon capture and storage. The trouble is, the country’s CCS track record is abysmal and there’s no Asia-Pacific carbon pricing framework in place to make the technology financially viable for the region’s exporters and importers, writes Clyde Russell in Reuters

“Everyone needs electricity. Not everyone needs gas.”

Despite recent report findings that ballooning U.S. gas utility spending on new infrastructure threatens to burden millions of customers with higher bills, there is growing evidence that state utility regulators are pushing back on growth plans that were previously waved through, writes Nicholas Cunnningham in Gas Outlook

China is rightly dragging its feet on Russia’s Power of Siberia 2 pipeline

A deal on the 2,000 mile project remained elusive after the latest meeting of the Chinese and Russian presidents, and with China transitioning to renewable energy and strategically diversifying gas imports, it may be starting to become one pipeline too far for Beijing, writes Aiqun Yu in the South China Morning Post

South Korea’s doubling down on LNG is misguided

The government has been seduced by the “bridge fuel” myth and is investing massive amounts of public funding into new LNG projects at home and abroad when its own projections show a dramatic decrease in gas demand over the next ten years, argues the Seoul-based nonprofit organization Solutions for Our Climate in Grist

Top News

U.S. Justice Department urged to investigate industry’s deception on climate change: Following a three-year congressional investigation into whether major oil and gas companies and their trade groups deceived the public about climate change, U.S. lawmakers have formally asked the U.S. Department of Justice (DOJ) to look into potential legal breaches from entities including ExxonMobil, the American Petroleum Institute, Shell, and BP. The request, led by U.S Senate budget chairman Sheldon Whitehouse and democratic congressman Jamie Raskin, guided by a 65-page report documenting fossil fuel firms’ alleged malfeasance, is not expected to gain sufficient political backing in Washington’s political circles before this autumn’s election. The DOJ, however, has not commented on the approach. (Bloomberg, Axios)

No plain sailing for EU restrictions on Russian LNG exports: European diplomats are reportedly up against time in a bid to gain the required unanimous approval from EU member states by the end of June for a fourteenth round of sanctions against Russia that would include a ban of transshipments of Russian LNG to third countries. The proposed measures, aimed at banning Russia’s access to European import terminals for reloading LNG to then export the fuel to non-EU countries, have drawn concerns that they could facilitate more Russian gas remaining in the EU. Belgium, France, and Germany are among the countries that have asked for European Commission assessments on whether a ban on LNG transshipments will impact the Russian economy more than the EU. A decision on the move is scheduled for an EU Council meeting on June 27-28, with the risk being that pro-Moscow Hungary takes over the Council presidency from July 1. (Reuters)

“There is no shipwreck” — dispute between Cyprus and China escalates over troubled import terminal: Despite a direct intervention by Cypriot president Nikos Christodoulides, who held a two-hour meeting with Chinese ambassador Liu Yantao to try to resolve the ongoing dispute over the long-delayed floating import terminal at the port of Vasilikos, no headway appears to have been made. While maintaining that the project remains on course, even though the floating storage and regasification unit Prometheas is still in Shanghai, Christodoulides told reporters that “there is no shipwreck” as concerns the deal. With the China Petroleum Pipeline company already engaged in an arbitration case in London where it is demanding over €200 million (US$216 million) in compensation from the Cypriot side, the Chinese construction consortium also issued a stern statement that accused the Cypriot Natural Gas Infrastructure Company (ETYFA) of radically departing from the terms of the original construction contract. Instead of just the construction of an import terminal, the Chinese party claims that ETYFA insisted on the simultaneous construction of an LNG export terminal, a much more expensive and time-consuming undertaking. (Cyprus Mail, Cyprus Philenews, Cyprus Philenews)

Doubts looming large over Europe’s hydrogen hype: “There has not yet been any measurable progress in the construction of hydrogen-ready, gas-fired power plants.” That’s the view of Eric Heymann, an economist from the research team at Deutsche Bank, Germany’s top commercial bank. It’s a view confirmed by the fact that a recently opened gas plant in the German city of Leipzig, which is being touted as the first fully hydrogen-capable power plant, will not be carrying out its first commercial tests with hydrogen before 2026. A co-development between the city’s utility and Siemens Energy, and the first of at least 20 such projects being lined up in the country with state support backing estimated at €20 billion (US$21.6 billion), the plant will initially rely on trucks delivering the fuel. That’s before — and many uncertainties remain — highly ambitious government-backed plans are realized to import liquid ammonia into a North Sea coast LNG terminal currently under construction. A further hurdle is finding a way to transport converted hydrogen to Leipzig. “The German government is making a risky bet here,” says Jonathan Barth, spokesperson of the German Energy Independence Council. “Hydrogen should be limited to no-regret applications.” Delegates at a recent hydrogen industry conference in the Netherlands also expressed concerns about slower-than-expected sector development amid a dearth of final investment decisions (FIDs) for hydrogen projects. The need to whip up demand for hydrogen via government action is now seen as urgent by the industry, and so too, according to a senior official from the industrial gas firm Linde, is removing blue hydrogen’s “stigma” in Europe. (Bloomberg, Argus)  
  
Total boss confirms some progress on Mozambique LNG as vessel delivery date slips: TotalEnergies’ CEO Patrick Pouyanné has said he is “a little concerned” about a recent insurgent attack on the city of Macomia in Cabo Delgado province but that security in the north of the province close to the company’s largely stalled US$20 billion LNG export project was “well under control.” Macomia lies roughly 225 kilometers south of the coastal town of Palma, which is close to the project site on the Afungi peninsula. Pouyanné, who was meeting with Mozambique’s president Filipe Nyusi in the Rwandan capital of Kigalia, once again refused to be drawn on a specific timetable for formally restarting construction work on the project, though satellite imagery suggests there has been significant work underway at the site since December last year, a point confirmed by the CEO. Following reporting earlier this year that investment deadlines were slipping with South Korean shipbuilders for 17 newbuild LNG carriers essential to the project, new agreements with HD Hyundai Group and Samsung Heavy Industries are said to have been reached. Delivery dates for the carriers have been penciled in for 2028 and 2029, suggesting that the most current known objective of a 2027 project start is unlikely to be achieved. (Zitamar News, Upstream [paywall])

The Gas Graph


Via the Daily Energy Report, showing a gradual increase in Australian exports to China since 2022, while Japan’s imports have declined.

News

Australia: A federal review found that the legal center Environmental Defenders Office did not breach the terms of an AU$8.2 million (US$5.4 million) grant from the Canberra government during a court case brought against Santos over its plans to lay an undersea gas pipeline past the Tiwi Islands off the Northern Territory coast. 

China: Another strong month of LNG imports in April — 6.22 million tonnes — took the country’s January–April total imports to 25.91 million tonnes, a 22.7% year-on-year rise for the period. 

UK: A new study by Imperial College London has found that wind power was Britain's largest single source of electricity in the six months to April, the first time this has happened for two consecutive quarters, with onshore and offshore turbines supplying 20% more electricity than gas-fired power plants in the period. 

U.S.: The planned start-up date for the Golden Pass LNG export facility in Texas is likely to be further delayed beyond 2025 after Zachry Holdings, the lead contractor building the US$10 billion terminal co-owned by QatarEnergy and ExxonMobil, filed for bankruptcy and will exit the project. 

Uzbekistan: Oil and gas company Saneg has become the first company in Central Asia to register a methane emissions reduction project and is hoping to achieve total greenhouse gas reductions of approximately 410,000 tonnes of CO2 equivalent per year by the end of 2024.

Companies + Markets

China’s gas demand projected to peak in 2040, says state-owned energy company: Domestic gas consumption, which stood at just under 400 billion cubic meters (bcm) for the calendar year 2023, is expected to peak at 700 bcm in 2040, according to Xie Xuguang, senior economist at China National Offshore Oil Corporation (CNOOC). The company’s projection broadly aligned with that of Li Yalan, the former head of Beijing Gas Group and current president of the International Gas Union, who foresees an annual demand level in 2040 of at least 650 bcm and, potentially, higher if gas prices remain below US$10 per million British thermal unit (MMBtu). The comments at a liquefied fuel shipping conference in Chongqing came as North Asian spot LNG prices rose to around US$11.5 MMBtu, their highest level since late-December 2023, on the back of still tight global supply conditions compounded by supply disruptions at export facilities in Malaysia and Australia along with a demand boost for LNG across Southeast Asia due to a punishing heatwave. Competition for cargoes with Asian markets and continuing concerns about geopolitical and supply risks saw European LNG prices also hit a five-month high on May 21. While European gas storage stocks remain high for this time of year, “[the] market seems tight,” commented a Europe-based LNG trader, “and any news can push prices to spike.” (Argus, Bloomberg, S&P Global)

Indonesia confident of further production boosts despite financing challenges: Indonesia is aiming for a 29% increase in its oil and gas sector investments this year, according to the head of the national regulator SKK Migas, with 40% of the anticipated US$17 billion spending to come from BP, Eni, and ExxonMobil. The country is seeking to address a long-term decline in production and the latest projections follow a 13% rise in sector investments in 2023. Dwi Soetjipto, chairman of SKK Migas, said the continuing drive was taking place in spite of tougher decarbonization requirements from foreign banks and doubts over the financial feasibility of carbon capture technology. Gas extraction is expected to outstrip oil this year and rise by 8% as a result of new projects entering production. A FID for Eni’s significant Geng North field off the coast of East Kalimantan is expected in the next few months. (Reuters, GEM.wiki)

Majors’ climate plans drastically failing, finds new assessment: The fourth annual Big Oil Reality Check published by the research and campaign nonprofit group Oil Change International (OCI) has found the eight European and U.S. oil and gas majors are continuing to comprehensively fail to align with international agreements to phase out fossil fuels and to limit global warming to 1.5C above pre-industrial levels. Based on a rating of the companies’ climate plans against a set of ten criteria, Chevron, ConocoPhillips, and ExxonMobil stood out as the worst performers, receiving the lowest assessment — “grossly insufficient” — on all nine criteria. Only Italy’s Eni was found to be “partially aligned” on one count, OCI’s metric looking at the setting of absolute targets to reduce all emissions, while no other company received an assessment above “insufficient” on any metric. Analysis of the companies’ current oil and gas extraction plans also shows their combined potential to drive a global temperature rise of more than 2.4C. With six of the companies analyzed still explicitly signaling plans to increase oil and gas extraction, the study calculates that as a whole the companies are on track to use 30% of the world’s remaining carbon budget to keep the global average temperature rise to 1.5C. (Oil Change International, The Guardian) 

U.S. gas plant financing remains steady as solar charges ahead: Financing for gas power plants in the U.S. has been on a steady rise over the last four years, according to Proximo Intelligence data, from US$7 billion in 2020 to US$9.6 billion in 2023. The market intelligence provider points out that 12 and 15 individual financing deals in 2020 and 2021, respectively, climbed to 28 in both 2022 and 2023, a trend that it attributes to more refinancings and acquisition periods in the latter period rather than financing for new projects. At the same time, financing for new solar projects in the U.S. hit US$35.5 billion in 2023 alone. “The fact that the amount of project finance activity has changed very little over the last few years indicates the extent to which gas-fired plants remain crucial to US electricity generation,” Proximo notes. “While renewables may be outpacing gas-fired plants, the surge in renewables financings has not yet coincided with a decline in financings for gas-fired projects.” (Proximo Intelligence)

ADNOC makes global ambitions clear with two LNG acquisitions: In quick succession, the Abu Dhabi National Oil Company (ADNOC) has announced two investments in the U.S. and Mozambique as it moves to expand its global LNG portfolio. Following recent comments from NextDecade, the developer of the Rio Grande LNG export terminal, that it was experiencing financial difficulties, the United Arab Emirates’ main oil company has made its first acquisition in the U.S. by buying an 11.7% stake in Phase 1 (Trains 1-3) of the Texas-based project. ADNOC has also secured a 20-year supply agreement with NextDecade for 1.9 million tons per annum (mtpa) of LNG from the project’s fourth production train for which a FID is still to be taken. One day later, ADNOC announced that it was acquiring a 10% stake from the Portuguese company Galp in Mozambique’s Area 4 concession in the Rovuma Basin. This investment gives the company access to the already operating 3.5 mtpa Coral South LNG export project and two other LNG projects — the proposed 3.5 mtpa Coral North project and the 18 mtpa Rovuma terminal being spearheaded by ExxonMobil. (Gulf News, Reuters, Bloomberg) 

Resources

U.S. gas industry claims are false, Oil Change International, May 16, 2024. (An accompanying data sheet is available here)

This analysis uses the International Energy Agency’s 2024 global methane emissions data to show that, contrary to U.S. industry claims of producing the cleanest gas in the world, for the methane emissions intensity of oil and gas production the U.S. ranks 19th among the top 50 oil and gas-producing countries.