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May 31, 2024
Issue 84  |  View Past Issues
Inside Gas
Published by Global Energy Monitor

Editor's Note

Climate change-induced extreme weather has been affecting Asian LNG import markets and may take its toll on U.S. exporters in the coming months. Diversionary measures were required for one tanker in the Bay of Bengal as an intense cyclone slammed Bangladesh and India this week. At the same time, two months of record temperatures across the region have driven up prices for the fuel. New analysis shows that plans to deepen Southeast Asia’s dependency on emissions-intensive imports can still be reversed if the region’s highly feasible solar and wind potential receives financial and regulatory backing. 

A super-charged hurricane season is looming in the U.S. and is likely to pose challenges for the LNG industry in Texas and the Gulf Coast. Weather events appear, though, to be the least of a beleaguered Louisiana terminal developer’s worries following a sale of assets that looks more like a stay of execution than a credible lifeline. Two comment pieces dig into Russia’s gradually expanding gas strategy and diplomacy in Central Asia and how this is shaking up gas politics in the region. 

Grieg Aitken

Features

Australia’s net zero target is being lost in accounting tricks, offsets, and more gas

The energy spent by the Labor government on manipulating the data related to how much carbon the country’s land use sector is storing has to be redeployed into developing concrete measures that will rapidly cut emissions, writes Bill Hare from Climate Analytics in The Conversation.

Moscow’s long gas game

A lot of attention continues to be devoted to the stuttering Power of Siberia 2 project between Russia and China, but the Kremlin is content to accumulate new export pipeline volumes to Central Asia in the short to medium term while the big prize is direct access to the Indian market, writes Chris Weafer in Business New Europe.

Russia is pushing Turkmenistan out of the gas market

Sitting on top of some of the world’s largest gas reserves, normally passive Turkmenistan appears to be reacting to Russian moves in Central Asia with a newly ramped-up marketing and sales drive, writes Bruce Pannier in Business New Europe

The dangers of the Black Sea dash for gas

Plans to extract major reserves off the coasts of Bulgaria and Romania are being pushed through despite demand and financial concerns. In the case of the Neptun Deep field, these plans would result in lifetime carbon emissions greater than those currently generated by Romania’s coal plant fleet, write Ventzeslava Kojouharova, Raluca Petcu, and Ido Liven for CEE Bankwatch Network

Top News

Cyclone disrupts Bangladesh’s LNG imports as U.S. Gulf Coast braces for potentially unprecedented hurricane season: Following warnings from the Bangladeshi government about disruptions to LNG supply due to a severe storm forming in the Bay of Bengal, Tropical Cyclone Remal made landfall and resulted in curtailed regasification volumes at floating import facilities and caused two oil cargoes and an LNG supply tanker to be temporarily relocated further offshore. The cyclone, which has resulted in the deaths of at least 65 people in Bangladesh and India and put millions of people at risk from floods and landslides, was described as “one of the longest in the country’s history” by the head of Bangladesh’s Meteorological Department, who attributed the storm’s intensity to climate change. Concerns are also being raised about weather-related impacts for the U.S. oil and gas industry ahead of an expected record number of hurricanes that are forecast to batter the Southeast and Gulf Coast this summer. The U.S. Energy Information Administration (EIA) has flagged outage risks for offshore oil production, oil refineries, and LNG export terminals across the region as U.S. government forecasters predict more and stronger storms than occurred in 2005’s record-breaking Atlantic hurricane season. (The Financial Express, The Sun, U.S. EIA, Reuters)

Data analysis shows threat to Southeast Asia’s renewables potential from massive gas build-out plans: A new report from Global Energy Monitor (GEM) has warned that international finance, led by Japanese institutions, is attempting to drive a major expansion of gas capacity in Southeast Asia that would block the region’s ability to make a strategic pivot toward vast sources of untapped solar and wind energy potential. With Vietnam, the Philippines, Indonesia, Malaysia, and Thailand at the forefront of an estimated US$220 billion gas infrastructure push across eleven countries in the region, GEM’s analysis points to plans for a 100 gigawatt doubling of gas-fired power capacity and an 80% increase in LNG import capacity. “Most of the in-development gas infrastructure capacity in Southeast Asian countries has not yet entered the construction phase,” the report notes. Although dwarfed by estimates for the region’s overall solar and wind power generation potential, data from GEM’s renewable energy trackers show that, amid tumbling costs for renewables, almost two-thirds of the region’s projected increase in energy demand by 2030 could be met by utility-scale solar and wind projects that are already planned. (GEM [pdf], The Straits Times)

Canadian watchdog deems pro-British Columbia LNG ads to be greenwashing: A leaked ruling from Canada’s advertising regulatory body, the Ad Standards Council, shows that a widespread marketing campaign run by one of the country’s largest pro-fossil advocacy groups qualifies as “greenwashing” due to its misleading headline claim that LNG exports from British Columbia (BC) “will reduce global emissions.” The Canadian Association of Physicians for the Environment received and then released a copy of the decision against the advertising paid for by the Canada Action Coalition. Although the decision was reached on January 30 this year, the campaign adverts continued to appear across the province until early May. The decision has not yet appeared on the Ad Standards Council’s website because, it says, an appeal process initiated by Canada Action is still ongoing, though the offending adverts have been pulled pending the appeal. Elsewhere in the province, the environmental organization My Sea to Sky is seeking the cancellation of a permit issued by the BC Energy Regulator that allows the release of contaminated water from the construction site of the Woodfibre LNG export terminal into the Howe Sound fjord, a region northwest of Vancouver that received UNESCO biosphere designation in 2021. The group’s appeal argues that the entry of up to 1,220 cubic meters of wastewater per day from the export facility site into the fjord threatens a sprawling region rich in biodiversity that is still recovering from decades of industrial pollution. (Vancouver Sun, Canadian Association of Physicians for the Environment, The Narwhal) 

Germany bends to pressure on controversial gas levy: A simmering dispute over a charge levied by German gas system operator Trading Hub Europe (THE) on neighboring countries receiving cross-border gas deliveries has resulted in an eleventh hour climbdown from Berlin ahead of a meeting of European energy ministers. In spite of EU single market rules that prohibit tariffs on trade between the bloc’s member states, THE has been imposing a surcharge on gas deliveries to Austria, the Czech Republic, Hungary, and Slovakia in order to recoup its multi-billion euro outlay on imports of non-Russian gas to meet Germany’s urgent storage needs in summer 2022 when gas prices hit record-high levels. The operator has justified the charge as unavoidable and necessary to maintain European gas market stability and recently, amid much reduced European gas price levels, announced a further 34% hike in the charge to take effect from July 1. This planned increase will still take place, according to Sven Giegold, Germany’s state secretary for climate action, as it is required by existing legislation. However, Giegold confirmed that the levy will be fully scrapped for cross-border flows from January 1, 2025, while it will continue to be paid by domestic customers. The four central European countries had been calling on the European Commission to take “concrete actions” against Germany arguing that, other than the apparent violation of EU free trade principles, the charge both raises prices for consumers and is hindering their efforts to get off less expensive Russian gas. (Montel, Reuters, EURACTIV [registration required]) 

International investment sought as Zelenskyy signs Ukrainian biomethane legislation: In mid-May, President of Ukraine Volodymyr Zelenskyy signed into law new legislation that aims to propel the country’s biomethane industry and make it a key exporter of the fuel to the EU. While foreign investment is being sought to expand the industry, long-term projections point to Ukrainian biomethane’s potential to satisfy 20% of the EU's biomethane demand by 2030, with output potentially reaching 22 billion cubic meters per year (bcm/y) within two decades. Naftogaz, the national energy company, believes that Ukraine’s biomethane production potential is greater than annual gas consumption and is ready to support the industry’s transportation needs. The new law regulating the customs clearance of biomethane exports lifts export restrictions and brings the fuel into line with gas. Other than export potential, development of the industry is also seen as vital for domestic needs to reduce reliance on Russian gas and coal imports. (Business New Europe)

“If I think about the money the U.S. puts into Ukraine, Bulgaria, Moldova, and so on, somehow they will have to get paid back, no? That’s why you see so much American L.N.G. flowing into this region,”

said Kostis Sifnaios, the managing director of Greek operator Gastrade.

News

Argentina: A gas shortage across the aspiring LNG-exporter nation saw supply being halted to industry, thermoelectric plants, and filling stations.

Australia: Woodside Energy has secured a US$1 billion loan from the state-owned Japan Bank for International Cooperation (JBIC) for the Scarborough gas project offshore Western Australia. JBIC disclosed that its financing will be accompanied by a loan facility of US$450 million from private financial institutions.  

Estonia: State prosecutor Triinu Olev has claimed that the Chinese authorities are not cooperating in the ongoing investigation into what caused the rupturing of the Balticconnector pipeline last October.    

Finland: Transmission system operator Gasgrid has said that the floating Inkoo LNG import terminal has sold 95% of its 5 bcm/y capacity for 2024. 

Germany: The federal cabinet has approved two draft bills — the Hydrogen Acceleration Law and the Carbon Management Strategy — to fast-track permits for hydrogen projects and end restrictions on carbon capture and storage. Energy industry calls for faster construction of new gas plants for future conversion to hydrogen were not included in the new measures.  

Mozambique: Two thousand additional Rwandan soldiers have been deployed to help restore peace in the northeastern Cabo Delgado province, home to TotalEnergies’ LNG export project.

UK: Energy infrastructure operator National Grid is looking for a buyer for Europe’s largest LNG import terminal on Grain Island in southeast England.

U.S.: While the Mountain Valley Pipeline company is now hoping for an “early June” in-service date, a growing number of groups are asking the U.S. Federal Energy Regulatory Commission to delay the project’s approval following a water pressure test rupture incident on May 1. 

Venezuela: BP and Trinidad and Tobago’s NGC have received a two-year license from the U.S. Treasury Department to plan the development of the Cocuina-Manakin gas fields (1 trillion cubic feet of reserves) that extend from sanctions-hit Venezuela to Trinidad. 

The Gas Graph


Via Eurostat, the EU’s statistical office, overall gas demand across the bloc fell by a further 7.4% in 2023 following a 13.3% annual decrease in 2022.

While demand dropped last year in 21 member states, including the five biggest gas consumer countries, it increased most notably in Finland (25.6%), Sweden (11.1%), and Poland (5.3%).

Companies + Markets

Extreme temperatures across Asia drive up LNG demand and prices: South Asian LNG imports have risen this month by nearly 20% compared to last year in order to feed power networks straining to cope with extreme heat and record temperatures across the region over the last two months. Indian imports of the fuel reached their highest ever level for May at 2.4 million tonnes, according to analytics firm Kpler. New importer the Philippines has received nine LNG cargoes so far this year compared to a total of eleven in 2023. The soaring regional demand has lifted Asian spot market prices further to US$12 per million British thermal units, their highest level since late-December 2023. Forecasts of higher than average summer temperatures in Northeast Asia are expected to keep prices elevated. (Reuters)

Record high oil and gas investments expected in Norway this year: The latest forecast from government data provider Statistics Norway sees spending from oil and gas companies operating on the Norwegian continental shelf reaching 247 billion kroner (US$24 billion) in 2024, 10% higher than the previous record set in 2014. This year’s rise in extraction and pipeline investments was attributed to a record number of project approvals towards the end of 2022. Statistics Norway estimates investment levels to drop to 216 billion kroner in 2025, though this is an upward adjustment from the agency’s previous estimate of 205 billion kroner. Equinor has also announced that it is stepping up investments at the Troll project, Norway’s largest gas field. The state-owned company and its partners will spend 12 billion kroner to maintain current production levels at Troll up to 2030. (Bloomberg, Argus, Montel)

Rating agency downgrades Colombia’s Ecopetrol to “junk” status: Citing factors including growing company debt and an investment plan replete with risky gas ventures, Moody’s Investors Service has downgraded Ecopetrol from Baa3 to Ba1, taking Colombia’s national oil and gas company into riskier, non-investment grade — so-called junk — territory. Moody’s expressed concern about the company’s increasing use of debt financing to fund expansion plans that are not translating into similarly increased core earnings. In December, Ecopetrol announced capital expenditure plans for 2024 of up to US$6.8 billion, with further development of the ultra-deepwater Gorgon discovery in Colombian waters alongside partner Shell being seen as central to a ramping-up of offshore activities. Such deepwater gas projects, though, were flagged as risky in Moody’s assessment. (Reuters, BNamericas, Energy Voice) 

Tellurian buys itself more time with upstream sale: The troubled U.S. LNG developer Tellurian has agreed to sell its integrated upstream gas assets to Dallas-based private equity investment firm Aethon Energy Management. The proceeds of the US$260 million deal will mostly go to paying off Tellurian’s long-term debt, said a company spokesperson, leaving US$36 million available for general corporate purposes including ongoing construction of the US$14 billion phase one of the Driftwood LNG export terminal. The two companies also signed a preliminary heads of agreement that could allow Aethon to purchase two million tons per year of LNG from Tellurian’s Louisiana facility. While Tellurian officials talked up the deal as the latest catalyst for the languishing LNG project, the company’s share price plunged almost 12% on the news. In March, analysts projected a sales price of between US$270 and US$500 million for the company’s upstream assets, with one commenting that any price below this range would leave Tellurian in financial jeopardy. (Reuters, LNG Prime)

Top European finance firms announce more moves out of oil and gas: Crédit Agricole, France’s second-largest commercial bank, has joined national counterpart BNP Paribas in announcing its withdrawal from oil and gas bond deals. At its annual general meeting, the bank distanced itself from bond issuances — a type of financing that major fossil fuel companies have increasingly come to rely on to fund development — that “do not comply with our own green bond framework.” Crédit Agricole’s involvement in a €1 billion (US$1.08 billion) bond deal for Italian oil and gas company Eni in January this year may well prove to be one of its last for the sector as such a deal “cannot happen in the future as a consequence of our strategy,” the bank told the Financial Times following the AGM. Hailing the big bank moves, Lucie Pinson, director of French campaign group Reclaim Finance, said they “could be the sign of a real change in the Paris financial center, known for its strong support for oil and gas expansion,” though the banks’ underwriting and facilitation of bond issues is still possible for companies that are part of the fossil fuel supply chain without producing oil and gas themselves. Europe’s biggest pension fund, the Netherlands’ ABP, also announced the sale — worth €10 billion — of all its liquid assets in oil, gas, and coal. ABP also plans to phase out its remaining €4.8 billion in illiquid fossil fuel assets. (Reclaim Finance, OilPrice.com, Financial Times, Bloomberg)

“Following the expiration of the agreement on natural gas transport from Russia via Ukraine in early 2025, the Vertical Gas Corridor infrastructure will be vital for the supply of liquefied natural gas from the south to the north,” 

said Kiril Ravnachki, executive director of Bulgartransgaz, about accelerating plans to leverage new and under-development floating LNG import terminals and enhance gas interconnectivity between countries in Southeast and Central Europe.

Resources

How Japan thinks about energy security, Center for Strategic and International Studies, May 22,2024. 

This analysis discusses how, as an island nation with almost no domestic hydrocarbon resources, Japan has spent decades focusing on ways to secure its energy supplies and protect itself against external shocks, with coal and gas importing still to the fore.

Europe's ludicrous hydrogen bet, Deutsche Welle Planet A, May 24, 2024.

This 13 minute video examines why hydrogen is not the miracle energy transition solution that EU leaders would like it to be, though there are signs that a hydrogen reality check is now underway in Brussels.