John Kerry, Freeport LNG, Azerbaijan-UAE — Energy Transition Summer Updates from June
Spotlight: United States
The United States Special Presidential Envoy for Climate John Kerry spoke at the IV CEO Summit of the Americas about the Energy Transition’s role in the Global Economy. Read a full report and watch some videos about it on CNBC.
An explosion caused a fire at a Freeport LNG facility in the Texas Gulf Coast which has dealt a big blow to European buyers of American LNG. It was reported by Reuters that the LNG plant could be shut down for at least three weeks — quite a disaster for natural gas markets since Freeport LNG is responsible for some 20% of US LNG processing.
Issues
Russia-Ukraine Conflict — The dominance of Russia’s hydrocarbon exports has come into full focus, per Euractiv on whether or not the oil and gas dependent economies can sustain themselves in the era of global climate change action. This means that Ukraine should follow an “accelerated energy transition” reconstruction plan as a result of the conflict. This stood out to me:
To achieve the ultimate victory and protect our children from new resource wars, energy blackmail and the devastating effects of climate change, we must not just embark on the path of the energy transition. We must race upon it and push Europe forward to completely stop using coal, oil, and gas.
European Ban on Russian Oil Imports — After agreeing in principle to ban seaborne transport of Russian crude oil and petroluem products it was reported that European companies will have certain transitional periods before they have to comply to the new policies. It wasn’t stated that the ban on Russian oil imports would affect oil that is transiting through Russia that originated in another country by non-Russian producers.
Australia Union Barganing Claims — Further legal setbacks to Shell’s Prelude FLNG facility in offshore Western Australia as the Electric Trades Union (ETC) pushes forward with industrial action over barganing claims between Shell and Prelude FLNG facility workers.
Companies
Equinor — The Norweigan energy giant got the Hammerfest LNG plant back into production afer a fire closed it down in 2020. Equinor’s Hammerfest LNG account for more than 5% of Norweigan gas exports.
Naftogaz Ukrainy, Gazprom — At a meeting in Washington DC on 8 June 2022 the executive board chairmen of Ukraine’s Naftogaz, Yuri Vitrenko, pleaded with attendees about the “significant challenge” to gas imports due to Russian attacks on Ukraine. Gazprom’s Nord Stream 2 was also a major focus of the meeting since the company has reduced gas transit shipments to Ukraine in lieu of committments to ship 110 MMcmd.
Santos, Yara — A new natural gas supply deal was initiated between Santos and Yara Pilabara Fertilisers on 2 June 2022 to supply Yara’s liquid ammonia plant in Western Australia; it is one of the world’s largest ammonia production facilities able to produce ~850,000 metric tons per year.
ADM, Marathon Petroleum — With the extraordinary high prices for diesel fuels the need for renewable diesel is becoming a big issue for North America industry. ADM and Marathon Petroleum unveiled the opening of a soybean processing facility in North Dakota for the purpose of supplying Marathon with refined vegetable oil as a renewable feedstock source.
Energy Transfer, China Gas — Another LNG deal between American suppliers and Chinese buyers was signed on 5 June 2022 between Energy Transfer and China Gas. The free-on-board (fob) purchase agreement is indexed to the Henry Hub benchmark with first deliveries expected in 2026.
Shell, Tokyo Gas, Osaka Gas — It was announced on 6 June 2022 that Shell has signed non-binding memorandum of understandings (MoUs) with two of its LNG buyers, Tokyo Gas and Osaka Gas, to explore more opportunities for LNG value chain decarbonization.
What To Watch Going Forward
Azerbaijan and UAE Energy Cooperation — It was announced on 6 June 2022 that the United Arab Emirates’ (UAE) Masdar signed two agreements with Azerbaijan’s Ministry of Energy for the purpose of developing projects in Azerbaijan for onshore wind, solar photovoltaic, offshore wind and green hydrogen. It was reported that this was the largest agreement made in Azerbaijan’s history, with the total production capacity amounting to 10,000 MW. For more information the World Bank Group published a document about the Offshore Wind Roadmap For Azerbaijan
European LNG Demand — European policymakers met at a floating storage and regasification unit (FSRU) facility in Alexandroupolis owned by Greek LNG carrier GasLog. The ceremony was significant for Europe’s natural gas and LNG future as it is the first sign of how Europe intends to rid itself of Russian gas import dependency by increading domestic production capacity.
LNG Export Competition — This summer is already signaling a competition for LNG tankers among the world’s largest energy companies — TotalEnergies, Shell, China Unipec — to stock up on LNG supplies ahead of the winter season in 2022. Because of this trend the price of LNG carriers is rising to the highest levels in 10 years, at around $120,000 a day, as LNG import demand is expected to grow higher and higher for developed countries.
CCS Market Competition — Both ExxonMobil and Chevron announced plans to expand into the Carbon Capture and Storage (CCS) markets with new projects to live up to commitments they have made on getting to Net Zero. Thailand’s PTTEP also announced the country’s first CCS project.
