Italian LNG imports fall on quick Algerian piped supply

  • Market: Natural gas
  • 22/07/21

Italy's LNG receipts have fallen sharply since the start of the 2020-21 gas year, displaced by brisk Algerian pipeline take.

Italy received 108 cargoes in October 2020-June 2021, with sendout of 30.5mn m³/d making up 15.8pc of total pipeline and LNG imports. This was well down from 137 in 2019-20 when sendout accounted for 19.9pc of supply, and 132 in 2018-19 when the share was 18.8pc (see sendout graph). Use of Italy's LNG terminals was much lower until an auction-based allocation mechanism was introduced in April 2018.

Italian firms have had little need to outbid northeast Asian and northwest European buyers for cargoes this gas year, as the quickest stockdraw in recent years in addition to brisk Algerian deliveries lifted supply availability.

Algerian gas is mostly supplied to Italy under hybrid hub and oil-indexed long-term contracts with Algerian state-owned Sonatrach. Pipeline flows to Italy were 59.8mn m³/d — or a cumulative 16.33bn m³ — in October 2020-June 2021, close to double the 30.7mn m³/d — or 8.38bn m³ — in the previous two years. They were even above 2016-2018 when contractual take-or-pay volumes were higher.

Italian PSV prompt and near-curve prices have extended their premiums to oil-indexed supply costs in recent months, bolstering the incentive for strong Algerian take for longer than previously expected.

An increase in Algerian spot sales to Italian firms — as well as make-up volumes following reduced take in 2019-20 — could also partly account for the large increase in imports.

Azeri deliveries to Italy through the 10bn m³/yr Trans-Adriatic pipeline (Tap) have also reduced the need for northwest European imports at Passo Gries since flows began on 31 December 2020. Contracts for Tap supply are entirely indexed to the PSV rather than oil prices, managing director Luca Schieppati has said.

LNG receipts may ramp up only in early 2022

PSV prices at a discount to the Dutch TTF — and northeast Asian LNG prices — for delivery periods up to the end of the year suggest a sustained weaker incentive for firms to bring cargoes to Italy.

Strong demand from Asian and Latin American markets has been drawing LNG away from Europe, lifting offers for European buyers above corresponding TTF prices. And with PSV prices at a discount to TTF, Italian firms have even less scope than their European peers to match offers from suppliers (see PSV-TTF basis graph). This likely triggered the July-August cancellations at Italian terminals, as even firms that had already secured regasification slots and could view that cost as sunk had no incentive to bring cargoes to Italy.

The country may remain an unattractive destination for spot LNG cargoes in the coming months. The criteria used to set the reserve price at auctions for regasification capacity are designed to maximise returns for the terminal operator when price spreads are higher than a minimum value, which varies according to the amount of capacity requested and its duration. But with price spreads into negative territory for the coming months, firms have little incentive to secure capacity at the minimum fixed value.

PSV forward prices only fall back in line with the oil curve at the start of the second quarter of 2022, which could limit the incentive for strong Algerian take next summer and boost the need for supply from elsewhere, including LNG. This partly explains why contracts for delivery in the second and third quarter of 2022 have held well above the TTF in recent months, market participants said.

The role of LNG in Italy has shifted in recent years, with spot LNG imports becoming a more important component of the country's supply mix. This was largely the result of an influx of new liquefaction capacity additions boosting LNG liquidity in the Atlantic basin, which allowed European buyers to secure supply at competitive prices. But with more limited LNG production capacity additions expected in the near term, particularly in the Asia-Pacific basin, fast-growing demand from Asian markets is set to increasingly draw supply away from Europe. And should PSV contracts continue to change hands predominantly at a discount to other European markets, Italy could remain at the back of the queue for spot LNG supply.

Italian LNG sendout mn m³/d

PSV-TTF basis markets €/MWh

Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News
27/03/24

Louisiana pipeline crossing bill nears vote: Update

Louisiana pipeline crossing bill nears vote: Update

Updates scheduled timing of vote in first paragraph. New York, 27 March (Argus) — The Louisiana state senate is scheduled to vote next week on a bill seeking to clarify pipeline servitude rights and expedite pipeline crossing disputes, advancing legislation promoted by three natural gas pipeline companies involved in a legal battle with US midstream giant Energy Transfer. Natural gas transmission projects by Williams, Momentum Midstream and DT Midstream — which aim to connect growing production out of the prolific Haynesville shale to a wave of new LNG export terminals along the US Gulf coast — have been put on hold while legal proceedings between Energy Transfer and DT Midstream play out. All three companies' proposed pipelines would cross Energy Transfer's own Tiger pipeline in northern Louisiana. The three pipeline companies' projects propose an excessive number of crossings over the Tiger line, an attorney for Energy Transfer argued in a Louisiana senate committee last week, and Energy Transfer has the servitude rights to stop them. But Energy Transfer's "unique" interpretation of the civil code on pipeline crossings is hurting the economy of Louisiana, the author of the bill , Louisiana senator Alan Seabaugh (R), said last week. By blocking the construction of new pipelines out of the Haynesville, Energy Transfer is eliminating jobs and taxes that would be created by new infrastructure, he said. Moreover, by arguing its servitude rights extend above and below its existing pipeline "to the center of the earth," Energy Transfer is "asserting a right that nobody has ever asserted before," Seabaugh said. The Seabaugh bill clarifies that, unless explicitly stated otherwise in a contract, pipeline servitude rights extend only to the physical space occupied by the pipeline and any space necessary to maintain it. The contract stipulating Energy Transfer's servitude rights for the Tiger pipeline is silent on the subject of that vertical, underground space, according to bill supporters. "This really isn't about pipeline crossings — this is about controlling market share," said Jimmy Faircloth, attorney for Momentum Midstream. But the pipeline industry has been amicably working together for decades to allow for reciprocal crossings, Energy Transfer attorney Kay Medlin said. By ripping up this convention over a dispute involving so many crossings, and forcing an expedited legal proceeding for something which "is not a minor process," the Seabaugh bill threatens an industry "that ain't broke," she said. "This legislation will break it, and you will likely spend years trying to fix it, if you ever can," Medlin said. The Seabaugh bill is a companion to two bills which passed 100-0 and 99-0, respectively, in the Louisiana House of Representatives on 21 March. Those bills seek to clarify the law on pipeline crossings and to expedite proceedings on pipeline crossing disputes. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Read more
News

Louisiana pipeline crossing bill nears senate vote


27/03/24
News
27/03/24

Louisiana pipeline crossing bill nears senate vote

New York, 27 March (Argus) — The Louisiana state senate is scheduled to vote tonight on a bill seeking to clarify pipeline servitude rights and expedite pipeline crossing disputes, advancing legislation promoted by three natural gas pipeline companies involved in a legal battle with US midstream giant Energy Transfer. Natural gas transmission projects by Williams, Momentum Midstream and DT Midstream — which aim to connect growing production out of the prolific Haynesville shale to a wave of new LNG export terminals along the US Gulf coast — have been put on hold while legal proceedings between Energy Transfer and DT Midstream play out. All three companies' proposed pipelines would cross Energy Transfer's own Tiger pipeline in northern Louisiana. The three pipeline companies' projects propose an excessive number of crossings over the Tiger line, an attorney for Energy Transfer argued in a Louisiana senate committee last week, and Energy Transfer has the servitude rights to stop them. But Energy Transfer's "unique" interpretation of the civil code on pipeline crossings is hurting the economy of Louisiana, the author of the bill , Louisiana senator Alan Seabaugh (R), said last week. By blocking the construction of new pipelines out of the Haynesville, Energy Transfer is eliminating jobs and taxes that would be created by new infrastructure, he said. Moreover, by arguing its servitude rights extend above and below its existing pipeline "to the center of the earth," Energy Transfer is "asserting a right that nobody has ever asserted before," Seabaugh said. The Seabaugh bill clarifies that, unless explicitly stated otherwise in a contract, pipeline servitude rights extend only to the physical space occupied by the pipeline and any space necessary to maintain it. The contract stipulating Energy Transfer's servitude rights for the Tiger pipeline is silent on the subject of that vertical, underground space, according to bill supporters. "This really isn't about pipeline crossings — this is about controlling market share," said Jimmy Faircloth, attorney for Momentum Midstream. But the pipeline industry has been amicably working together for decades to allow for reciprocal crossings, Energy Transfer attorney Kay Medlin said. By ripping up this convention over a dispute involving so many crossings, and forcing an expedited legal proceeding for something which "is not a minor process," the Seabaugh bill threatens an industry "that ain't broke," she said. "This legislation will break it, and you will likely spend years trying to fix it, if you ever can," Medlin said. The Seabaugh bill is a companion to two bills which passed 100-0 and 99-0, respectively, in the Louisiana House of Representatives on 21 March. Those bills seek to clarify the law on pipeline crossings and to expedite proceedings on pipeline crossing disputes. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Grupo Carso expande su huella en energía


27/03/24
News
27/03/24

Grupo Carso expande su huella en energía

Mexico City, 27 March (Argus) — En los últimos años Grupo Carso, dirigido por Carlos Slim, ha expandido sus operaciones en el sector de petróleo y gas natural, destacándose como uno de los pocos operadores que han fortalecido su presencia a pesar de las restricciones del presidente mexicano Andrés Manuel López Obrador a la inversión del sector privado. A medida que los independientes y las grandes empresas petroleras han empezado a cerrar sus negocios en medio de la falta de nuevas oportunidades en subastas de la fase de exploración y producción, el Grupo Carso ha adquirido dos de los mayores contratos de aguas someras en los últimos 12 meses y ha expresado interés en hacer nuevas adquisiciones. Durante una conferencia de prensa de cuatro horas en febrero, Slim confirmó el interés de la empresa en desempeñar "un papel más importante en el sector de los hidrocarburos y, finalmente, participar en los productos petroquímicos." Slim, la persona más rica de México y director de un conglomerado que abarca desde las telecomunicaciones hasta la minería, también expresó su interés por "ser socio de alguien con experiencia" y por aumentar la participación de la empresa en el operador independiente estadounidense Talos Energy. La división de energía de Grupo Carso, Carso Energy, tenía un papel marginal en el sector aguas arriba de México antes de esta administración, con derechos de producción y exploración de dos bloques terrestres asegurados tras la reforma energética de 2014. A pesar de que los contratos se adjudicaron en 2017, los bloques 12 y 13 de Veracruz siguen en fase de exploración en medio de la falta de equipos de perforación disponibles y la presencia del crimen organizado en la zona, que ha impedido el acceso al emplazamiento, el operador informó al regulador de petróleo CNH el pasado diciembre. Pero los dos bloques terrestres son pequeños en comparación con los bloques de aguas poco profundas que Grupo Carso compró el año pasado. En septiembre, Grupo Carso completó la compra por $124 millones de una acción de 49.9pc en la filial mexicana de Talos Energy, involucrada también en el mega yacimiento de aguas superficiales de Zama que se está desarrollando con la paraestatal Pemex. Con un pico pronosticado de producción de 180,000 b/d de crudo para 2026, el yacimiento sería el segundo campo de producción de crudo más importante de México según las cifras de enero. El pasado diciembre, Carso Energy llegó a un acuerdo de $530 millones para adquirir el bloque de aguas someras 4 del conglomerado mexicano Petrobal en la cuenca sureste. El bloque es el tercer contrato de producción de crudo más alto, con una producción de 11,784 b/d en enero, según la CNH. Inversiones en gas En el sector del gas, Carso Energy también opera el gasoducto de gas natural Sasabe-Samalayuca de 472mn cf/d y es socio en las líneas estadounidenses de interconexión Waha-Presidio y Waha-San Elizario. Pero mientras que la mayoría de las empresas del sector de la energía han visto un colapso de las oportunidades de inversión durante la administración de López Obrador, el Grupo Carso parece ser una de las pocas empresas del sector privado con las que el presidente permitirá que las empresas estatales Pemex y CFE hagan negocios. CFE adjudicó directamente un nuevo contrato de gasoducto al operador en diciembre del año pasado, con un acuerdo para ampliar la línea de gas Sasabe-Samalayuca de 416km y 472mn cf/d de Sasabe, Sonora a Mexicali, Baja California. López Obrador, a menudo crítico de las empresas del sector privado dentro del sector de la energía, incluso ha elogiado el papel creciente de Slim en el mercado del petróleo y el gas, celebrando su adquisición del contrato Petrobal por permitirle "permanecer en manos mexicanas." Mirando hacia el futuro, los profundos bolsillos del Grupo Carso podrían convertirlo en un socio potencial para desarrollar el campo de gas de aguas profundas de Lakach tras la decisión de New Fortress Energy de retirarse el pasado mes de noviembre. Pero el entorno de bajos precios del gas podría complicar el proyecto en el que Pemex ya ha invertido $1.4 mil millones, mientras que la falta de experiencia de Carso en aguas profundas plantea preguntas sobre su viabilidad como socio. Carso Energy representó sólo 1.6pc de los Ps55.4 mil millones ($3.29 mil millones) totales de ventas del Grupo Carso durante el cuarto trimestre del año pasado, pero la estrategia de adquisición del grupo y el estatus favorecido frente a la administración podrían ver esa cuota aumentar en los próximos años. Por Rebecca Conan Proyectos de energía de Carso Proyecto Tipo de proyecto Tamaño/capacidad Bloque 12 E&P en tierra Fase de exploración Bloque 13 E&P en tierra Fase de exploración Zama E&P en aguas someras 180,000 b/d crudo en 2026 Bloque 4 E&P en aguas someras 11,784 b/d crudo en enero Sasabe-Samalayuca Gasoducto 472mn cf/d Waha-Presidio Gasoducto 1.4 Bcf/d Waha-San Elizario Gasoducto 1.1 Bcf/d Grupo Carso Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Serica CEO warns on UK offshore investment


27/03/24
News
27/03/24

Serica CEO warns on UK offshore investment

London, 27 March (Argus) — The lack of a stable offshore fiscal regime is creating shareholder pressure on UK-focused independent oil and gas operators to invest abroad, according to outgoing Serica Energy chief executive Mitch Flegg. "The feedback I get from shareholders and from banks is: 'What are you doing in the UK? We want you to invest in other parts of the world'," Flegg told attendees at a meeting of industry group Offshore Energies UK (OEUK) today. "That's the elephant in the room. We can't ignore that." The UK government introduced an Energy Profits Levy (EPL) windfall tax on oil and gas profits in summer 2022 in response to the jump in energy prices resulting from Russia's invasion of Ukraine. Initially the levy meant profits were taxed at 65pc, but by the start of last year this was 75pc. In February, UK finance minister Jeremy Hunt extended the duration of the EPL for a year to 2029. Flegg said the offshore oil and gas sector is "not whining about the levy itself" but it is concerned about "the continual changes in the fiscal regime and it's the instability, rather than the rate, that we're worried about". Serica, which in recent months has averaged production of 45,500 b/d of oil equivalent (boe/d) in the UK offshore, is now facing pressure to look at other countries, such as Norway. While that country has always had a 78pc tax rate, "that doesn't put us off at looking at working [there]", Flegg said. "What makes it more attractive is that it's been stable and the allowances that go with that are well thought through and have been there for years and years," he said. Flegg said another concern is offshore regulator NSTA's new emissions reduction plan, announced today , which could see the authority require operators to cease production of assets with high-emissions intensity as part of an increased drive for electrification at offshore facilities. Flegg acknowledged the industry has needed encouragement "to move in the right direction" on emissions, but said some elements of the NSTA plan "have gone too far" and that important infrastructure could be lost if facilities shut down because of a lack of electrification. "This is a fragile industry. We all depend upon each other and we've built upon the supply chain," he said. "The supply chain depends on operators and operators depend upon the infrastructure that's out there. "If the infrastructure doesn't exist then we're not going to be able to tie back new discoveries." Flegg, who will step down as Serica chief executive in mid-April, was speaking at the launch of OEUK's Business and Supply Chain Outlook report. This said UK offshore oil and gas production will continue to decline at double-digit rates if measures are not taken to improve the investment environment. By Jon Mainwaring Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Oil transition plans inadequate for investors: Report


27/03/24
News
27/03/24

Oil transition plans inadequate for investors: Report

London, 27 March (Argus) — Oil and gas producers' energy transition plans are "insufficient for investors to accurately gauge transition risk", according to a report released today from investor initiative Climate Action 100+ and investor research group Transition Pathway Initiative (TPI). Several companies measured have net zero goals, but there is an "absence of disclosure on critical elements", which makes it difficult for investors to understand how companies will achieve net zero, as well as the transition risks posed. The lack of sufficient transition plans presents a "material financial risk", Climate Action 100+ said. The report assessed 10 publicly-listed oil and gas producers — European firms BP, Eni, Repsol, Shell and TotalEnergies, and North American companies Chevron, ConocoPhillips, ExxonMobil, Occidental and Suncor. The companies scored lowest against 'alignment' metrics, measuring if they are in line with the Paris climate agreement that seeks to limit global warming to 1.5°C above the pre-industrial average. "More disclosure is required on the central aspects of transition planning, including measures to neutralise emissions, and production forecasts", TPI found. Companies assessed failed to score on 87pc of metrics related to quantifying emissions cuts, and on 89pc of metrics related to future oil and gas production. Most North American firms assessed have stated they plan to lift output, the report noted. But "without acknowledging the impact of the transition on the core business, companies risk deploying capital that… accentuates the risk of assets becoming stranded", it said. The report flagged a stark difference between the two regions. "European companies provide substantially better disclosure, set more aligned targets and are investing more in climate solutions", it said. North American firms are "not planning to meaningfully diversify into low carbon energy production", while European ones are exploring a range of lower-carbon options, including biofuels, hydrogen and renewable power. The companies assessed are also not reaching for "easy wins" on methane abatement, with just two having "convincing strategies" on this, the report found. Of the 10 companies, seven have joined reduction initiative the Oil and Gas Methane Partnership, but "most companies have not set a methane emissions reduction target with a clear and specific base and target year." Investment is crucial for companies looking to decarbonise. A report this week from non-profit CDP and consulting firm Oliver Wyman found that more than half of corporations in high-emitting sectors said access to capital was "a key concern in decarbonisation efforts". Their report analysed data from 1,600 European companies, which reported via CDP's environmental disclosures programme. "This implementation gap between concrete business actions and stated climate goals persists despite most businesses reporting they have a transition plan and emissions reduction targets in place", CDP said. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more