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Europe is saving itself! Floating LNG terminal has been put into operation in Netherlands

Source: Zhitong Finance

According to Zhitong Finance and Economics, two floating LNG terminals, Golar Igloo and Eemshawen LNG, are berthing at Eemshawen, a port in the north of the Netherlands, and are expected to be berthed for five years. Floating LNG storage is considered to be the key for Europe to reduce its dependence on Russian gas and cope with the energy crisis.

Both ships are floating storage and regasification units (FSRU), which are designed to convert the ultracold fuel transported by seagoing ships into gas that can be pumped into the onshore network. After Russia cuts its natural gas supply, it is crucial that these ships arrive before winter, as this will help Europe overcome the deepening energy crisis. The soaring energy prices have pushed the economy to the edge of recession, forcing governments to accelerate the use of floating natural gas terminals.  

Not only the Netherlands, but also the German government has leased five FSRUs, two of which will be privately leased, and the other three ships are scheduled to be used this winter. Italy and France are also planning to start using floating terminals for imported LNG.    

The port of Eemshawen will deliver LNG cargo for trial operation on Thursday, preparing for the first commercial transportation in mid September. The lease term of the two FSRUs is five years. Together, they are called EemsEnergyTerminal. It is expected to receive, unload and transport about 18 LNG cargoes before December 31.        

The FSRU is usually permanently moored on the shore, and the arriving carrier stores the cargo in the unit and turns it into high-pressure gas. These vessels tend to be faster, cheaper and more environmentally friendly than onshore solutions, but their capacity is much smaller.        

According to Helge Haugane, senior vice president in charge of natural gas and electricity of Norwegian oil and gas giant Equinor (EQNR. US), as more LNG plants will be put into use in the middle of this decade, it is expected that there will be more gasification facilities, and there will be 20 new terminals on the European continent.        

Haugane said: "If these facilities are built quickly and the government can reduce red tape, the situation will become brighter in 2026-2027 even without Russian supply."

Related (I): The EU will not target Russia for the time being! 15 countries want to cap the price of all natural gas

Source: Tan Hua, Editor in Chief of Ma Lan, Associated Press of Finance

At the meeting of EU energy ministers on Friday, it was decided to temporarily suspend the price ceiling plan for Russian natural gas and arrange the windfall profits tax of energy companies first.        

AP, September 10 (Editor Malan) The EU held an emergency meeting of energy ministers on Friday. Concerned about Russia's retaliation against the gas price ceiling, the EU has decided to shelve its plan for Russia's gas ceiling, instead focusing on imposing windfall profits tax on energy enterprises.        

As previously expected, the EU still needs several weeks to pass "emergency measures", and the delay may further deepen the crisis.        

The EU said details would be released next week and member states would likely approve the proposals later this month. Interestingly, the EU executive agency revealed that it would prepare a more extensive proposal on gas price ceiling, not just for Russia.        

With the EU's firm determination to intervene in the natural gas market, natural gas prices in the region fell nearly 8% on Friday to 205 euros per megawatt hour. However, despite the recent decline, the price is still more than twice the level in early June.

On the scene of the meeting, on July 26, the special meeting of EU energy ministers was held in Brussels, Belgium (photographed by Zheng Huansong, a reporter from Xinhua News Agency)

Fuzzy focus

According to Roberto Cingolani, Italy's minister of ecological transformation, 15 of the 27 EU member states hope to impose a price ceiling on all natural gas entering the EU through pipelines, including Poland, Greece and Italy.        

The reason why these countries want to expand the price ceiling is also very strange: they worry that Putin will completely shut down the supply of natural gas to Europe to retaliate against the deliberate targeting of the EU.       

With this in mind, these EU countries have taken the same approach to avoid Russia feeling "special treatment".       

Hungarian Foreign Minister Peter Szijjarto said that if only price restrictions were imposed on Russian natural gas, it would obviously lead to an immediate interruption of Russian natural gas supply, which can be understood without winning the Nobel Prize.        

Greece's chief energy adviser was much more straightforward, saying that if the price ceiling was imposed on Russia, they would retaliate against it.        

Tinne van der Straeten, Belgium's energy minister, said earlier that he hoped to set a ceiling on the transaction price of natural gas in Europe.        

"Our primary goal is to reduce the price. Only the price ceiling for Russian natural gas will not reduce the price, which is purely for political purposes."        

Putin sniffed at the idea that the EU wanted to set a ceiling on Russian natural gas, saying that if the EU's policies contradicted Russia's interests, Russia would not provide anything.     

This attitude of avoiding the sharp edge has aroused suspicion from other EU countries, such as the Netherlands.        

The European Commission warned that limiting the price of LNG could divert it to other regions, depriving Europe of much-needed fuel.

Pick the soft persimmon first

Although the EU has not yet decided on a specific windfall profits tax plan, consensus has been reached. Energy enterprises within the EU are more like "soft persimmons" than those in Russia.        

The windfall profits tax will be applied to non natural gas power plants such as wind, solar, nuclear and coal-fired power plants. The windfall profits tax will be levied on the income beyond a certain range. And this tax will be used to subsidize consumers and reduce the energy burden.        

In addition, the summary of the meeting mentioned that fossil fuel companies must also pay "solidarity contributions". The specific content of the contribution is not yet determined.        

The proposal of the EU windfall profits tax may be one of its few solutions. Due to the COVID-19 epidemic, the EU has issued several rounds of cash subsidies, which has made the government debt far higher than the pre epidemic level.        

On the other hand, the European Central Bank does not intend to cooperate with the EU's "spending" plan to make the EU government even more stretched.        

European Central Bank President Christine Lagarde said on Friday that the EU government should help the energy companies under the pressure of market fluctuations to rescue, rather than the European Central Bank.        

That is to say, the idea that the EU wants to provide emergency liquidity tools has nothing to do with the ECB. Although more and more natural gas importers are facing financial difficulties, the EU is still requested to find ways to solve them.        

On Friday, VNG, one of Germany's largest importers of Russian natural gas, officially submitted emergency relief to the authorities. If there is no quick and effective rescue, more European energy companies may enter bankruptcy proceedings, making the natural gas crisis worse.

Relevance (II): There is no room on land for Europe to store liquefied natural gas at sea

Source: Zhitong Finance

According to Zhitong Finance APP, when the market is facing a serious shortage of energy, European energy traders and power companies seem to be taking an unusual measure for winter reserve supply: storing more liquefied natural gas at sea.        

It is said that energy deficient European utility companies are parking ships carrying liquefied natural gas on the coast in order to replace Russian pipeline natural gas this winter. As the terminal is full, these companies cannot place the fuel import on land for storage, so they have to choose to pay the cost and let the ship park nearby.        

In addition, importers from Asia and South America seem to have joined the floating LNG storage and sought additional supplies. At the same time, traders also hope to make profits by storing LNG and cashing in when prices soar in winter.        

According to the data of the energy information company Kpler, on September 2, the amount of liquefied natural gas in the global floating storage reached 1.4 million tons, the largest in two years, which is almost equal to the total import of Spain in August.        

This strategy is often used in the oil market, but it is rare for LNG, because liquid fuel will slowly evaporate on ships, which makes long-term storage challenging. However, on the other hand, it also shows that natural gas importers have made great efforts to ensure that they have enough fuel this winter.

According to the shipping data of Bloomberg and Kpler, there are at least 9 ships storing LNG at sea. Bloomberg data shows that the British Partner cargo ship loaded with natural gas from Oman and Qatar by ship to ship transfer near Malaysia this month, and then flew in the South China Sea. At the same time, Kler analyst Mathew Ang said that the "Aristidis I" ship carrying Dominican and American natural gas was waiting in the Caribbean Sea.        

This year, the soaring natural gas prices in Europe and Asia have intensified the competition for LNG transportation from suppliers such as the United States, Nigeria and Qatar. At the same time, the global demand for ships is also driving up freight rates. Traders said that there is still room for freight rates to rise.        

Oystein Kalleklev, CEO of Flex LNG Management AS, a LNG carrier company, said: "We expect to have more floating storage. However, the LNG carrier market has been mostly sold out in winter, so we expect traders to use ships in the existing portfolio."

Related (III): German energy giant Uniper and Woodside (WDS. US) reached an LNG supply agreement

Source: Zhitong Financial Network

According to Zhitong Finance APP, on September 5, German energy giant Uniper announced that it had reached an LNG supply agreement with Woodside (WDS. US), Australia's largest oil and gas producer. According to the agreement, Woodside will supply 1 billion cubic meters of liquefied natural gas to Europe every year to help the European continent reduce its dependence on Russian supply.

LNG delivery will start in January 2023 and may last until 2039. It is reported that before the news was released, Gazprom had said that it would stop the supply of natural gas through Beixi 1 Pipeline indefinitely.

Klaus Dieter Maubach, CEO of Uniper, said: "This agreement ensures more LNG supply for our customers in Europe, which has become increasingly important due to recent developments."

"Woodside is one of our largest LNG suppliers in Asia, and we are pleased to extend our cooperation with Woodside to Europe through this transaction," Maubach said.