One of the most significant events in Q3 was the successful float-out of what is believed to be the first mass-produced gravity-based (GBS) liquefaction unit. This was successfully floated-out in early July from the Belokamenka Offshore Super Facility Construction Center (OSCC), located just a few kilometers from the Russian Arctic Circle city of Murmansk.
Expansion Of Facilities
Currently, Russian oil and gas are under sanctions, but the project, built at one of Europe’s largest construction facilities, commenced before Russia’s invasion of Ukraine and is part of a long-term strategic plan to exploit Russia’s resources in the Arctic region. The natural gas liquefaction train series GBS is part of Novatek’s Arctic LNG 2 project, for which three LNG GSB trains will be constructed with an annual capacity of 6.6M tonnes each, making a complete LNG capacity of 19.8M tonnes, along with 1.6M tonnes of stable gas condensate. The GBS will be installed at the Utrenneye field on the Gydan Peninsula as part of the Arctic LNG 2 project’s resource base. While Russia may have forfeited its role as a major gas supplier to Europe, the expansion of these facilities will impact non-aligned natural gas and LNG buyers.
Speaking on the sidelines of the Gastech 2023 conference, held in Singapore, Wood Mackenzie vice president, APAC gas and LNG consulting, Mangesh Dilip Patankar, said the LNG market is at a critical juncture, with the uncertain outlook affecting pricing and contract terms significantly and widening the gap between buyer and seller aspirations. “Many LNG buyers face the challenge of ensuring LNG supply security, while keeping their procurement costs competitive and contractual terms flexible,” Mr Patanker said. “Simultaneously, the terms in LNG sale and purchase agreements are also evolving as LNG trading increases,” he added.
Price Volatility
According to Wood Mackenzie’s LENS service, Australia and Qatar will be the biggest suppliers of LNG to Asia from 2023-2030, with volumes of more than 886M tonnes and 827M tonnes, respectively. This will account for almost 60% of the total volume of LNG delivered into Asia during this period. Mr Patanker noted the LNG market cooling off from last year’s highs means emerging buyers, particularly in Asia, are now keen to re-engage sellers. However, he warned any Asian buyers looking to re-enter the market must understand LNG’s complex fundamentals and track its price volatility.
Mr Patanker added that with the new wave of LNG projects not expected to make a significant impact in terms of increased supply until 2026, the market looks set to remain tight. Wood Mackenzie’s LENS data shows LNG year-on-year supply growth averaging 40M tonnes annually from 2026 to 2028, helping the global market to rebalance, which is predicted to bring prices down. Mr Patanker said this will improve gas affordability, facilitate LNG availability for Europe and enable a rebound of demand in Asia. “The outlook for the LNG market beyond 2028 is dependent on the level of liquefaction project final investment decisions within the next one to two years, as well as the pace of energy transition, in addition to several dynamic supply/demand-related factors.”
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Source: Rivieramm
