April 2023, Vol. 250, No. 4
Global News
Global News April 2023
US LNG Exports Hit Record as Freeport Production Returns
U.S. LNG exports rose to a record in March as Freeport LNG, the nation’s second-largest exporter, stepped up production after an eight-month outage caused by a fire at its Texas Gulf Coast facility.
A total of 108 cargoes departed U.S. ports in March carrying 7.73 million tons of LNG, above the previous record of 7.67 million tonnes a year ago, according to Refinitiv Eikon trade flows data via Reuters.
Europe was again the main destination for U.S. LNG exports, receiving almost 71% of total cargoes, while Asia received 1.32 million tons, or 17%. The production recovery allowed exporters to boost shipments to Latin America and the Caribbean, which last month received 4.5% of U.S. exports, the highest since September.
Freeport LNG, named for the small city where its facility is located, was on track to pull in about 2.2 Bcf/d of gas, above its nameplate capacity, pushing up the country’s overall processing rates.
Average gas flows to all seven big U.S. LNG export plants had risen to 14.1 Bcf/d by early April, up from a record 13.2 Bcf/d in March, signaling the export gains may continue grow.
Refilling US Strategic Petroleum Reserve Could Take Years
With crude oil prices remaining above its target range, the United States has delayed refilling its Strategic Petroleum Reserve, and Energy Secretary Jennifer Granholm told a congressional panel this month it could take years to refill.
Even so, Department of Energy is moving forward with a sale of 26 million barrels from the SPR that was mandated by Congress in earlier years to help fund the federal budget. The oil will be delivered from April 1 to June 20.
“This year, it will be difficult for us to take advantage of this low price,” Energy Secretary Jennifer Granholm told U.S. representatives in a congressional hearing. “But we will continue to look for that low price into the future because we intend to be able to save the taxpayer dollars.”
Last year’s historic sale of 180 million barrels, directed by President Joe Biden, pushed the stockpile to its lowest level since 1983. The oil sold for about $94/bbl, and Biden administration officials are targeting a price below $72/bbl, Granholm said at the hearing.
The DOE last month said it is implementing a three-part strategy to refill the reserve in the long term, including repurchases with about $4.5 billion in revenues from previous sales, returns of more than 25 million barrels of oil from previous exchanges and working with Congress to avoid “unnecessary sales unrelated to supply disruptions.”
The department succeeded last year in persuading Congress to cancel sales it had mandated of about 140 million barrels that had been set to take place from fiscal year 2024 to fiscal year 2027.
EU Nations Seek Legal Option to Stop Russian LNG Imports
European Union countries agreed in early April to seek a legal option to stop Russian companies sending LNG to EU nations by preventing Russian firms from booking infrastructure capacity.
EU countries’ energy ministers proposed that new EU gas market rules should include the option for governments to temporarily stop Russian and Belarusian gas exporters from bidding up-front for capacity on the infrastructure needed to deliver LNG into Europe.
The proposal is part of countries’ negotiating position on new EU gas market rules. It must be negotiated with the European Parliament – a process that can take months.
The 27-country EU has pledged to stop buying Russian gas in response to Moscow’s invasion of Ukraine. Europe’s pipeline imports of gas from Russia have plunged since the invasion, but LNG imports have increased.
Russian LNG deliveries to Europe increased last year to 22 Bcm, up from around 16 Bcm in 2021, according to EU analysis.
Lithuanian Vice Minister for Energy Albinas Zananavicius said the proposal would avoid a situation where LNG infrastructure designed to help countries swap Russian gas for alternatives, was in fact being used to import more from Moscow.
Oil Firms Halt or Cut Output in Iraqi Kurdistan
Producers shut in or reduced output at several oilfields in northern Iraq after Turkey stopped pumping Iraqi crude exports in late March through a pipeline that runs from its northern Kirkuk oilfields to the Turkish port of Ceyhan.
Iraq was forced to halt around 450,000 bpd of crude exports, or half a percent of global oil supply, from the semi-autonomous Kurdistan region.
Turkey stopped pumping Iraqi crude from the pipeline after Iraq won an arbitration case in which it said Turkey had violated a joint agreement by allowing the Kurdistan Regional Government (KRG) to export oil to Ceyhan without Baghdad’s consent.
Oil firms operating in the KRI were forced to halt output or move production into storage, which many expected to reach capacity within days, as talks drag between Turkey, Baghdad and the KRG to resume exports. The shutdown continued into early April.
Among the companies affected, Norwegian oil firm DNO started shutting down production at its Tawke and Peshkabir fields, which averaged 107,000 bpd in last year. The figure represents about a quarter of total Kurdish region exports, DNO said.
Canada’s ATCO Hands Over Unfinished Pipeline to Mexico
Canada’s ATCO Ltd. has agreed to transfer ownership to Mexico of an unfinished pipeline bogged down in a dispute with the Mexican state power company, two officials told Reuters, marking a rare breakthrough in ongoing tensions over energy.
Mexican power utility Comision Federal de Electricidad (CFE) in 2021 had to pay ATCO about $100 million in damages, interest and legal fees over the Ramal Tula natural gas pipeline in the central state of Hidalgo.
The deal to hand over the pipeline will free ATCO from attendant liabilities and gives Mexican President Andres Manuel Lopez Obrador the chance to finish the stalled project which was designed to supply natural gas to a power station north of Mexico City, the sources said.
Arguing that past governments skewed Mexico’s energy market in favor of private capital, Lopez Obrador has taken a series of steps to bolster state control of the sector. ATCO went to arbitration because after Lopez Obrador took power in 2018, CFE canceled a contract the Calgary-based.
By then, ATCO had already finished most of the 11-mile (17-km) pipeline. But the company said it could not complete the final stretch due to resistance by local communities, and therefore invoked force majeure. The project was valued at $66 million when the contract was awarded in 2014.
Colombian Oil Pipeline Shut Down after Bombings
Ecopetrol’s oil transportation subsidiary Cenit suspended pumping operations for at least 12 days along the Cano Limon-Covenas pipeline due to attacks on the infrastructure, it said after a series of bombings, it said.
The company said it has stopped pumping oil through the pipeline, and that that the resumption of operations would depend on Colombia’s military securing the attacked sites.
Ecopetrol suspended transportation of gas from the Gibraltar plant, located in the Norte de Santander province, due to the attacks on the infrastructure, it said in a statement. The most recent attack on the pipeline in late March was the sixth of the year. It took place in a rural zone of the Cubara municipality, in Colombia’s Boyaca province.
Military troops were dispatched to secure the bombing site so Cenit personnel can repair the damage.
The Cano Limon-Covenas pipeline, which can transport up to 210,000 bpd and runs along Colombia’s northern border with Venezuela, was attacked 13 times last year, leading to fires and environmental contamination.
Energy Transfer Boosts Permian Presence with Lotus Acquisition
Dallas-based Energy Transfer announced that it will acquire pipeline operator Lotus Midstream in a $1.45 billion cash-and-stock deal to boost its pipeline portfolio in the U.S. Permian basin.
The deal adds 3,000 miles of crude gathering and transportation pipelines covering to Energy Transfer’s assets and a 1.5 MMbpd of capacity from major production areas of the Permian, it said.
Lotus’ Centurion pipeline subsidiary includes a network of crude oil gathering and transportation pipelines that extend from southeast New Mexico across the Permian Basin of West Texas to Cushing, Okla. Integrated assets also include two crude oil storage terminals in the Midland, Texas, and Cushing market centers with a combined storage capacity of 7 MMbbls and more than 125 truck stations.
The Southeast New Mexico gathering system includes more than 50 miles of crude oil gathering pipelines with connections to the Centurion pipeline system and a third-party, intra-basin system and related infrastructure.
The deal, expected to close by June, also includes a 5% equity interest in the 650-mile Wink to Webster Pipeline, which can deliver 1 MMbpd of crude oil and condensate to the Gulf Coast.
Kazakhstan Shipping Oil Via Caspian Sea to BTC Pipeline
Kazakhstan’s state-owned Kazmunaigaz (KMG) has started shipping oil to the Baku-Tbilisi-Ceyhan (BTC) pipeline in Azerbaijan, as it seeks alternatives to exporting via Russian ports.
Kazakhstan exports most of its oil via Caspian Pipeline Consortium (CPC) pipeline, which terminates in southern Russia. However, Kazakh producers have started testing other routes after several interruptions to the CPC last year amid Russia’s standoff with the West over Ukraine.
KMG started shipping oil from Kazakhstan’s Caspian Sea port of Aktau to the Sangachal terminal in Azerbaijan for onward distribution via BTC pipeline on March 22, sources told Reuters. Some 10,000 tons of oil were loaded on the vessel Heydar Aliyev.
KMG will have to do several shipments via the route to provide enough oil for a full export cargo of BTC Blend, normally of at least 80,000 tons. It had been expected to start supplies via the BTC pipeline in February, but the plan was delayed by the earthquake in Turkey, where the pipeline ends.
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