Gas Processing & LNG is Produced by Gulf Publishing Holdings LLC



Russia's Sakhalin 2 may double LNG revenue as top buyers stay despite Ukraine crisis

(Reuters) - Russia's Sakhalin 2 LNG project could generate twice the revenue this year that it did before the Ukraine conflict thanks to long-term deals with Asian buyers and higher prices, according to analysts and Reuters calculations.

State-run top shareholder Gazprom stands to benefit from the boost which comes as Russia ramps up its military spending almost a year after sending troops into neighbouring Ukraine.

Moscow has already tapped its rainy day fund, boosted domestic borrowing and is considering raising taxes.

Shell quit Sakhalin 2 as one of the many Western firms which pulled out of Russia after Moscow launched what it dubbed its "special military operation".

Renewed deals with Asian buyers could secure demand for 6.5 MMt of LNG annually from Sakhalin 2, according to contractual volume data from the GIIGNL international group of LNG importers and Reuters calculations.

That could generate $3.8 B to $4.5 B in revenue for Sakhalin 2 shareholders this year, according to Masanori Odaka, a senior analyst on Rystad Energy's gas and LNG team.

The project could earn another $7.45 B this year if it keeps production in line with 2022 and sells 4.9 MMt of LNG on the spot market, according to Alexei Kokin, chief analyst at Russia's Otkritie brokerage.

The project was forecast to produce 11.4 MMt of LNG last year, a senior official from Russia's Sakhalin region had said, but the final figure is yet to be released.

In 2021, Sakhalin 2's revenue totalled $5.7 B and net profit was $2 B.

But Asia spot LNG prices jumped 42% in 2022 to average $38.80 per million British thermal units.

With spot prices in Asia estimated to be higher than long-term deals, marketing additional volumes could be challenging, Rystad's Odaka said.

China's Sakhalin LNG imports more than doubled in 2022 to 33 cargoes, Refinitiv Eikon data showed.

It was not immediately clear what would happen to the 2.75 MMt of LNG previously taken annually by Taiwan's CPC, whose contract ended last year, by Shell and by Gazprom Global LNG, which was nationalised by Germany last year in its sanctions stand-off with Russia.

All three have stopped receiving LNG supplies from Sakhalin 2, their officials said.

SHAREHOLDERS

After Shell's departure, the Kremlin created a new entity to run Sakhalin 2, one of the top LNG plants globally.

Japanese shareholders Mitsui & Co and Mitsubishi Corp applied to retain their stakes.

They hold a combined 22.5% stake alongside Gazprom, which has a 50% holding.

Shell's 27.5% stake is now held by Sakhalin Energy. Russia has yet to name a new shareholder to replace Shell.

Sakhalin Energy, the managing company for Sakhalin 2, did not reply to a Reuters request for comment.

Last week, Osaka Gas Co Ltd became the latest Japanese company to renew its deal to buy Sakhalin 2. It will take 200,000 tonnes of LNG per year, or about 2% of its output.

South Korea's KOGAS continues to offtake LNG under its 10-year contract, its spokesman said, and Japanese Hiroshima Gas, JERA, Kyushu Electric, Saibu Gas, Toho Gas, Tohoku Electric and Tokyo Gas have also renewed their deals.

While Asian energy firms have declined to provide specifics of their renewed agreements, they have said conditions were either similar or little changed from previous deals.

(Reporting by Katya Golubkova and Yuka Obayashi Additional reporting by Sarah Wu in Taipei, Joyce Lee in Seoul, Oksana Kobzeva in Moscow, Christoph Steitz in Frankfurt, Emily Chow in Singapore, Ron Bousso and Marwa Rashad in London; editing by Florence Tan, Kim Coghill and Jason Neely)


Copyright © 2019. All market data is provided by Barchart Solutions. Futures: at least a 10 minute delay. Information is provided 'as is' and solely for informational purposes, not for trading purposes or advice. To see all exchange delays and terms of use, please see disclaimer.

                                  CMEGroup                                     Icelogo

FEATURED COLUMNS

Editorial Comment
-Lee Nichols
Modern society would not be possible without the use of pipelines to transport natural gas, crude oil and finished products to demand centers.


Optimizing Gas Distribution: Accounting for Changeovers, Regulators, and More

Register Now

Gas distribution systems are critical to the effective operation of many industrial facilities around the world. Despite the importance of these systems, however, opportunities to improve their performance and cost-effectiveness are often missed or misunderstood. Increasing changeover pressure may seem like a good way to improve system flow, for example, but it often does so at the expense of bottled gas. Adding regulators may help you control supply pressure, but it also adds cost to your system. So, how do you know what the ideal gas distribution setup is for you?

Attend this webinar to:

  • Gain a basic understanding of the fluid dynamics that affect pressure control in gas distribution systems, learning to interpret flow curves and recognize phenomena like lockup, droop, and supply pressure effect (SPE)
  • Learn how inlet pressure affects regulator performance and when to specify certain regulator types and configurations to effectively control gas system pressures

Understand the inherent trade-offs between gas utilization and flow capacity and how to select both the right changeover pressure and automatic changeover panel design for your operations.

May 4, 2021 10:00 AM CDT

Register Now

 

Please read our Term and Conditions, Cookies Policy, and Privacy Policy before using the site. All material subject to strictly enforced copyright laws.
© 2023 Gulf Publishing Holdings LLC.