May 9, 2023

Output issues at Ichthys LNG lead to tender withdrawal, add to supply disruptions

The Inpex-operated 8.9 mtpa Ichthys LNG plant in Darwin has withdrawn a tender to sell a cargo for delivery in June -July because of production problems, limiting available spot supplies amid planned and unplanned maintenance at other LNG plants.

The Japanese upstream firm cancelled its tender yesterday to sell one cargo that would load on June 6-8 at Ichthys, with the cargo expected to be deliverable on either June 21-23 or Jul. 14-17.  The tender was meant to close today.

Term offtakers at the plant said output has fallen by around 50% because of issues relating to the plant’s heat exchanger tubes, which are crucial in the liquefaction process.  

An official at a Japanese utility firm with an agreement to offtake LNG from Ichthys said Inpex probably detected the issue “a few days ago.” Inpex could not be reached for comment, but it typically does not comment on operational or commercial matters relating to Ichthys.

Term offtakers said they expect production at Ichthys to normalise by May 20 and that two cargoes may be lost due to the production cut. Based on nameplate capacity, the two-train Ichthys plant can produce about 170,684 t of LNG a week, or around two to three 65,000 t cargoes. Plants that have offtake agreements with Ichthys include Taiwan's state-owned CPC, Japan's Jera, Kansai Electric, Kyushu Electric, Osaka Gas, Toho Gas, Tokyo Gas and TotalEnergies.

Market participants said that the production disruption has had no impact on prices, despite the anticipated loss of two cargoes. They said that weak demand among Asia’s larger buyers in northeast Asia and in Europe because of ample supplies has continued to weigh on spot prices.

“There is no reason for prices to rise,” a trader with a Chinese utility firm said. “There is no shortage of LNG, Asian and European demand is still pretty weak, and stocks are high. We are waiting for prices to fall further.”

India’s state-owned oil refiner BPCL issued a tender today to buy one cargo for delivery to the 17.5 mtpa Dahej LNG terminal in Gujarat on May 30-Jun. 14. But is one of only a few buyers, including Vietnam’s PetroVietnam Gas, seeking cargoes this week. A few northeast Asian buyers have begun enquiring about summer cargo deliveries, but it is unclear if or when these will translate into firm requirements.

Traders pegged prices today for deliveries to northeast Asia in June at around the high-$10s/mmBtu to $11/mmBtu. The front-month futures contract of the JKM index, a price reference for deliveries to Asia, settled at $11.315/mmBtu yesterday, unchanged from its previous settlement. A settlement at $11.31/mmBtu on May 4 was the contract’s lowest price this year. It was last around this level in June 2021.

The Ichthys issues contribute to reducing spot supply availability that has already been pared by an unplanned shutdown at the 4.2 mtpa Snohvit LNG plant in Norway and scheduled two-week shutdowns at Train 3 of Qatar’s Ras Laffan export facility and Train 1 of Oman LNG’s Qalhat export plant.

And, US LNG exporter Cheniere may have been forced to take the third train of its 15 mtpa Corpus Christi LNG plant offline yesterday, market participants said. Cheniere could not be immediately reached for comment. But, market participants said feed gas flows to the plant dipped by around 32% to 1.52 billion ft3 yesterday from 2.24 billion ft3 a day earlier.

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