LNG Takes New Directions in 2015: Cedigaz

Trade in liquefied natural gas grew by just 2.1% last year, to 241.2mn mt, according to Cedigaz’ first estimates.

Asia began importing less and, Europe more, marking a reversal of the trend in both cases; while the Middle East and North Africa (Mena) became a larger importing region, the French analysts said.

For the first time since 2009, Asian LNG net imports declined by 2.8% to 172.8mn metric tons (mt), mainly because of weather related factors, gas-fuel competiveness and the slowdown of economic growth. Japan and South Korea, the two biggest importers in the world, saw imports fall by 7.2mn mt, or 5.8%.

In a context of slowing economic growth and poor gas price competitiveness, Chinese demand dwindled by 0.9% to 19.7mn mt, compared with an average annual growth rate of 20.1% from 2010 to 2014.

Minor gains in Thailand (+1.3mn mt) and Taiwan (+1.1mn mt), as well as the beginning of imports in Pakistan (above 1mn mt) were not enough to offset the regional decline.

European LNG net imports grew by 10.2% in 2015 to 37mn mt after three years of continuous decline, but remained far below the peak level of above 65mn mt reached in 2010 and 2011. Except in France, where net imports declined to 4.3mn mt and in Greece where imports were flat at around 0.4mn mt, LNG net imports increased everywhere for different reasons.

In the Iberian peninsula, LNG demand was boosted by the power sector as a summer heatwave drove up air conditioning demand and reservoirs dried. In northwest Europe, where gas markets are more liquid than in other parts of the region, LNG net imports grew significantly as large portfolio owners, including Qatar, diverted LNG to limit oversupply in Asia. In the UK, where the South Hook terminal received about 20% more LNG (all coming from Qatar), net imports grew to 9.4mn mt and in Belgium and in the Netherlands net imports grew respectively to 2mn mt and 0.7mn mt.

The weight of Mena countries in the global LNG market strengthened and the region emerged as the new growth driver. Last year, the five importing countries received close to 10mn mt of LNG against only 4.1mn mt in 2014 (+141% or 5.8 Mt). Growth was fuelled by new importers, Egypt and Jordan, buying respectively 2.7mn mt and 1.7mn mt using FSRUs moored in the Red Sea. Qatar (2.1mn mt) and Nigeria (0.6mn mt) provided the bulk of this new demand.

As demand declined spot prices collapsed and converged globally (with the exception of North American prices which remained markedly lower than elsewhere in the world). As a consequence, suppliers of flexible LNG tried to limit shipping costs by targeting the nearest markets. Thus, a trend towards intra-basin trade flows of LNG emerged in 2015: imports from Nigeria decreased by 15% in Asia Oceania (-1.5mn mt) while in Europe and Latin America, they rose by 1.2mn mt and 0.6mn mt respectively.

Monthly Average Prices:

Source: Platts

1. Henry Hub prices represent NYMEX front month futures prices

2. NBP and JKM prices represent Platts front month assessments for the UK and the Japan-Korea spot LNG markets.

In addition, exports of Qatar to Asian countries fell by 4.1mn mt (-7.5%) while exports to Europe jumped by 17.3% (+3mn mt) and exports to the Mena countries more than doubled to 4.5mn mt. Similarly, LNG exports of Trinidad & Tobago to Europe and Asia Oceania dropped by 47.2% (-1.1mn mt) and 60.3% (-0.6mn mt) respectively, while exports to the neighbouring North American countries grew by 23.8% (+0.8mn mt).

William Powell