By Heather Douglas
Despite the “alleged poor global LNG market conditions,” the global hot commodity in energy is actually liquefied natural gas (LNG) and, according to a recently released report, it is expected to grow four to six per cent yearly for the next eight to 10 years, in contrast to an estimated one to two per cent per annum for natural gas consumption.
According to the study, entitled LNG Outlook 2017: Surplus or Balance? and authored by Gas Strategic Group Limited (GSGL), based in London, 2017 is an important year for LNG. In June, global demand was approximately 265 million tonnes per annum (Mtpa) and is expected to reach 292 Mtpa by year-end — an unparalleled year-on-year rise of 34 Mtpa from 2016.
“The lion’s share of additional production will come from the ramp-up of liquefaction plants commissioned in the U.S. and Australia (December, 2016), and those are scheduled to come on-stream in 2017,” GSGL claims. “But as sellers continue to grapple with an already well-supplied market, the crucial question is whether or not the demand will grow enough to absorb the surplus production volumes as it did in 2016.”
In 2017, as Canada cancels export terminals, other countries are commissioning receiving terminals with a total capacity of 17.4 mtpa, including:
- China — Shenzhen-Diefu with a capacity of 4.0 mtpa;
- Ghana – WAGL – Golar FSRU with 1.0 mtpa;
- India – Mundra LNG with 5.0 mtpa;
- South Korea — Boryeong with 3.0 mtpa; and
- Pakistan – GasPort Limited LNG with 4.4 mtpa.
“Assuming that LNG demand remains solid in 2017, either from countries going through a colder-than-normal winter, or gas-hungry markets in the Middle East and Asia, a long market is likely to be kept at bay during the first half of the year,” the authors note. “The cumulative effect of steadily rising production is likely to be felt in the second half of 2017, especially in the middle of the year, when demand tends to be lower in the dominant markets of the north hemisphere.
While the rest of the world remains bullish on LNG, Canada lets the United States and Australia scoop up its Asian customers and sign long-term contracts for a steady supply of liquids. Some buyers are trying to coerce tankers into sole-source agreements.
There are also a number of liquefaction projects scheduled for commissioning this year. The study says, “Provided that new liquefaction capacity projects scheduled for start-up this year go according to plan, the third-quarter could see total production of 73.8 mt, up 8.7 mt from 65.1 mt in Q3, 2016.” These include:
- Australia – Prelude, Cove Point, Kribi floating LNG, APLNG Train 2, Gorgon Trains 1 and 2, Wheatstone Train 1 and Ichthys Train 1;
- United States – Sabine Pass Trains 2, 3, and 4;
- Malaysia – Petronas FLNG Satu and Malaysia LNG Train 9; and
- Malta – Armanda LNG Mediterrana.
“Unfortunately for sellers, demand from Japan, the world’s largest LNG importer, is unlike to rebound with buyers there facing further demand decline, leaving them seemingly over-contracted,” the study notes and predicts that China will pick up the slack. “China’s imports rose by 33 per cent in 2016, reaching 26.0 mt, increasing LNG’s share of the Chinese gas market. Some of the growth was due to the programmed start-up of new LNG supply from Australia, boosted by cut-backs in Chinese coal production and cold weather in the latter part of the year.”
The authors boldly predict China will overtake Korea as the world’s second largest importing country, this year.
