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9 Things To Know About The Booming Global Liquefied Natural Gas Market

President Donald Trump participates in a tour of the Cameron LNG export facility, Tuesday, May 14, 2019, in Hackberry, La. (AP Photo/Evan Vucci)

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First, a special thanks to GIIGNL for much of this data filed in its Annual Report 2019 that reviews the 2018 global LNG market.

I cherry picked this list on things that I find interesting and/or underrepresented in market talk, and then of course added a few other points.

Given that cleaner, flexible, affordable, and reliable natural gas is the go-to fuel to cut greenhouse gas emissions and backup intermittent wind and solar power, and given that LNG is the fastest growing commodity market in the world, the reality is that there are about 100 things you need to know about LNG, but let’s just stick to nine of them.

1… In 2018, the LNG market grew by 8% with deliveries at 314 million tons (MT)  This was nearly a 30% rise from 2015 and over a tripling since 2000. There was 868 MTPA (per annum) of total regasification capacity but only 406 MTPA of total liquefaction capacity. LNG now accounts for ~14% of gas use globally. And there is currently some $1.4 trillion in LNG development across the globe, with the U.S., Canada, Russia, and Australia leading. This makes perfect sense: yearly global demand is modeled to soar 3-7% for decades (those that foresee any regression for LNG base their assumptions on unrealistic Herculean forecasts for wind and solar power).

2…Although declining, long-term, oil-based contracts still dominate, at 68% of LNG contracts. Around 25% of all LNG was sold on a spot basis, with another 7% short-term (i.e., under four years). The emerging U.S. export market in particular is adding a critical flexible contract style to the market – more liquidity and shorter-term options enhancing the business. The U.S. is bringing LNG that lacks the “destination clauses” that have long restricted the resale of unneeded supply. It’s the U.S. that will evolve gas from a regional product into a global commodity sold like petroleum.

3…At 26% of all global imports, Japan got nearly 55% more LNG than second place China. China, however, saw yearly growth of 38% following a 42% jump in 2017. Already the largest gas importer when piped supplies are included, China should become the leading LNG buyer this year or next. Latent gas demand in China is obviously immense: gas only accounts for 8% of China’s total energy demand (compared to the OECD average of 25%).

4…Global LNG leader Qatar is surely facing stiff competition to hold its position. The country, however, has at least one key advantage beyond low cost production and already established links to customers. Qatar has its own state-owned ship builder. Nakilat owns nearly 70 LNG vessels. This must be nice: globally in 2018, the average spot charter rate for a 160,000 cubic meters LNG carrier stood at $88,692/day, compared to an average $46,058/day in 2017. Illustrating the country’s forward thinking, Qatar Petroleum also plans to invest $20 billion in U.S. energy projects over the next five years.

5…With three more export facilities coming online this year and literally dozens more under consideration, the U.S. could become the global LNG leader by 2024. In fact, around 25 MTPA of new liquefaction capacity is expected to come online this year, 21 MTPA of which is located in the U.S. The U.S. has a massive low cost gas resource base of 700-800 trillion cubic feet that can be produced even when prices fall below $3.

6…Cameroon starting exporting LNG in 2018, and Tanzania and Mozambique will soon join. Unfortunately, these poor countries will be exporting a modern fuel like gas while being drastically energy-deprived themselves. Looking at “access to electricity” stats from the World Bank, respectively Cameroon, Tanzania, and Mozambique have 10 million, 40 million, and 22 million people that have NO ACCESS TO ELECTRICITY – the enabling sine quo non of modernity. “Oil And Natural Gas Companies Could Be Heroes In Africa.”

These three poor, energy-deprived nations have scores of millions without electricity, yet are poised to export loads of natural gas – increasingly, the go-to fuel in the most developed nations.

Data source: World Bank; UN; JTC

7… Never underestimate the non-stop advance of natural gas technologies  For example, Floating liquefaction plants (FLNG) and Floating Storage and Regasification Units (FSRUs) are making the business easier and cheaper for both exporters and importers. As the market matures, some of the still developing nations (non-OECD) are now able to realistically buy LNG. There are now 20 LNG exporters and 42 importers, with the latter potentially doubling within 12-15 years. These new customers, however, are bringing a credit risk dynamic to the LNG trade since many of them have lower ratings.

8…LNG is a key option for shippers to meet the coming IMO Sulfur Rule (cutting the sulfur rate for bunker fuel from today’s 3.5% to 0.5%) that starts in 2020. The four options for shippers are: Convert to or purchase LNG-fueled vessels; Use low-sulfur fuel oil (LSFO); Install or purchase vessels that have scrubbers to remove polluting matter like sulfur; Utilize variants of middle distillates such as marine gas oil (MGO) or marine diesel oil (MDO).

9…Given a lack of final investment decisions for new LNG export projects in recent years, demand will start to outstrip supply by 2022-2023. This is why so many LNG price forecasts have a bullish tilt over the mid-term and beyond. As a seller not a buyer, EIA forecasts that U.S. Henry Hub prices will remain below $4 until 2035, giving our LNG suppliers rather solid netback opportunity. Europe’s gas prices are expected to be 2-4 times higher than those in the U.S, with Asia’s 3-5 times higher. After all, Asia now accounts for just over 20% of global gas demand but will constitute 45% or more of incremental demand in the decades ahead.

Please be sure to follow Jude on Twitter




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