LNG market set to post a record in 2018 buoyed by Asian buyers
Energize Weekly, October 3, 2018
The market for liquefied natural gas (LNG) is poised to set a record in 2018, spurred by Asian imports, according to a Bloomberg New Energy Finance analysis.
Demand is projected to grow 308 million metric tons per annum (MMtpa) in 2018, up 8.5 percent from 2017.
“The rate of growth will slow from 2019 and further in 2020, before picking up again in 2021,” Bloomberg said. “Imports will expand at a steady rate during 2021-2027, before accelerating again. In 2030, total demand will reach 450 MMtpa.”
Half of the increased demand this year comes from China, with most of the rest from Japan, South Korea and India. Bloomberg projects Asia will add a total of 143 MMtpa in demand between 2017 and 2030, accounting for 86 percent of the world’s total LNG demand growth during that time frame.
In 2019, strong demand from China and South Asia is forecast to add 12 MMtpa to the global LNG trade, Bloomberg said. Demand will slow in 2020-2021 when Japan restarts its ninth nuclear power plant and a Russian pipeline begins supplying China.
Still, any global supply surplus after 2019 is expected to be small and short lived, according to Ashish Sethia, Bloomberg’s global head of LNG analysis. “Post-2021, growth will rebound with South and Southeast Asia becoming the main growth engine due to faster depletion of local gas and significant infrastructure buildout,” Sethia said.
Meanwhile, the long-term LNG demand forecast for Europe, including Turkey, was cut by Bloomberg to 60 MMtpa by 2030.
“Growth of renewables and batteries will marginalize gas-fired generation in the European power system,” said John Twomey, head of European gas analysis. “This will restrict the growth of LNG imports, despite declines in Dutch and Norwegian gas production. Europe will limit its reliance on Russian pipeline gas imports.”
On the supply side, 104 MMtpa of new LNG production capacity will be added between 2018 and 2021 reaching a total global capacity 329 MMtpa in 2021. About 17 additional projects in the 2020s could add another 172 MMtpa of capacity by 2030.
U.S. sales could benefit from growing demand in Asia and efforts to cut the cost of U.S. LNG. Bloomberg is projecting the addition of another 90 MMtpa of North American capacity in the next few years, primarily in the Gulf of Mexico.
LNG is increasingly being purchased on short-term contracts, Bloomberg said. The volume of long-term contracts has been stalled while the share of one- to four-year contracts has risen to 41 percent from less than 25 percent in the last decade. Bloomberg said that contract signings should “revive” after 20121 when existing contract supplies decline.