Global LNG market

Figure 3.15 Evolution of LNG imports, quarterly volumes and annual averages, 2015–19

Source: IEA analysis based on ICIS (2019), ICIS LNG Edge, www.icis.com/energy/liquefied-natural-gas/lng-market-intelligence- solution/ (subscription required).

Global LNG trade grew at an average of 10% per annum between 2016 and 2018, with strong import increases in emerging Asian markets, Korea and Europe (in late 2018).

Europe was the second main source of trade growth in 2018 with a total of 69 bcm10 imported, 6 bcm or 10% above the 2017 level, which already showed some recovery compared to the lower levels recorded between 2013 and 2016 (all below 55 bcm/y) in the aftermath of the Fukushima Daiichi nuclear incident. Most of this LNG increase materialised in the last quarter of 2018 (which accounted for 35% of Europe’s annual imports), as the prospect of a tight market in Asia did not materialise due to milder-than-expected temperatures. At the time of writing, LNG flows to Europe remain high, with data for the first quarter of 2019 showing some 65% y-o-y increase at 27 bcm, as spot price spreads between Europe and Asia have narrowed. This makes LNG reloads to Asia uneconomical. For more information on market prices, see Chapter 4. Other regions of the world experienced a variety of import trends in 2018: LNG flows increased by 4% in Central and South America in spite of a decrease in Argentina’s import needs, with new import facilities ramping up in Colombia and the Caribbean, and Panama starting imports; LNG flows into the Middle East decreased sharply (down 21%) on lower imports into Jordan and the United Arab Emirates, and into Africa (down 63%) due to Egypt’s domestic production recovery.

On the supply side, 2018 confirmed Australia’s position as largest single contributor to LNG supply growth, with 16 bcm of additional exports, followed by the United States with 11 bcm (Figure 3.16). Together these two countries accounted for 79% of the LNG export increment in 2017 and 72% in 2018. Russia saw its export capacity increase rapidly following the commissioning of the first train of Yamal LNG at the end of 2017, growing by 10 bcm in 2018 and above 3 bcm for the first quarter of 2019 with the start-up of the second and third trains. This makes Russia the largest source of LNG supply growth for the beginning of the year. Both Middle Eastern and Central and South American exporters saw their LNG flows increase in 2018 (up 3 bcm and 2 bcm respectively) mainly due to export increases from Oman and Trinidad and Tobago.

Figure 3.16 LNG annual export increment by main country and region, 2015–18 and Q1 2019

* Including reloads.

Source: IEA analysis based on ICIS (2019), ICIS LNG Edge, www.icis.com/energy/liquefied-natural-gas/lng-market-intelligence- solution/ (subscription required).

Australia has been the main contributor to the growth in LNG exports between 2015 and 2016, followed by the United States. Russia was the largest contributor in the first quarter of 2019.

A rebound in reloading activity from northwest Europe and Spain and the start of transhipment of Russian LNG in Norway led to a 2 bcm increase in European LNG (re)exports in 2018. Reloading activity was almost non-existent in Europe during the first quarter of 2019, except for 0.2 bcm in Norway and 0.1 bcm in France, due to the absence of favourable price spreads with Asia. Exports from the Asia Pacific region (other than Australia) decreased by 6 bcm in 2018 due to production shutdown in Papua New Guinea following the February 2018 earthquake and lower send-out from Indonesia and Malaysia. African LNG exports decreased by over 1 bcm, mainly due to lower Algerian volumes (down 17%) but partly offset by growth from Angola and the progressive restart of Egyptian exports – Egypt shipped almost 1 bcm in the first quarter of 2019, equivalent to almost half of its total exports of 2018.

The strong growth in LNG trade volumes over recent years was also accompanied by an increase in flexibility, which keeps improving in a move towards a liquid global market. The trend for an increasing share of long-term volumes signed from new export projects without destination clauses has fostered the development of midstream flexibility provided by major portfolio players. These companies, which account for the largest share of long-term offtake from recent liquefaction projects, resell those volumes to third parties – thus enabling the development of a secondary market and providing access to LNG for smaller buyers and new entrants. This trend towards more diversification of buyers is evidenced by the continuous increase in spot traded volumes, which rose from an average of 11% of LNG trade in 2015 to 21% in 2018 – or the equivalent of 90 bcm (Figure 3.17).

of the leaders in terms of LNG growth, driven by its strong domestic consumption and the doubling of its regasification capacity over the forecast period to reach 80 bcm/y by 2024. India has four projects under construction plus the Ennore terminal, which started operations during the first quarter of 2019. Pakistan and Bangladesh are also likely to see their imports grow over the coming years, due to their strong reliance on natural gas in their energy mix and their stagnating or declining domestic production. South East Asian countries also see their import capacity further develop in the near future, with several projects currently under development to expand Thailand’s existing regasification capacity and build new infrastructure in Viet Nam and the Philippines.

The two large traditional Asian LNG importers, Japan and Korea, see their imports decline by 15 bcm/y during the forecast period. Japan’s import needs slowly decrease in parallel with the expected progressive restart of its nuclear power generation fleet, ceding its position as number one LNG importer to China by 2024, whereas Korea’s imports are expected to stabilise after 2022.

Outside Asia, Europe is the main source of LNG import growth, helped by a combination of decreasing domestic production in northwest Europe and the ambition to increase the diversity of supply vis-à-vis traditional pipeline suppliers. About 7 bcm/y of additional regasification capacity is under development as of the beginning of 2019, including capacity extensions to existing terminals as well as a new project in Croatia, the first in the country. Additionally, other European countries are considering the LNG option, including Germany with four projects proposed. The German government, which is promoting the development of at least two of the said projects to provide alternative sources of supply to its domestic market, announced in March 2019 a plan to incentivise investment by lowering the cost of connection to the transport network by 90% (Witkop, 2019; Reuters, 2019c).

Figure 3.19 LNG importing countries and territories and LNG import volumes, 2010–24