Cedigaz LNG Brief – July 2019 edition

The CEDIGAZ LNG brief is based on CEDIGAZ’ monthly LNG trade database. It is published on the blog 3 months after its disclosure to CEDIGAZ members. 

LNG in H1 2019

Global Imports (net of re-exports) grew by 12% in H1 2019 to reach 169 Mt (+18.5 Mt Y-o-Y) driven by the surge of European imports. Asian demand was insufficient to absorb the sharp supply rise. Overall demand in Asia remained almost flat as strong growth in China (+4.7 Mt) and Bangladesh (+1.6 Mt) was offset by declines in Japan (3.3 Mt) and South Korea (3 Mt).
Imports growth in China declined from nearly 50% in 2018 (H1) to 20% on account of increased domestic gas production (+10%), higher pipeline imports and weaker demand growth due to a mild winter (vs H1 2018) and policy easing on enforcement of coal-to-gas conversions.
In Japan, nuclear output has increased and, inventories were high after a mild winter. Nuclear output in Korea grew by 36%, affecting gas demand as gas-fired electricity generation dropped by 11%.
In the absence of a strong North Asian demand growth, Europe acted as the market of last resort. Net imports in the region almost doubled to 41 Mt (+19 Mt Y-O-Y). Growth was particularly strong in the UK (+4.2 Mt) and France (+4.4 Mt). In Latin America, imports were up by +17% (+0.8 Mt), conversely they declined in North America and MENA.
Global supply growth was driven by Australia, the US and Russia where exports increased by almost 5.6 Mt, 5.1 Mt and 3.7 Mt respectively, boosted by the ramp up of Train 1&2 of Ichthys LNG and Train 2 of Wheatstone in Australia, Train 1 of Cove Point and Corpus Christi in the US and Train 2&3 of Yamal in Russia. Strong global supply growth and weak NEA LNG demand contributed to the rapid decline in spot prices. NEA spot prices, almost halved since January, stimulating European imports. Average monthly spot prices for June were $3.5 mmbtu (TTF) in Europe and $4.4/mmbtu in North East Asia, putting pressure on the US LNG off takers (the estimated short run marginal cost of US LNG in June was around $3.3/mmbtu to Europe and $4.5/mmbtu to Asia).
The spreads between European gas hubs and the Asian spot market remained low this year, reducing Europe’s re-exports by 21% (0.3 Mt Y-o-Y) to 1.2 Mt. The lower prices have not yet triggered additional demand in Asia and with further new supply scheduled to come online in the months ahead, the pressure on global gas prices should contin-ue to mount.

A new era for CCUS driven by contrasted policies and business models: US and European approaches

According to a new report by CEDIGAZ, CCUS is coming back into the limelight, especially in the US and in Europe, in the wake of the Paris agreement, boosted by a growing interest in hydrogen, rising carbon prices, new supporting policies and new business models.

There are currently 20 new, large-scale, CCUS projects planned around the world, nine of them in Europe. While projects developed in the middle of the 2000s mainly targeted coal-fired power plants and stored the captured carbon, the focus of the new projects is different as they tend to concentrate on industrial and manufacturing processes and on carbon utilization rather than just storage. Several projects involve production of clean hydrogen from natural gas, a cheaper option than hydrolysis using renewable power. New business models aim at reducing costs by dis-integrating the CCUS value chain into its three components of capture, transport and storage, and by addressing clusters of industrial facilities to achieve economies of scale.

Natural gas demand grows strongly by 40% from 2017 to 2040, supported by air quality policies, abundant low-cost supplies and the expansion of LNG trade

CEDIGAZ, the International Information Center on Natural Gas, has just released its « Medium and Long Term Natural Gas Outlook 2019 ». Cedigaz Scenario incorporates government ambitions in the context of the energy transition that is underway. It is built upon the implementation of strong energy efficiency programmes and increased diversification of the energy mix based on the NDCs. Cedigaz Outlook 2019 highlights that natural gas has a crucial role to play to support the energy transition and meet all targets of the NDCs. However, this will not be enough to reach the +2°C target: emissions in the Cedigaz scenario would put the world closer to a +3°C path. The future expansion of natural gas in the energy mix is driven by the competitiveness and abundance of gas resources in gas-rich markets (North America, Russia, Middle East, Mozambique), which will expand LNG export capabilities. Positive developments of unconventional gas, especially in the US, and liquefied natural gas markets will continue to reshape natural gas supplies.