In the first quarter of 2015, first estimates of global LNG market announced changing dynamics compared to the previous year. Second quarter estimates confirm this trend as the Asian market remains soft with lower demand and increased output in the Pacific Basin. In Europe, Q2 saw net imports grow as gross imports increased and re-exports collapsed. New players such Egypt, Pakistan and Jordan are now integrated in the market while in the United States, Q2 seemed to mark the beginning of the end of the LNG rush. Overall, first outlook for 2015 sees a 2.1% to 2.5% growth year-on-year of the global LNG market to 240-241 million tons.
The Asian market remains soft
In Q1 2015, following the collapse of oil prices and under the influence of softening market conditions, LNG average import prices declined significantly in Asia. In Japan, prices plummeted by 19.4% from January to March and in South Korea, prices fell by 8.4% over the same period.
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NBP: summer prices moderate, without sharp drops
This summer, the average NBP price did not decline to the same extent as last year. In July, it even found itself under slight pressure: at €21.2/MWh ($6.8/MBtu), it was 2% higher than in June and 30% higher than in June of last year. During August, the price saw a fairly marked downtrend, hitting a low of €17.2/MWh on August 24 before rallying. The first September quotations, progressing due to sustained demand, were in the neighborhood of €18.9/MWh ($6.2/MBtu). These moderate values helped make natural gas more competitive in the electricity sector compared to coal, a phenomenon fostered since April by the increase in carbon tax support, now fixed at £18/TCO2 (about €24/TCO2). The result has been a fairly notable increase in gas consumption in this sector: 18% more in June on an annualized basis, as opposed to a 24% decrease for coal over the same period.
The new CEDIGAZ report, U.S. Natural Gas Update and Outlook*, analyzes the consequences of the oil price decline on the U.S. oil and gas sector as well as the implications for production and hydrocarbon prices.
The oil price decline has left American producers in a situation like that of 2009 following the collapse of the Henry Hub gas prices. At the time, shale gas production was growing fast but demand was depressed due to the effects of the subprime mortgage crisis. Producers reacted by redirecting their investments towards liquid-rich deposits (containing oil or natural gas liquids) and were thus able to benefit from the oil price recovery. This strategic reorientation did not penalize gas production, which continued to grow, thanks to the gases associated with oil production which, in recent years, have been responsible for almost all growth in gas production. Today, more than 50% of the shale gas produced in the United States comes from liquid-rich deposits. Consequently, any decrease in liquids production occurring in reaction to falling oil prices is bound to have major repercussions on domestic gas production.