Global LNG production rose to 316million tonnes in 2018, a 9.6% increase over 2017 figures driven primarily by new volumes from Australia, the United States and Russia and these countries are positioning to push over 361.5million tonnes in 2019 according to LNG Edge Supply Forecast.
The United States alone is primed to push over 17m tonnes of new LNG production into markets in Asia where there is demand growth.
“We expect that Australia will overtake Qatar in 2019 as the largest LNG exporter on an annual basis. But the US is now the major growth market. US LNG production could hit almost 38m tonnes this year – a 10% share of the market, and 61m tonnes in 2020, a 16% share,” said Ed Cox, global ICIS LNG editor, an energy commodity information provider.
Australia’s exported over 68m tonnes in 2018, a rise of almost 13m tonnes from 2017 with shipments from Chevron’s Gorgon and Wheatstone LNG projects making significant additions. Analysts expect the country’s exports could reach 78.4m tonnes, this year and reach around 81.9m tonnes in 2020.
The US finished fourth last year behind Australia, Russia and Qatar with production of 20.6m tonnes, a 6% share of global supply. The rise in US production came from Dominion’s Cove Point plant and Cheniere’s Sabine Pass, where Train 5 started up.
Delays to the start of Sempra’s Cameron and Freeport LNG plants means the impetus from the US will come more from 2019 and it will overtake Australia as the fastest-growing market, analysts at ICIS said.
Betting on Asia
A WoodMac research found that seven major buyers of the world’s Liquefied Natural Gas (LNG), CNOOC, PetroChina, Sinopec, CPC, JERA, KOGAS and Tokyo Gas which accounts for half of global volume could see their total uncontracted demand rising fourfold by 2030 providing opportunity for savvy producers.
The four-decade old global research and consultancy firm says these Northeast Asian players have become active again in global LNG contracting activity, with over 16 mmtpa of contracts announced this year pushing forecast for uncontracted demand volume to 80 million tonnes per annum (mmtpa) by 2030.
2019 could be a record year for LNG project sanctions with over 220 mmtpa of gas targeting final investment decision (FID). Some of the less prepared or competitive projects will slip into 2020 and beyond, but nonetheless a bumper year beckons, says WoodMac.
But the market belongs to suppliers who can meet the changing needs of major LNG buyers as they seek a variety of contracts to meet their different needs. In addition to price, factors such as contract flexibility, index, source diversification, upstream participation and seasonality will all be considerations, it said.
“Market liberalisation and uncertainty on longer-term demand in more mature markets, such as Japan, South Korea and Taiwan, will mean more room for spot and short-term purchases,” said Nicholas Browne, research director.
“While oil indexation will continue to dominate markets due to familiarity and ability to hedge, Asian buyers should be more inclined towards hub indexation to boost diversity and enable sales into Europe.”
African Producers
Major African LNG producers including Algeria and Nigeria will add volumes to the market as well in 2019. If the LNG train 7 can reach FID in 2019, Nigerian volumes could jump to 30m tonnes.
Cameroon offers hope for new capacity addition. The country’s $1.2bn Hilli Episeyo LNG project, which started full commercial operation in early June 2018 has a production rate of approximately 2.4mn t/yr.
Mozambique’s first liquefied natural gas export project is under construction but two much larger developments are targeting final investment decisions in 2019. It could become the sixth-largest LNG producer in the world by the mid-2020s with investments.
ExxonMobil and Eni are developing one project and Anadarko, the second with a combined development cost of $55 billion and would bring 28 million tonnes of annual liquefaction capacity on stream by 2025.
But huge demand does not immediately translate into value for producers until they make the required investments.
ISAAC ANYAOGU
