GasLog has taken its usual snapshot of the market in the company’s third quarter 2019 results presentation.
Compared to 3Q19, this quarter’s supply is expected to grow by 6%, to 95 mill tonnes, which will principally be driven by a full quarter of production from new US projects, as well as initial production from the Elba Island facility, the LNGC owner said.
Including projects approved earlier in the year, 2019 has set a record for LNG FIDs, totalling 63 mill tonnes per annum year-to-date and surpassing the 2005 record of 46 mill tonnes.
In addition, the 2.1 mill tonne Woodfibre LNG project in Canada is expected to reach FID by the end of this year, while ExxonMobil recently awarded engineering contracts for the 15.2 mill tonnes per annum Rovuma LNG project ahead of an expected FID in 2020.
In total, Wood Mackenzie said that it expected 115 mill tonnes of new capacity to commence production between 2020 and 2024.
For the 12 months up to 30th September, 2019, LNG demand was 351 mill tonnes, compared with 308 mill for the previous 12 months, an increase of 14%.
The global gas market is well-supplied, given the combination of ample inventories following higher-than-average temperatures in the 2018/19 winter and LNG supply growth so far this year.
This has resulted in further inventory build ups, notably in Europe where storage is currently at 98% of capacity, according to Gas Infrastructure Europe, plus sustained pressure on gas pricing, with European and UK gas levels recently reaching their lowest since 2009. Similarly, Asian LNG prices are currently about 40% below 2018 levels.
A deteriorating macro-economic outlook, particularly in China, could present a near-term LNG demand problem by reducing natural gas consumption growth. However, the long-term fundamentals for gas and LNG demand growth were still very attractive, underpinned by continued energy demand growth and the significantly better emissions profile of gas versus coal.
In addition, GasLog said that Wood Mackenzie recently said that Europe’s gas import dependency will continue to grow, due to falling domestic production in many countries and declining pipeline flows from North Africa and Central Asia, as well as potential limits on Russia’s share of European gas imports.
GasLog said that it continued to believe that the ongoing LNG shipping market tightening will persist through at least early 2021, which may result in further term charter opportunities for on-the-water vessels, as their existing charters expire.
As of 28th October, 2019, the LNG fleet and orderbook (excluding FSRUs) and vessels with capacity below 100,000 cu m) stood at 507 and 110 vessels, respectively, according to Poten, with the orderbook representing 22% of the on-the-water fleet, unchanged from the beginning of 2019.
Out of the LNGCs in the current orderbook, 68, or 62%, have multi-year contracts attached. There have been 37 vessels ordered thus far in 2019, including 13 during 3Q19, compared to 63 in 2018, suggesting that the pace of newbuilding ordering has continued to moderate.