LNG

The International Energy Agency said the structure of global natural gas markets has been altered by issues raised by the Ukraine conflict and will require still more  closer dialogue between producer and consumer nations to ensure the availability of short-term and long-term pipeline gas and LNG cargo volumes.

The IEA’s annual “Global Gas Security Review” also noted that tensions in the gas markets had eased “significantly” since the beginning of 2023.

The report coincided with the 12th LNG Producer and Consumer Conference in Tokyo involving the leading importers and exporters.

That Tokyo event was co-organised by the IEA and Japan’s Ministry of Economy, Trade and Industry (METI) and has always provided a forum for discussions between natural gas and LNG producer and consumer countries.

The new IEA analysis noted that deeper coordination among market participants remained essential, given momentous shifts in how gas markets function.

The IEA’s latest assessment of market dynamics showed gas markets had moved towards a gradual rebalancing since the start of the year.

High inventories

The report stated that high inventory levels at storage sites in key Asian and European markets provide grounds for “cautious optimism” ahead of the 2023-24 winter heating season in the Northern Hemisphere.

“If injections continue at the average rate observed since mid-April, EU storage sites will reach 90 percent of their working capacity by early August and could be filled close to 100 percent by mid-September,” said the report.

“However, full storage sites are no guarantee against market volatility during the (coming) winter,” the report warned.

The Paris-based body said that there remained “major uncertainties” ahead of the upcoming heating season.

“A cold winter, together with a full halt in Russia piped gas supplies to Europe early in the heating season, could easily renew market tensions,” said the report.

“Fierce competition for gas supplies could also emerge if Northeast Asia experiences colder-than-usual weather and economic growth is stronger than expected in China,” the IEA added.

The security of global gas supplies remains at the forefront of energy policy making, with growing complexity for both the short and long term.

LNG surge

“LNG has become a baseload source of supply for Europe, with its share in total EU demand rising from an average of 12 percent over the 2010s to close to 35 percent in 2022 - similar to the contribution from Russia’s piped gas before the invasion of Ukraine,” said the report.

“Meanwhile, China’s balancing role in global gas markets is set to increase,” stated the IEA.

The report also explained that the “flexibility of gas supply” needed to be reassessed in light of the phase-out of Russian piped gas exports to the European Union.

As producers and consumers engage in closer dialogue to address these dynamics, the new IEA report recommended that they should explore the development of innovative commercial offerings, new procurement mechanisms and cooperative frameworks favouring a more flexible supply of LNG.

The new IEA report also includes a special focus on integrating low-emissions gases into energy systems.

“A new global gas market is taking shape after last year’s crisis. Given this, responsible producers and consumers must reconsider their approaches to supply security and flexibility, cooperating even more closely,” said Keisuke Sadamori, the IEA’s Director of Energy Markets and Security.

“Meaningful efforts are also needed to reduce the carbon footprint of gas supply chains, including through greater use of low-emissions gases,” added Sadamori.

Japanese demand

The report also focused on some individual nations and on the main regions.

In the case of Japan, the leading LNG importer's gas consumption decreased by 12 percent, or 4 billion cubic metres, in the first three months of 2023.

“Gas-fired power generation in the first three months declined by 16 percent (or 15 terawatt hours) according to data from the METI. This was primarily driven by lower electricity consumption, down by 6 percent year-over-year with improving nuclear availability,” said the IEA.

“Japan’s nuclear power output rose by 47 percent (or 12 TWh) in the first half of 2023. In addition, city-gas sales for commercial and industrial use decreased by 3 percent and 12 percent respectively,” added the report.

“For 2023 Japan’s gas demand is forecast to decrease by about 5 percent compared with the previous year,” the IEA stated.

Energy World Corp., the Australian-listed developer of LNG and power projects in the Philippines and Indonesia, has apologised to shareholders for the slow progress and pointed out that just by almost standing still the assets had gained in value.

Woodside Petroleum has joined to new politicised trend for energy companies to make political investment decisions after several years of intimidation by banks and environmental activists on climate change by shutting down a natural gas project in Myanmar citing reasons of human rights.

The latest gas appraisal well has been successfully drilled at the Maha-2 discovery offshore the liquefied natural gas export plant at Bontang in the East Kalimantan region of Indonesia.

DNV GL, the leading European classification society, said liquefied natural gas was set to thrive in a strong gas market on the route to energy transition through 2050.

PetroChina, the Hong Kong-listed arm of China National Petroleum Corp. and with LNG project stakes in Mozambique and Canada, has swung to a first-quarter loss because of the effects of the coronavirus and as its own oil and natural gas output increased in a low-demand period.

The state-controlled Chinese major reported a net loss for the first three months of 2020 of 16.23 billion yuan ($2.29 billion) versus a profit of 10.24Bln yuan ($1.44Bln) in the prior-year quarter.

PetroChina’s revenues fell by 14.4 percent to 509 billion Chinese yuan ($79.9Bln), according to its earnings statement filed with the Hong Kong Stock Exchange.

Crude oil production rose 4.2 percent to 232.7 million barrels and natural gas output increased 8.7 percent to 1,086.9 billion cubic feet.

“The increase in output was driven by new oil and gas capacity built in 2019,” said PetroChina.

“Facing a severe and complicated economy and operational situation both abroad and domestically, the group faithfully acted out the new concept of development, pushed ahead with quality-based development, paid more attention to green and low-carbon development and digital transformation as well as the value creation,” it added.

PetroChina’s managing company CNPC imports pipeline natural gas from Central Asian countries and Russia as well as LNG from projects such as the Yamal plant in Siberia and from PetroChina LNG agreements.

The Chinese major is additionally part of Royal Dutch Shell’s LNG Canada project under its own name PetroChina and has a stake in the Area 4 reserves in the Rovuma Basin offshore Mozambique with Italian company Eni and ExxonMobil.

PetroChina also operations three important Chinese LNG import terminals at Dalian and Tangshan in the northeast of the country and at Rudong in the central Jiangsu province in the coastal area near Shanghai.

PetroChina also receives natural gas pipeline supplies from Turkmenistan, Kazakhstan and Uzbekistan.

“The production and sales plans for the first quarter were set in advance and lagged behind in terms of adjustment,” stated the company.

In response to the coronavirus pandemic and record-low oil prices, PetroChina said it would aim to “dynamically optimise” and adjust spending this year from a previously planned 295Bln yuan ($41Bln)

Its exploration and production business recorded a 14.88Bln yuan operating profit in the first quarter, up 3.9 percent and was helped by an 8.9 percent cut in operational costs.

PetroChina's crude oil throughput at refineries fell by 9.6 percent to 276.5 million barrels, or 3.04 million barrels per day, due to the coronavirus pandemic.

Sales of refined oil products, including gasoline, diesel and kerosene, fell 15.9 percent to 3,547.8 tonnes, reducing profits by around 20.11 billion yuan ($2.84Bln).