LNG

The Australian Government said that given the inherent seasonal variability in European natural gas consumption driven by heating demand, there remains a risk of further price volatility in 2023 as seasonal conditions change.

The European Union currently lacks the firm liquefied natural gas contracts needed to fully offset lost Russian pipeline gas volumes, which will force the bloc to source its marginal LNG supplies from global spot markets when needed, according to the latest Australian “Resources and Energy Quarterly” from the Office of the Chief Economist.

“As such, LNG markets are expected to remain in moderate shortfall over 2024 and early 2025, as Europe continues to replace lost Russian pipeline gas with LNG imports,” stated the report.

“Our base case is for Asian spot prices to average US$14/MMBtu over the outlook period, with risks skewed to the upside for the reasons mentioned above,” added the report.

“While this price is well below levels averaged over 2022 (US$33/MMBtu), it is still double the five year, pre-2020 average of US$7/MMBtu,” stated the report.

Export plants

Australia itself has 10 LNG export plant and in 2022 shipped 82 million tonnes of LNG valued at A$91 billion (US$60.55Bln).

The report forecasts that national LNG income will fall through fiscal 2024-2025 to A$60Bln (US$40Bln), with volumes also easing to 79MT over the same period.

“While volatility in LNG markets could re-emerge over the Northern Hemisphere winter and boost spot sale earnings, the base case is that lower energy prices will cause the value of Australian LNG exports to fall,” said the report.

The cargoes last year were mainly delivered to Asia and with 80 percent of volumes being unloaded in Japan, China and South Korea.

Around 75 percent of the cargoes were sold under long-term contracts.

The Australians believe that global LNG trade is expected to grow by 13 percent, or 51MT, over the two-year outlook relative to 2022.

Almost half of the growth (24MT) will come from newly commissioned US LNG plants, while facilities in Nigeria will also contribute 7MT.

Forecasts indicate that most of the new production should be sold to Europe, which is expected to increase its LNG imports from 121MT to 147MT between 2023 and 2025, respectively.

ASEAN volumes

“But ASEAN, Australia’s closest export market, will likely be the second-largest source of demand growth as Vietnam and the Philippines start importing LNG, with total ASEAN demand rising by 11MT over the outlook (two-year) period,” added the report.

The report explained that despite the favourable environment for LNG producers, the outlook for Australia was mixed.

“Australian LNG exports are forecast to fall marginally, as existing facilities face difficulties back-filling their operations with gas from new reserves,” said the report.

“At the same time, investment in offshore exploration remains low despite high commodity prices, which could impact Australian gas production beyond the outlook period,” it declared.

Prices spiked for North Asian spot cargoes in the post-winter windows to $28 per million British thermal units, underpinned by increasing contract cargo prices linked to oil and with European benchmarks staying at seasonal record levels and fuelling global concerns over gas shortages.

Indian liquefied natural gas imports plunged over 20 percent for a second successive month as the costs of LNG shipments soared, though falling volumes were again offset by offshore domestic natural gas pipeline supplies on the East Coast.

Cargo liftings of liquefied natural gas are maintaining their momentum through the week to April 11 and spot cargo prices for North Asia increased for June and July compared with last week while European gas values were flat.

Intercontinental Exchange, the US operator of global trading platforms and clearing houses, released its fourth-quarter and full-year 2020 trading volumes showing record usage of products like the Dutch Title Transfer facility (TTF) gas pricing for continental Europe and the Japan-Korea Marker spot LNG cargo price derivative.

The US Department of Energy has just published its latest liquefied natural gas export data illustrating the drop in prices at the different plants and with China returning as the second-largest destination and two European nations, the UK and France, dropping out of the top five.

US cargo prices fell in April 2020, according to the new DoE report. Four out of the five large US facilities operating had lower prices in April 2020 versus the previous month.

The Corpus Christi plant in Texas, belonging to Cheniere Energy, was the only exporter to have higher prices compared with the previous month.

The proportion of spot cargoes compared with the contracted and other tolling-based deliveries has declined in 2020.

The number of overall spot cargoes dropped in April to 9.5 percent from 9.8 percent in the previous month. The total volumes shipped since February 2016 came to 4,720.4 billion cubic feet of which 449.6 Bcf were spot shipments.

The average year-to-date prices for each plant (from the export point) from highest to lowest were: Cove Point (Maryland) $6.49 per million British thermal units, Cameron (Louisiana) $5.84 per MMBtu, Sabine Pass (Louisiana) $4.80 per MMBtu, Freeport (Texas) $4.60 per MMBtu, Corpus Christi (Texas) $4.17 per MMBtu and Elba Island (Georgia) $2.99 per MMBtu.

Since US LNG exports began more than four years ago in February 2016, the DoE said a total of 1,446 cargoes had been shipped on LNG carriers and 440 in ISO containers through April 2020 to 38 different countries, including to four nations in the Caribbean who receive ISO containers.

The top five countries of destination represented 47.7 percent of total US LNG exports in April 2020 and China returned to the top five group as the UK and France dropped out.

The top five destinations for cargoes in April were: South Korea (24.3 billion cubic feet - seven cargoes); China (21.1 Bcf - six cargoes), Spain (20.0 Bcf - six cargoes), Japan (18.4 Bcf - five cargoes) and India (18.9 Bcf - five cargoes ).

Each April cargo amounted to 3.39 Bcf of natural gas in volume and totaled 210.4 Bcf, 13.8 percent lower that the March shipments of 244.1 Bcf, though 67 percent higher than in April 2019.

A total of 62 cargos were shipped in April compared with 75 in March 2020 and 42 shipments in April 2019.

The Top 10 countries of destination overall since 2016 through April 2020, by numbers of cargoes, are 1) South Korea 221 cargoes, 2) Mexico 150, 3) Japan 140, 4) Spain 93, 5) UK 77, 6) China 75, 7) Chile 70, 8) India 66, 9) France 61 and 10) Brazil 54 (including split cargoes).

The Sabine Pass plant sent out 27 cargoes in April, Cameron (11) Corpus Christi (10), Freeport (9), Cove Point (5) and Elba Island (0).

The average year-to-date price of US LNG through April 2020 was $4.49 per MMBtu versus March’s $4.66 per MMBtu.

Prices of shipments from the Sabine Pass export point in April averaged $4.42 per MMBtu ($4.68 per MMBtu in March).

Shipments from the Cove Point plant in April cost an average of $5.93 per MMBtu ($6.21 per MMBtu in March).

Prices at Corpus Christi in April averaged $3.59 per MMBtu ($3.08 per MMBtu in March).

Cameron plant exports cost an average price of $4.93 per MMBtu in April ($4.98 per MMBtu in March).

The Freeport facility posted average April prices of $4.41 per MMBtu ($5.01 per MMBtu in March).

The Elba Island plant shipped no cargoes in April and just its second cargo in January 2020 at a price of $2.57 versus $3.77 per MMBtu for the December 2019 cargo.

The US also sends regular ISO containers by cargo ship to the Caribbean nations of Barbados, the Bahamas and Haiti.

In April a total of 15 containers were delivered versus 14 in March 2020. The recipients were Bahamas eight, Barbados four and three for Haiti and none in the month for Jamaica.

Oil prices partially recovered after two days of turmoil as US crude futures stayed in positive territory but the North Sea Brent oil price was weak amid the supply glut, also shared with the LNG market as the Asian spot price dropped.

Oil prices recovered slightly by around 10 percent along with financial markets, helped by statements from President Donald Trump on taking major steps to help the US economy counter the impacts of the spreading coronavirus outbreak and global economic slowdown.

South Korea, the third-largest LNG importer, posted a 15 percent decline in liquefied natural gas shipments last month even at seasonally low prices, with Australia and Malaysia as the leading suppliers.

LNG spot cargo prices were flat over the past week with mostly higher quotes reserved for December volumes peaking to an average of at least $6.250 per million British thermal units for shipments to southeast Asia and North Asia.