LNG

UK major BP filed a complaint with the US Federal Energy Regulatory Commission against LNG developer Venture Global claiming the Arlington, Virginia-based company was “illegally withholding information” about delays in delivering LNG from its Calcasieu Pass export plant in Louisiana.

Japanese liquefied natural gas imports dropped again last month as storage increased and North Asian prices declined with thermal coal deliveries also plunging while nuclear plant usage is increasing.

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.

Japan, which formally took back the World No. 1 LNG importer spot from China in 2022, reported a small rise in LNG shipments in January though at a much higher cost than in the prior-year period.

Imports for January amounted to 6.82 million tonnes, or about 100 cargoes, and an increase of 0.5 percent from the 6.78MT received in January 2022, according to Japan's Finance Ministry.

The imports cost 873.8 billion yen ($6.54Bln), which was 57 percent more than the 556.6Bln ($4.16Bln) cost of shipments in January 2022.

While China’s LNG imports dropped by 18.8 percent to 64.15MT, the official Japanese LNG import volumes for 2022 came to 71.99MT compared with 74.31MT in 2021, showing a fall of 3.1 percent but still enough to essily maintain the lead over China.

China had overtaken Japan in 2021 to become the world’s largest LNG importer with 78.93MT of imports, though then slipped back because of the economic slowdown and Covid-19 restrictions affecting energy demand.

Japan’s annual LNG costs jumped by 97.5 percent to 8.55 trillion yen ($64.34Bln) in 2022.

Monthly LNG imports for December 2022 to Japan’s network of 37 terminals had fallen by 13.8 percent to 6.06MT from 7.03MT in the same month of 2021.

Coal imports

Japan continued to use an increased proportion of thermal coal for electricity generation and the January coal imports rose by 1.3 percent from January 2022 to 10.68MT.

LNG cargo deliveries from Asian countries like Malaysia and Indonesia increased in January by 17.8 percent to 1.88MT.

Middle East cargo imports rose by 24.1 percent to 787,000 tonnes during the month.

LNG imports from the US tumbled by 73.9 percent year-on-year to 90,000 tonnes as cargoes from American export plants were pointed at Europe.

Imports from Russia declined on the month by 9.7 percent to 704,000 tonnes and cost 78.6Bln yen ($589M) for what amounted to 11 cargoes.

The cost to Japan of Russian deliveries for all of 2022 was 82.4 percent higher than in the previous year with the bill from the Russians coming to 677.5Bln yen ($5.24Bln).

Japan continues its deliveries of LNG from the Russian Far East plant at Sakhalin Island even after the invasion of Ukraine in February 2022 as energy security outweighed the Western-led imposition of sanctions against Russia on the energy and financial fronts.

The balance of Japan's LNG imports in January amounted to 3.86MT in the form of deliveries from the country’s largest supplier Australia, some spot cargoes and small volumes from Africa.

In its energy mix in 2022, Japan has continued to delay more nuclear power re-starts meaning that volumes of LNG and coal purchases remain high.

Since the Fukushima disaster, only 10 reactors have been given the go-ahead to go back into operation compared with the 54 that were online in 2011 and which supplied around 30 percent of Japan’s energy needs.

A further 21 reactors have been decommissioned since 2011 and will never be re-started.

Natural gas wholesale futures prices in Europe broke records for a second day in a market of contrasts as sky-high prices for spot LNG carrier charters have finally crashed for both the East of Suez and West of Suez markets and by up to $70,000 per day.

The International Gas Union, the global promoter of the natural gas industry and whose membership covers 85 countries and 95 percent of the gas market, has published its latest Global Wholesale Gas price survey showing that gas-on-gas competition (GOG) in the markets continued on its upward path.

China’s National Development and Reform Commission (NDRC), the nation’s economic planning body, has urged energy companies to increase imports of liquefied natural gas and thermal coal for power generation as colder weather hits northern China around the capital Beijing and is forecast to last for weeks.

China Petroleum and Chemical Corp. (Sinopec), one of the largest LNG importers, said it would seek more volumes on the spot market.

Sinopec and PetroChina, the Hong Kong-listed affiliate of China National Petroleum Corp. and another LNG importer, have also said they would be increasing shale-gas production under five-year plans.

Sinopec, a shareholder in the Australia-Pacific LNG plant in Queensland operated by ConocoPhillips, said its regasification terminals at Tianjin Port in the north and the east China Qingdao facility would both handle record volumes in January.

The company said it would also increase domestic natural gas production by another one million cubic metres per day by the end of January by accelerating the drilling of new development wells.

Sinopec said it was additionally extracting gas from its underground storage in central and east China, while maintaining high inventories at LNG storage tanks.

Chinese LNG imports soared to a record in November and surpassed the monthly total of shipments received by Japan, the world’s largest LNG importer.

Another record of LNG volumes is forecast to be announced for December. China’s November imports amounted to 6.61 million tonnes, 2.4 percent from a year earlier, while Japan’s November shipments came to 6.02MT.

For the first 11 months of the year, China received shipments totalling 59.54MT, an increase of 10.7 percent compared with the same period of 2019.

November 2020 is the fifth time that China had taken the position of the largest LNG importing country on a monthly basis, following November 2019 and May, June and August 2020.

China’s main LNG suppliers are Australia, Qatar, Malaysia, Indonesia, Russia and the US.

At the same time, PetroChina and Sinopec are planning to increase their shale-gas output over the next several years from the Sichuan shale basin in central China.

PetroChina aims to more than double shale gas production in Sichuan to more than 22 billion cubic metres by 2025.

That will surpass a target set by Sinopec, which led China’s shale gas development with the first commercial discovery at Fuling in Sichuan, from the current 7.5 Bcm of output to 13 Bcm by 2025.

Sinopec has added 83 Bcm of newly proven reserves that have yet to enter production at the Chuanxi field in Sichuan.

The reserves, certified by the Chinese Ministry of Natural Resources, raise the field’s total proven resources to 114 Bcm.

The reservoir is spread over 138 square kilometres in the western part of the basin at depths of 6,000 metres.

However, shale gas output is limited in China in that by 2025 the total annual production by Sinopec and PetroChina combined would only amount to the LNG shipments from one large US Gulf Coast LNG export plant.

PetroChina’s shale operations are centred in the Yibin, Zigong, Neijiang, Luzhou and Yongchuan regions of the Sichuan Basin.

The company started appraising shale gas blocks in the Sichuan basin in 2006 and made its first major discovery with the Wei-201 well in 2010.

Japanese liquefied natural gas imports declined again last month while prices were 13.5 percent lower than a year ago as Australian cargoes increased and Middle East shipments fell.

Singapore LNG spot cargo prices dropped half a percentage point on the week from already low levels with only Asian and Middle East cargoes for delivery in the second half of November maintaining values over US$5.000 per million British thermal units amid ample supplies.