Posted - November 19, 2013 - Hellenic Shipping News Worldwide
The global market for shipped natural gas is entering key years of
change in 2014 with several new buyers emerging while big new supplies
will only slowly become available from 2015, resulting in a tight market
for years to come.
Demand for liquefied natural gas (LNG) has been rising for years, driven
mostly by booming Asian demand and a loss of nuclear power in Japan and
more recently South Korea. Import needs are set to rise further in 2014
as China and Latin America are becoming increasingly active buyers.
"Looking towards 2014,... rising Chinese import capacity and continued
strong demand out of Latin America suggest global LNG markets are
heading towards another tight year," Bank of America Merrill Lynch
(BoAML) said in a research note this month.
While demand for LNG is expected to rise, analysts say that big supply additions are not expected before 2015.
"On the supply side, there is plenty to be concerned about. Projects in
Angola, Algeria and Nigeria have been underperforming. Major Australian
projects should start to hit the market in 2014, but we continue to see a
dearth of new liquefaction projects coming online until 2015," BoAML
said.
As a result of the tight market in 2014, the report said that Asian spot
prices could rise above last winter's highs of almost $20 per million
British thermal units (mmBtu) this winter, up from a current price of
$18.30 per mmBtu.
NO GLUT
While some new supply sources are expected to ease the market somewhat
by 2015, driven largely by new exporters from the United States and
Australia, analysts say that a rise in LNG demand of around 7 percent a
year until 2020 will still result in a tight market for most of the
decade.
"Global gas demand is surging, which is driven by a preference towards
lower carbon fuels, a shift away from nuclear and emerging market
growth. As a result, we expect international gas markets to remain
'tight' through to 2020," Bernstein Research said this month in a global
gas market study.
Beyond an overall tight market outlook, large regional supply and demand differences are expected to remain in place.
North America, where the shale gas boom has pulled down prices, will
benefit from low domestic prices and an opportunity to export its excess
gas to Asia, where prices are expected to rise further on the back of
booming demand and a lack of significant gas production of is own.
"Gas markets will remain fragmented, divided between North America,
where gas is abundant and prices are low and international markets where
gas will be supply constrained and prices continue to rise," Bernstein
said.
The researchers added that this imbalance would result in a sharp rise
in global LNG trading activity, as producers and shippers try to take
advantage of regional price differences.
NEW PLAYERS
Beyond a tight market, LNG trading is set to become more diverse, with several new buyers and sellers entering the stage.
On the demand side, China is fast emerging as a major buyer, with six
LNG import terminals likely to become operational between November 2013
and the end of next year..
China, which is already the world's top energy user but is so far only a
small LNG player, is keen to curb use of dirtier coal and aims to
triple the use of natural gas to top 300 billion cubic metres (bcm) by
2020, with nearly a third of that having to be imported to China via
LNG.
In the Americas, import demand is also rising especially in Mexico and
Argentina where domestic production is dropping while demand is on the
up.
Reacting to rising demand, new sellers are slowly emerging.
Russia, the world's biggest supplier of pipeline gas, has so far been
slow to enter Asia's booming LNG market, but the government passed
legislation this month towards allowing rivals of state-controlled
Gazprom to export LNG in a move to enter growing Asian markets.
In North America, the U.S. will begin to export LNG from 2015 and most
analysts say that volumes will reach over 50 bcm by 2020, and Canada
also has plans to begin exports this decade.
But the biggest new exporter is likely to be Australia, which could
challenge the world's top LNG shipper Qatar by reaching annual export
volume of almost 100 bcm by 2020. Qatar exported 105.4 bcm of LNG in
2012.
However, most of this LNG will become available after 2015 and at
minimum costs of almost $15 per mmBtu, so it will act more as a price
stabiliser rather than help bring down prices.
Other major LNG export sources, such as East Africa or the East
Mediterranean, are not expected to come to market before 2018 at the
earliest.
Source: Reuters (By Henning Gloystein, Additional reporting by Oleg Vukmanovic; editing by Keiron Henderson)
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