LNG continues to enhance global energy security
The International Gas Union (IGU) is pleased to launch its annual LNG report for 2020. The comprehensive analysis highlights all the material changes in the global LNG industry in 2019.
This report features key global LNG industry updates, right across its value chain, demonstrating yet another strong year of growth for this crucial segment of the natural gas sector. LNG continues to enhance global energy security and increase the flexibility of access to the abundant global gas supplies.
In its sixth consecutive year of growth, the LNG trade increased by 13% to a total of 354.7 MT.
While no new consumers joined the existing 37 markets in the global LNG arena in 2019, the most recent new players have increased their intake volumes - Bangladesh, Pakistan, Poland, and Panama - a welcome sign. At the same time, mature markets, like India, are adding new floating regasification capacity.
FSRU continues to be an exciting and growing segment, improving access to modern energy and energy security worldwide. Of the 37 existing LNG import markets as of February 2020, 19 imported LNG with FSRUs, and six of those had onshore terminals as well.
Export growth came from the USA, Russia and Australia, as well as Algeria and Egypt. The US is now the third largest LNG exporter, behind Qatar and Australia, with Russia in the fourth spot.
Asia Pacific and Asia remain the key centres of demand, and together they accounted for almost 70% of global LNG imports in 2018.
2019 was another record year of low prices, driven by increasing natural gas production, the commissioning of new export infrastructure and limited demand response from Asian markets.
The first quarter of 2020 has proven to be very challenging for natural gas and LNG producers, as historically low gas prices have prevailed throughout the winter season. First, the increase in LNG exports combined with a mild winter across the Northern Hemisphere lead to a counter-cyclical drop in international gas prices. The bearish tone continued throughout February and March as markets around the world started to announce lockdowns in order to control the spread of the COVID-19 virus.
As the world has entered an unprecedented era of low LNG prices, the moment could be opportune for the environment, as there is a stronger economic case for switching from more polluting fuels to natural gas.
Gas will continue to play a vital role towards an economically and environmentally sustainable energy future. It produces less than 10% of the particulates and 50% less GHG than coal when used in power, 21% less than fuel oil in transport, and above 95% higher efficiency when used to heat homes. To reinforce this value, the industry continues to improve measurement and reduction of emissions across the full LNG value chain.
"As the cleanest burning fossil fuel, natural gas has a key role in providing reliable and cleaner energy to all. Even in the most developed markets, affordability and reliability of clean energy is a key issue and switching to natural gas offers an enormous opportunity. The IGU will continue to demonstrate the vital environmental and economic role of gas in the sustainable energy future and encourage collaboration between industry and communities towards achieving this future." - says IGU President, Joe Kang.
Global LNG trade set a new record last year, reaching 354.7 MT, up 13% on 2018. The US (+13.1 MT), Australia (+8.7 MT) and Russia (+11 MT) added the most capacity but Qatar managed to maintain its position as the largest exporter in the world (77.8 MT).
China imported 7 MT more and Europe 37 MT more while Japan and South Korea both took less; and Egypt and Argentina swung from LNG imports to LNG exports. Re-exports fell 59% in 2019 as price differences between the Atlantic and Pacific basins fell.
Only three markets saw a drop in export levels versus 2018: Indonesia and Equatorial Guinea received less feedstock gas; and Norway had longer maintenance at Hammerfest owing to low prices.
Asia Pacific continued to grow, exporting a total of 131.7 MT in 2019, an increase of 7%, mainly from Australia but also from Papua New Guinea.
Despite its gas resource size, the Middle East increased exports by only 2% with small increases from Qatar, the UAE and Oman.
The largest increases in imports were seen in Europe, with the UK, France, Spain, the Netherlands, Italy and Belgium accounting for most of the additional imports (+32 MT).
Europe re-exported 58% of global re-exports in 2019, and France and Singapore had the highest re-export loadings in 2019, re-exporting 0.6 MT and 0.4 MT respectively.
The United States continued to contribute significantly to LNG project sanctions in 2019, totaling 30.1 MTPA, thanks to the availability of abundant shale gas in the region.
In the US, Henry Hub front month prices dropped about 15%, averaging US$2.53 per MMBtu in 2019 despite liquefaction and power generation demand, as total US natural gas supply increased 10% to 935 Bcm in 2019.
The Marcellus and Utica shales (in the Appalachia Basin) accounted for 45 Bcm of the growth as new pipeline capacity came on line. But associated gas supplies from oil fields have also flooded the US market.
Liquefaction capacity expansion is set to continue in 2020 and is expected to reach 24.35 MTPA in capacity additions. Liquefaction capacity is forecast to further expand to 454.85 MTPA by the end of 2020, following a record volume of sanctioned projects totaling 70.8 MTPA.
The record volume of sanctioned liquefaction projects is underpinned by the expectation of growing LNG demand globally, creating the need for additional liquefaction capacity. This will also lead to competition to secure EPC capacity, as project developers aim to enter the market by the mid-2020s in order to capture growing demand.
Africa had 20.9 MTPA of liquefaction capacity sanctioned in 2019, driven by growing interest in commercialising the continent's rich gas resources.
As of February 2020, total LNG regasification capacity was 821 MTPA across 37 markets, thanks to the addition of six new terminals and three expansions at existing terminals between 2019 and February 2020. Of the existing LNG markets, Bangladesh, Brazil, China, India, and Jamaica together built seven terminals, adding 23.4 MTPA in 2019.
The LNG shipping industry kept pace, adding 42 new vessels to a total of 541 active vessels by the end of 2019. The active fleet includes 34 FSRUs and 4 FSUs, demonstrating the continued interest in flexible solutions to enable markets to start importing LNG or increase their LNG imports as energy demand grows.
FSRUs have continued to act as a quick enabler for LNG imports. Bangladesh has two such FSRUs to replace declining gas production. Traditional barriers including project siting limitations, environmental and domestic land use requirements and opportunity costs, investment qualification and availability deficiencies, and policy uncertainties and instabilities will continue to exert pressure against LNG development among prospective importers.
BENEFITS OF GAS
Almost a billion people today have no access to electricity and nearly three billion have to cook with fuels that produce toxic fumes in their homes. Indoor air quality still represents a large part of the premature deaths attributable to air pollution (3.8 million deaths in 20161) - proof of the urgent need to tackle this issue. As the cleanest-burning fossil fuel, natural gas has a key role in providing reliable and cleaner energy to all. Even in the most developed markets, affordability and reliability of clean energy is a key issue and switching to natural gas offers an enormous opportunity.