GIIGNL: global LNG trade climbs 2.5 pct

Global LNG trade hit record high in 2015 driven by new volumes from Australia and Indonesia, GIIGNL, the International Group of Liquefied Natural Gas Importers said in its latest annual report.

According to GIIGNL, global LNG trade has grown by 2.5% in 2015, with total quantities reaching an all-time high of 245.2 MT over the year.

Most of the growth was absorbed by the Middle-East and by Europe, where net imports recovered thanks in part to a 31% decrease in re-exports,” Domenico Dispenza, President of GIIGNL said in the report.

While the USA are on track to challenge Qatar as the world’s leading supplier of “flexible LNG”, with the first loadings from Cheniere’s Sabine Pass in February 2016, two new liquefaction plants were commissioned in the past year (Donggi-Senoro inIndonesia and GLNG in Australia).

According to Dispenza, Australia became the second largest exporter of chilled gas, ahead of Malaysia.

In 2015, 14.4 MTPA of new production capacity have been added to the market and 42 MTPA are expected to come on stream in 2016. On the demand side, the mature markets of North East Asia look uncertain and experienced their first decline since the 2009 recession, mainly in South Korea and Japan,” he said.

In China, traditionally considered as a key driver for LNG growth, imports continued to rise despite a 25 year-low in GDP growth rate. Europe consumed 16% more volumes (net of re-exports) than in the previous year, while the Americas experienced an 8% decline in imports, Dispenza said.

Number of LNG importing countries more than doubled since 2005

According to Dispenza, the number of countries importing the chilled fuel more than doubled to 34 as compared with 15 LNG importing countries in 2005.

This was supported by the development of FSRUs (floating storage and regasification units) the capacity of which now amounts to 77 MTPA.

At the same, the time pricing levels and structures are evolving as well. Regionalized until recently, LNG prices have declined globally in recent months because of common drivers, such as the drop in oil prices, slow demand and the ample supply situation, Dispenza said.

As a result, the (temporary?) price convergence in the Atlantic and Pacific Basins has reduced arbitrage opportunities and curbed the enthusiasm for interbasin trade. As a consequence, re-loadings dropped from 6.4 MTPA in 2014 to 4.4 MTPA last year.”

Dispenza said that the decline in LNG spot and short-term volumes imported by Japan and South Korea was partly offset by deliveries to Egypt, Jordan and Pakistan.

As a result, the share of spot and short-term LNG transactions remained stable compared to last year, around 28% of total trade.

Based on data submitted by GIIGNL members who cover about 80% of worldwide LNG flows, the share of “true” spot trades–defined as trades of LNG cargoes delivered within 90 days from the date at which the transactions is concluded– was estimated at approximately 15% of all trades last year, Dispenza said.

Positive outlook for LNG imports

According to Dispenza, in the longer-term, the future of LNG imports looks positive.

A number of emerging economies are considering FSRU projects and all eyes are on China and India, expected to require large volumes over the next decade.

FLNG solutions will make it possible to unlock reserves in otherwise stranded areas, and Iran could soon be in the limelight as an LNG exporter, he said.

LNG continues to be recognized as a clean, flexible and competitive solution to energy needs across all demand sectors and regions, in particular in promising markets of marine and road transportation.

However, in the near to medium term, the consequences of low prices on LNG trade seem “difficult to predict, which brings considerable uncertainty along the value chain for the next five or so years.

As a result, greenfield investment decisions expected in Africa and Canada have been deferred and only five FIDs have been taken in 2015 –four of which in the USA and one in Cameroon– for a total capacity of 19.3 MTPA, Dispenza said.

On the demand side, buyers are striving to reshape their strategies in order to mitigate risks, to optimize procurement costs and maximize flexibility, he added.