Following a rise in the supply of liquefied natural gas (LNG) in recent years, it was speculated that these cargoes would be unable to find buyers. However, demand for the commodity has aligned with this increased supply. In the face of these developments, what are the market prospects for 2018?
On February 8, our Gas Research & Forecasts department hosted LNG Market Outlook 2018 — Tightly Balanced or Finally Set for a Supply Glut?. The webinar analyzed the upcoming supply, demand and pricing for 2018.
At the beginning of 2017, the Asian spot price for LNG was at a two-year high of nearly $10/MMBTU. It ended the year at a three-year high of $11.20/MMBTU.
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New production in 2017
A number of new trains came online last year, including Malaysia’s Bintulu, Sabine Pass in the U.S. and Gorgon in Australia. These were in addition to the start-ups of Wheatstone in Australia and Russia’s Yamal.
The majority of new supply in 2017 came from the U.S. and Australia, but there was a moderate uptick in production from Africa, with Nigeria and Algeria receiving additional feed gas from new gas fields.
However, Indonesia witnessed lower-than-expected exports in comparison with 2016, due to declining gas production domestically.
Overall, 39bcm was added to the global production of LNG, bringing total global production to approximately 400bcm — an 11 percent increase on 2016.
Where has demand increased?
With the large increase in production in 2017, one wondered where the increase in demand came from — the answer was China.
As China switches from coal to gas, its imports of LNG increased by 46 percent in 2017, and in doing so overtook South Korea as the world’s second-largest LNG importer.
Elsewhere, noticeable upticks in demand were seen in the Mediterranean and South Korea.
What is the supply outlook for 2018?
Our Gas Research & Forecasts department expects an additional 25bcm to be added to the global production of LNG in 2018.
In Australia, a number of new trains are expected to come online.
Meanwhile, the U.S. has a number of projects all the way from Maryland down to Texas that are expected to start commercial operation this year.
Finally, train two at Yamal, Russia, is expected to come online in the coming year.
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How does demand for 2018 look?
As with 2017, we expect China to be a key buyer in 2018 and maintain its position for a second consecutive year as the second-largest importer of LNG.
We anticipate a combined two percent decline from the world’s number one and number three importers, Japan and South Korea respectively.
In South Asia, India is expected to increase its imports by 20 percent this year, while Pakistan will have to import 50 percent more additional LNG to shrink its growing gas deficit.
Meanwhile, Bangladesh also recently announced it would start importing LNG in 2018, marking a new importer for the year.
Thailand, Turkey and Mexico are also expected to increase LNG imports, while imports to Southern Europe and Egypt are anticipated to decline.
Register here to watch the webinar recording on demand, or access the slides from the presentation, as we delve into further detail regarding supply, demand and pricing scenarios for the global LNG market in 2018.
