Increased Global LNG Demand Forecast
Global liquefied natural gas demand was up 8.5% year on year in the first half of 2011 and is expected to grow by 12% for the whole year, driven by incremental demand from Japan, the United Kingdom and India, and continued growth from traditional buyer South Korea, according to a report prepared by Bernstein Research.
Japanese demand rose strongly in the second quarter of 2011, as LNG was the major substitute for the lost nuclear power following the March quake and tsunami. Japan's LNG imports were up 8% year on year in H1 2011, or equivalent to 2.64 million mt/year of additional demand compared with H2 2010.
According to the report, future LNG demand is likely to remain supported, as "long term viability of nuclear power continues to put stress on the power sector in Japan."
Bernstein estimated that "1 GW of lost nuclear capacity will require an additional one million mt of LNG to replace it." They added that Japan will require "an additional 10 million mt of LNG in 2011, 14 million mt in 2012 and 12 million mt 2013 onwards."
As a result, Japan LNG demand is expected to grow from 70 million mt in 2010 to 89.3 million mt in 2015 and 97.4 million mt by 2020.
As such, oil and LNG will meet the power deficit due to the lost nuclear capacity in Japan in the ratio of 60:40 in 2011 and 50:50 in 2012, according to the IEA.
Asian LNG demand growth, averaging 9% year on year in H1 2011, was the strongest in India and China, where LNG imports were up 26% and 10% year on year, respectively, the analysts said. Korea recorded a 8% year on year increase in imports for the same period.
The UK, Japan, Korea, India, China and emerging markets in Latin America such as Brazil and Chile would support the near-term demand outlook, the Bernstein report said.
Longer term, analysts expect global LNG demand to grow from 218 million mt/year in 2010 to 310 million mt/year by 2015 and 410 million mt/year by 2020.
On the supply side, Bernstein said that the LNG supply-demand balance will tighten over the next three to four years due to stronger demand growth, limited liquefaction capacity growth, project delays and declines in Southeast Asian exports.
Global spare capacity is likely to drop to 26 million mt/year in 2011 from 50 million mt/year in 2010, the analysts added.
"Spare capacity will bottom out in 2014 with the total LNG liquefaction output capacity just 0.6% above the demand," which will translate to about 2 million mt/year of spare capacity.
Market tightness will prevail till major capacity additions come online in 2015 and 2016, which includes the 15 million mt/year Gorgon LNG, 7.8 million mt/year Gladstone LNG and 9 million mt/year Asia Pacific LNG.
More than 60% of the global planned LNG liquefaction projects are located in Australia, including the Prelude LNG, Asia Pacific LNG, Gladstone LNG, Ichthys LNG and Wheatstone LNG projects.