[NGW Magazine] LNG Trade Grows Sharply

Global LNG imports rose by 9.9% last year 2017, the biggest growth spurt since 2010. More ways of using and distributing LNG, including bunkering, small-scale LNG and the rising use of LNG in local power plants, suggest more growth is to come.

Global LNG imports increased by 9.9% to 289.8mn metric tons (mn mt) in 2017, according to the annual report of the International Group of LNG Importers (GIIGNL) released mid-April.

The 26.2mn mt increase was the highest recorded since 2010, contrasting with an average annual growth rate of 0.5% in 2012-15 and exceeding the rise of 7.5% in 2016. 

Main additions to supply came from Australia and the US, as trains that came online in 2016 ramped up, and five new liquefaction trains were added: Gorgon train 3 and Wheatstone T1 in Australia; Sabine Pass T3 and T4 in the US; and Russia’s Yamal T1 which just scraped into 2017. The environment for new projects seeking investment remained “challenging”, said GIIGNL, with only one export project – Coral FLNG offshore Mozambique – taking final investment decision in 2017.

Qatar supplied 77.5mn mt, so 27% of global 2017 LNG imports. But its volume slipped by 2.7% year on year whereas next-placed Australia at 55.6mn mt, Malaysia 26.9mn mt and Nigeria on 20.3mn mt all increased their supplies year on year – in Australia’s case by 24%. This trio accounted for about 19%, 9% and 7% of global LNG supply. In fifth place, Indonesia supplied 18.7mn mt. Imports from the US last year were 12.2mn mt, on par with Algeria. The number of LNG exporting nations remained 19, the same as in 2016. 

Most demand growth occurred in Asia where LNG imports grew by 19.6mn mt last year. China (up 11.6mn mt) and South Korea (up 3.6mn mt) accounted for the largest year on year increases in net imports, while Egypt and the UK had the largest declines (down 1.3 and 2.6mn mt respectively). The five largest LNG import markets in 2017 were all in Asia. 

Japan's net LNG imports edged 0.2% higher to 83.5mn mt, remaining the largest last year. But China nudged into second place, up by a whopping 42%, to 39mn mt, ahead of South Korea at 37.8mn mt (up 11%) – followed by India 19.2mn mt (up 1%) and Taiwan 16.6mn mt (up 10%). 

Spain, at 12.1mn mt and up 19%, was the only other country in the world to top the 10mn mark, although four European countries each more than doubled their imports, albeit from a low base: Portugal, Greece, Netherlands, and still tiny Finland which until lately relied wholly on Russian gas. Malta imported LNG for the first time in 2017, taking the total number of importing countries to 40.

Asia’s market share edged higher to 72.9% (from 72.7% in 2016), followed by Europe’s 15.9% (from 14.6%), whereas the Americas' share of 5.8% and that of the Middle East on 5.5% were lower (from 6.1% and 6.6% respectively in 2016). Whereas import volume into the Americas at least grew, it fell by 9.1% into the Middle East - where top importer Egypt's 2017 imports fell by 18% to 6.18mn mt. 

Greater liquidity and flexibility

Of the 289.8mn mt global trade in 2017, 27% or 77.6mn mt were traded on a spot or short-term basis (compared with 28% in 2016). Of that, pure ‘spot’ – delivered less than three months from the transaction date – accounted for 20% of the global total, or 59mn mt, said GIIGNL.

That pure spot ratio has risen steadily in recent years, up from 47mn mt or 18% of global trade in 2016, and 37mn mt or a 15% share in 2015. Spot imports are facilitated by LNG contracts with destination flexibility, noted GIIGNL.

Although not discussed in the report, five commodity traders have amassed an increasing share in spot trade in recent years and look set to continue to do so going forward. Returning to this report, GIIGNL saw the largest growth in spot imports from China and South Korea, which imported 21% and 22% respectively of their LNG intake on a purely spot basis last year. 

US cargoes represented much of this pure spot traffic. With only Cheniere’s Sabine Pass exporting last year, the US nonetheless supplied 25 countries in 2017 (up from 13 in 2016), followed by Qatar (down one to 24) and Nigeria (up 3 to 24). 

Last year Japan joined Europe to insist on greater destination flexibility, certainly for new contracts. Japan also re-exported LNG for the first time in 2017.

The 289.8mn mt total trade is net of LNG cargoes loaded for re-export. In 2017, 2.6mn mt were re-exported by 12 countries – mainly France, Netherlands and Singapore – to 20 destination countries, said GIIGNL, which was down from 4.5mn mt in 2016 owing to narrower price differentials. Both years were a far cry from 2014 when 6.4mn mt were re-exported, of which over hlf  – 3.8mn mt – came from Spain.

Liquefaction capacity expands by 7% in 2017

World liquefaction capacity increased to 365mn mt/yr at end-2017, up 25.4mn mt (or 7%), while this year a further 38mn mt/yr ofnew capacity is expected to come online – of which one-third in the US – taking the total 10% higher to 403mn mt by the end of this year.

In Canada however, four projects were cancelled in 2017: Prince Rupert LNG (by Shell in March), Pacific Northwest LNG (by Petronas in July), Aurora (by CNOOC/Inpex in September) and Malahat (by Steelhead in December).

Regasification (import) capacity grew to 850mn mt/yr in 2017, up 20mn mt/yr, providing a fair amount of redundancy. Five new terminals were added, and two expansions. Also, GIIGNL said at end-2017 that nine offshore and 15 onshore terminals were reportedly being built, including five in China. 

Shipping fleet and retail growing 

The total tanker fleet at end-2017 consisted of 511 vessels, including 28 floating storage and regasification units (FSRUs). In addition, 120 vessels were on order – of which 72 were scheduled for delivery during 2018.

GIIGNL said the average spot charter rate for a 160,000 m³ LNG carrier stood at $46,058/d, 37% higher than the average $33,528/d realised in 2016. The FSRU fleet of 28 units had an overall cargo capacity of 4.3mn m³, said GIIGNL, with a further 12 FSRUs on order, of which five are due for delivery this year.

In a new ‘retail’ section at the end of its report, GIIGNL collated how much LNG was loaded onto trucks at receiving terminals to be distributed to transport and industrial end-users. China led the way with 10.2mn mt, followed by Japan 1.5mn mt and Spain 0.76mn mt. The report says distribution by truck for retail use is growing. In China particularly, it represented 26% of imports. 

The report also said that uptake of LNG as a fuel for ships is accelerating, with more than 220 ships in service and under construction worldwide at the end of 2017. 

Mark Smedley 

The full GIIGNL 2018 Annual Report is available at https://giignl.org/publications