These last two weeks in LNG: we saw a weak start to the fortnight in the LNG complex, continuing the bearish trend observed since the start of the winter. Apr TTF reached down to a 2.5-year low of around €23.60/MWh on Feb 23. Apr JKM also weakened to around $8.05/MMBtu on Feb 22. Storage continued to be above historical averages with Europe seeing stocks at seasonal highs, currently at 63% of full capacity. Read more in our LNG Report.
Here are some key news from the last fortnight:
China and Europe are expected to drive LNG demand growth this year, according to a TotalEnergies executive forecast. In the years to 2040, the demand is set to rise by 50%, driven by China and other Asian economies switching from coal to natural gas. According to the senior executive, China has yet to find its 2021 consumption growth levels and Europe is a ‘new and big market’. However, the latter is not as certain as the European Commission wants to keep an eye on gas consumption and keep it as much subdued as possible, on the back of the need for a stable and secure energy supply.
Demand seems to not have picked up in Europe on the back of warm weather, according to an Atlantic-based trading analyst.
On the back of ongoing tensions in the Middle East, Qatari shipments have been delayed to the East Mediterranean, to which imports ended up still increasing to 1.92m mt in February as opposed to 1.77m mt in January.
New Fortress Energy expects to start producing LNG in late March at its offshore export terminal in Northern Mexico. The project was initially planned to commence by the end of 2023. However, it was delayed due to the US Department of Energy not allowing exports to countries that lack free trade agreements with the US as the project relies on American feedgas. Some countries already have free-trade agreements with the US, such as Nicaragua and Mexico, leading to New Fortress Energy not being concerned by the governmental restriction.
According to Market experts, Qatar’s expansion plan could see the country control nearly 25% share of the global market by 2030. This would prompt rival projects to be ejected out of the LNG race. Qatar plans a 85% expansion for LNG, bumping output from 77mtpa to 142mtpa by 2030, above previous expectations of a 126mtpa output. Access to cheap labour, low construction costs and from southeast Asia could help make unit cost of LNG production as low as $0.3/MMBtu, versus $3-5/MMBtu globally.
The US LNG capacity will almost double over the next four years. However, Biden’s administration’s decision to halt approvals for new LNG export terminals could jeopardise energy security worldwide. Such pause was due to environmental concerns around LNG being potentially as polluting as coal, according to Cornell University professor Robert Warren Howarth.
TotalEnergies has signed a sale agreement to Singapore-based company Sembcorp for a 16-year delivery of LNG. The deal will see 0.8mtpa worth of LNG shipped to Singapore, in line with the French major’s commitment to Singapore’s energy security and decarbonisation goals.
