John Snyder discusses the five stories that are defining the LNG market in the first half of 2019
As 2019 unfolds and the emissions debate continues to dominate discourse, what is clear is that LNG, the lowest carbon-intensive fossil fuel, will have a place in the world’s energy mix alongside renewables for years to come. With mid-year approaching, it seems a good time to assess the trends that are shaping the LNG market this year and in the near term.
Australia cements top LNG exporter spot courtesy of China
Already the world’s largest exporter of coal, Australia emerged as the largest exporter of LNG last November when the country surpassed Qatar, loading 6.5M tonnes of LNG, as compared to Qatar’s 6.2M tonnes of LNG.
China is a primary market for Australian fossil fuels, and Australia figures to benefit further from the ongoing US-China trade war in 2019. In 2018, Australia shipped 23.45M tonnes of LNG to China – about 42% of its total imports, up from 31% in 2017. Already the world’s largest importer of LNG, China has plans to import as much as 247M tonnes of LNG by 2035.
US LNG exports to Europe see dramatic rise
The first wave of US LNG export projects is already disrupting the LNG market, and imports into Europe continue to grow. Since the first cargo left US shores in April 2016, US LNG exports to the EU have seen a steep rise, increasing by 272% just in the past 11 months.
This year, the US has been Europe’s third-largest supplier of LNG. March 2019 recorded the highest volume ever of European Union-US trade in LNG, with Europe receiving more than 1.4M m3. And with new LNG terminal capacity coming on line, US LNG export capacity is expected to double this year from 3.6Bn ft3 to 8.9Bn ft3, according to the US Energy Information Administration.
Russia, however, continues to be Europe’s largest supplier of natural gas, and the completion of the Nord Stream 2 pipeline in the Baltic would further cement that position. Europe figures to be a battleground for US and Russia gas interests for the foreseeable future.
Qatar gears up LNG export facility expansion
While it might have temporarily lost is crown as the top exporter of LNG, Qatar is moving ahead with its plans to expand its LNG production capacity by over 40% from 77 mta to 110 mta by 2024.
Qatar Petroleum (QP) has issued invitations to tender for the engineering, procurement and construction of the four LNG trains for its North Field expansion project, with the award due by January 2020. The expansion will require a fleet of new LNG carriers, initially with plans for 60 ships, possibly growing to more than 100. State-run Qatargas, on behalf of QP, is executing the shipbuilding programme, with South Korean shipyards expected to be the primary beneficiaries.
Greek shipowners continue to build LNG carriers
With LNG exports expanding, savvy Greek shipowners have been aggressively ordering new LNG carrier tonnage at South Korean shipyards ahead of Qatar’s historic newbuild programme. The Greek LNG carrier fleet numbers just over 60 ships and with current orders is already set to almost double in number. As a result of their ordering spree, Greek shipowners will have one of the youngest and most valuable fleets, worth about US$18.6Bn, according to UK-based valuation firm shipping monitoring firm VesselsValue.
FSRUs prove their worth in emerging economies
For emerging market nations, floating storage and regasification units (FSRUs) have proved valuable in offering lower capex and shorter commissioning times than onshore LNG import terminals. Also, since FSRUs are built by shipyards, they circumnavigate local labour and skills shortages that could lead to higher costs, logistics issues and delayed commissioning.
One project to keep an eye on will be LNG Croatia, which is developing Croatia’s first LNG facility on the island of Krk. Golar Power will provide the Golar Viking for conversion to an FSRU for the import project.