Surge in LNG production expected

A new whitepaper finds that global LNG supply is likely to increase by 5.1M tonnes in 2024. Growth of LNG supply in the Atlantic Basin will be the driving force, but low demand from Europe will see Asian absorb the increase.

In Europe, the weak European macroeconomic environment is likely to limit demand, despite lower gas prices. In addition, the high level of storage is keeping a lid on demand.

According to the Argus Energy whitepaper: Summer 2024 European Gas Market Preview: “Combined stocks in the EU and UK were roughly 680 TWh on 1 April, around 40 TWh higher than a year earlier and representing 58% of nameplate capacity.”

“Europe has replaced Russian gas dependence with a reliance on LNG secured on the spot market”

Storage in France and Germany is also being impacted by LNG imports from FSRUs; EU storage reached the target of 90% in August 2023 and is expected to rebuild back to that level by November 2024.

The 4.3M tonnes per year Alexandroupolis FSRU is expected to come online in April 2024. This will provide Greece and the region with an alternative source of gas and replace some of the demand for Russian gas. In some respects, noted the whitepaper, Europe has replaced Russian gas dependence with a reliance on LNG secured on the spot market.

Elsewhere, the complex hybrid pricing (which includes a crude oil price element) of natural gas via pipeline from Algeria may actually encourage LNG imports to Spain over pipeline. The whitepaper noted that the Spain – Algeria relationship is still difficult: “Spain can only import Algerian gas through the 10.5bn m³ per year Medgaz pipeline, after flows through the Maghreb-Europe link halted in October 2021, following a breakoff in diplomatic relations between Algeria and Morocco.”

But Algerian LNG exports have room to grow. The whitepaper notes: “Algerian LNG loadings already jumped by 41% year-on-year to 4.99M tonnes in summer 2023. But the 21M tonnes per year Arzew and 4.5M per year Skikda terminals still operated at only 55% of capacity, leaving scope for a further ramp-up.”

The impact of the loss of the OLT Terminal FSRU Toscana for the whole summer while extraordinary maintenance is undertaken on the turret bearing is likely to be balanced, noted the whitepaper, by increased delivers into the Piombino facility, and be a pre-emptive increase in stocks.

The outlook for Asian LNG demand is mixed, with growth being driven by China, India and South-East Asia, while the more traditional markets of Japan and South Korea are not expected to grow significantly.

In Japan, there is the unknown quantity of how many coal-fired stations will come back online after the most recent earthquake, while in South Korea, summer demand revolves around the price of LNG versus coal. India is maintaining a subsidy scheme that saw LNG consumption double in the power sector in the summer of 2023.