Giles Farrer, Research director at Wood Mackenzie, recently shared his thoughts on whether 2019 is the year of the much-vaunted LNG oversupply.
With the start of 2019, the mood in the LNG market is said to be mixed. Big LNG buyers have returned and began setting a record year for supply in terms of both production growth and new project FIDs.
The LNG demand growth in the Asian market, unfortunately, does keep pace with LNG supply and Europe, and northwest Europe, in particular, will have to absorb the surplus, especially during the summer. But Europe requires additional imports and flexibility, given its increased reliance on maxed-out Russian and Norwegian imports.
While LNG imports are in more demand than required, providing competition to pipe imports and putting pressure on prices, will unlikely usher in the level of oversupply that many fears.
Despite the rebalancing global LNG market, 2019 will still be a record year for LNG project sanction, with in excess of 60 mmtpa of capacity likely to take FID, which is well above the previous 45 mmtpa sanctioned in 2005 and a tripling of the 21 mmtpa sanctioned in 2018.
Frontrunners in the race to hit FID include the US$27 billion Arctic LNG-2 in Russia, at least one project in Mozambique and three in the US. In the US, it is Golden Pass, Calcasieu Pass and Sabine Pass Train 6. The small Woodfibre project in Canada might take off in 2019 as well. Other projects in the US, Australia, Qatar, Papua, New Guinea, and Nigeria are targeting FID in 2019 too.
Succeeding the eight years of global economic growth, economists agree that a downturn is simply a matter of when and how deep.
A new electricity plan is set to be introduced in South Korea by 2019. This may push further the adoption of higher taxes on imported coal and make the restrictions which were imposed on old coal plants last year more onerous. In Japan, the government could scrutinise the 8 GW of coal under construction and the 8 GW at the planning stage more heavily, after most of the country's financial institutions toughened their lending criteria for new coal projects.
In India, the National Clean Air Action Plan is aiming to reduce PM 10 and 2.5 concentrations by 20 per cent to 30 per cent over the next five years. If it is rigorously implemented, it could force the shutdown of old polluting coal plants. And in Germany, the Coal Commission will publish its recommendations on the timing of coal phase-out on February 1st. A leaked document suggests initial phase-out could start as early as 2022.
References:
https://www.pipelineoilandgasnews.com/interviewsfeatures/features/2019/january/mood-in-the-lng-market/
With the start of 2019, the mood in the LNG market is said to be mixed. Big LNG buyers have returned and began setting a record year for supply in terms of both production growth and new project FIDs.
The LNG demand growth in the Asian market, unfortunately, does keep pace with LNG supply and Europe, and northwest Europe, in particular, will have to absorb the surplus, especially during the summer. But Europe requires additional imports and flexibility, given its increased reliance on maxed-out Russian and Norwegian imports.
While LNG imports are in more demand than required, providing competition to pipe imports and putting pressure on prices, will unlikely usher in the level of oversupply that many fears.
Despite the rebalancing global LNG market, 2019 will still be a record year for LNG project sanction, with in excess of 60 mmtpa of capacity likely to take FID, which is well above the previous 45 mmtpa sanctioned in 2005 and a tripling of the 21 mmtpa sanctioned in 2018.
Frontrunners in the race to hit FID include the US$27 billion Arctic LNG-2 in Russia, at least one project in Mozambique and three in the US. In the US, it is Golden Pass, Calcasieu Pass and Sabine Pass Train 6. The small Woodfibre project in Canada might take off in 2019 as well. Other projects in the US, Australia, Qatar, Papua, New Guinea, and Nigeria are targeting FID in 2019 too.
Succeeding the eight years of global economic growth, economists agree that a downturn is simply a matter of when and how deep.
2019 will also bring in more clarity on the level of ambition with regards to the Chinese domestic supply growth and the ramp-up of Power of Siberia.
Economic slowdown is a more considered approach on coal-to-gas switching and increased domestic infrastructure availability. This, however, will result in slow demand of LNG in 2019, from the 40-45% growth we have seen in 2017 and 2018. But China will still grow at around 20 per cent, by far the largest source of LNG demand growth in the global market.
China, however, announced a series of gas policies in 2018, all aimed at relieving supply tightness and import dependency.
2019 will also bring in more clarity on the level of ambition with regards to the Chinese domestic supply growth and the ramp-up of Power of Siberia.
China, however, announced a series of gas policies in 2018, all aimed at relieving supply tightness and import dependency.
2019 will also bring in more clarity on the level of ambition with regards to the Chinese domestic supply growth and the ramp-up of Power of Siberia.
Coal-to-gas switching in China and recent coal power retrials in Europe, has provided headroom for gas demand growth.
A new electricity plan is set to be introduced in South Korea by 2019. This may push further the adoption of higher taxes on imported coal and make the restrictions which were imposed on old coal plants last year more onerous. In Japan, the government could scrutinise the 8 GW of coal under construction and the 8 GW at the planning stage more heavily, after most of the country's financial institutions toughened their lending criteria for new coal projects.
In India, the National Clean Air Action Plan is aiming to reduce PM 10 and 2.5 concentrations by 20 per cent to 30 per cent over the next five years. If it is rigorously implemented, it could force the shutdown of old polluting coal plants. And in Germany, the Coal Commission will publish its recommendations on the timing of coal phase-out on February 1st. A leaked document suggests initial phase-out could start as early as 2022.
References:
https://www.pipelineoilandgasnews.com/interviewsfeatures/features/2019/january/mood-in-the-lng-market/
POST A COMMENT
