The International Gas Union (IGU) released its 2017 World LNG Report, examining the current state of the Global LNG Industry. The latest report highlights the dynamic 2016 experienced by the global LNG industry, with significant growth in LNG supply projects, as well as increases in demand for LNG as a fuel from new and existing markets across the globe.
In particular, global LNG trade in 2016 reached a record 258 million tonnes (MT) – an increase of 5% from 2015, and the largest ever year for LNG trade. This increase is particularly noticeable when compared with the average 0.5% growth rate of the previous four years.
This jump can primarily be attributed to a significant increase in new supply, due largely to the start of exports from the US Gulf of Mexico, as well as the start of commercial operations in Australia Pacific LNG, among others. These new projects come about as governments, businesses and consumers become increasingly aware of the advantages of natural gas in the global energy mix, and are encouraging trends pointing to further growth in the LNG market.
LNG continues to play an essential role in the marine shipping sector – with 31 newbuilds delivered from shipyards to the LNG shipping fleet in 2016. This constitutes an increase of 7% compared to 2015. The IGU’s most recent report on Enabling Clean Marine Transport emphasises the monumental impact switching to LNG fuel can have on emissions generated by shipping, with one tanker on 3% bunker fuel producing as much in emissions as 50 million diesel-fuelled cars.
“The increased use of natural gas is hugely beneficial to the environment, and subsequently human health, across the globe. Our recent reports on urban air quality, as well as the use of LNG in marine shipping, are testament to this. This year’s World LNG report is extremely promising, and LNG maintains an essential role in expanding access to gas across the globe, acting as a key pillar in the future energy mix,” said David Carroll, President of the IGU.
Natural gas has many important benefits – it is abundant, flexible and is the perfect complement to intermittent renewables for power generation. Natural gas provides clean affordable heating for industrial processes and for commercial and residential customers around the world. Natural gas also has benefits relative to coal and oil – in terms of lower carbon emissions as well as particulates and other pollutants that contribute to poor air quality and ensuing health concerns.
LNG Carriers
LNG shipping has evolved in response to significant changes in the LNG market over the past decade. Spot charter rates hit historic highs in 2012 following the Fukushima disaster, but have since fallen drastically to where the market currently stands facing historic lows. The LNG shipping sector, like most shipping markets, is cyclical in nature and 2016 continued the trend from the previous year, marking historic lows in spot charter rates as new tonnage enters an already over supplied market.
Average estimated spot charter rates for steam vessels fell below $20,000/day for a period of time during the year, with rates ultimately averaging ~$20,500/day. Average dualfuel diesel electric (DFDE)/ tri-fuel diesel electric (TFDE) day rates dipped to ~$33,500/day as demand for Atlantic volumes in the Pacific Basin continued to decrease, resulting in a more regionalized LNG trade. The continuous wave of newbuilds hitting the market in 2017 will further push the LNG shipping market deeper into a period of oversupply, maintaining the current trend for spot charter rates in the
near term.
However, the report predicts a more substantial increase in new liquefaction capacity come online during 2017, which could potentially absorb some of the excess capacity.
LNG Terminals
Tracking the growth of LNG demand, global LNG regasification capacity also increased, reaching 777 MTPA by end-2016 and 795 MTPA as of January 2017. In contrast to 2015, growth in receiving terminal capacity was primarily centred in established LNG markets, including: China, Japan, France, India, and South Korea. Poland and Colombia joined the global LNG market as new importers. The Emirate of Abu Dhabi also began imports via an FSRU; although as a country, UAE was already an importer. Furthermore, Jamaica completed its first LNG terminal in late 2016 and began importing LNG via floating storage and a break-bulk delivery vessel.
Over the last few years, given relatively low LNG price, new markets have been able to complete regasification projects fairly quickly using FSRUs. However, the majority of new regasification capacity came from expansions to existing terminals and the inauguration of new, larger onshore terminals. The Dunkirk terminal in France (9.5 MTPA) is the largest terminal to come online in five years.
The incentives for developing new receiving terminal projects and expansions is increasing given that a significant amount of new liquefaction capacity will continue to be added to the market through 2020. Lower prices could unlock previously unattainable pockets of demand, both within existing LNG markets and countries new to the LNG space. Regasification capacity growth in the next two years is concentrated in existing Asian markets, particularly China and India. Japan, Pakistan, Thailand, Singapore, and Malaysia are among the other Asian importers set to expand capacity by end-2018.
However, new LNG markets are still expected to materialize around the world. Beyond Colombia, which is expected to reach commercial operations at its first terminal in 2017, the Philippines, Russia (through an FSRU in Kaliningrad), and Bahrain are expected to complete their first regasification projects in the near-term. Further out, Ghana, Bangladesh, Uruguay, Croatia, Myanmar, Ivory Coast, Morocco, South Africa, and Sudan all have project proposals announced to come online by end-2020. LNG demand in emerging markets is still expanding. These new markets provide additional outlets for LNG producers, particularly important in a market with growing supply.
Further information may be found in the following report:
Source: IGU
