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Suwin Sandu
In 2009, world liquefied natural gas (LNG) trade is forecast to remain at around 171 million
tonnes. The steady trade volume reflects falling demand in northern Asia being counterbalanced by increased demand in the European Union as buyers take advantage of low prices to fill storage tanks. World LNG trade is forecast to increase by 6 per cent in 2010 to 181 million tonnes, as gas consumption increases in line with improved economic conditions.
The global economic downturn has resulted in lower energy demand in the northern Asian gas market, which has led to lower gas consumption and LNG imports into countries such as Japan, the Republic of Korea and Chinese Taipei. Reflecting this, imports into the northern Asian market in the first quarter of 2009 were 9 per cent lower year on year. Lower gas imports were achieved through fewer purchases of LNG spot cargoes from the Middle East and by applying the downward quantity tolerance clause to shipments under long-term contracts from Indonesia. Under this clause, buyers can request sellers to either postpone or cancel the deliveries of LNG cargoes.
Japan, the world’s largest LNG buyer, imported
17 million tonnes of LNG in the first quarter of 2009, a decline of 6 per cent compared with the same period in 2008. The economies of Japan and its major trading partners have been negatively affected by the global economic downturn. With Japan’s economy assumed to contract by around 6 per cent in 2009, lower gas consumption is expected for both electricity generation and industrial production.
In addition, the utilisation rate of nuclear electricity generation is expected to improve in 2009 as the world’s largest nuclear plant, Kashiwazaki-Kariwa, is scheduled to restart this year. For a large part of 2008, Japan’s nuclear generation sector operated at a utilisation rate of less than 50 per cent, which supported increased LNG imports. The restart of the Kashiwazaki-Kariwa-7 (1350 megawatts) and Tomari-3 (920 megawatts) reactors in early 2009 will increase nuclear generation capacity utilisation throughout the year and reduce demand for other fuels, including natural gas. Reflecting these developments, Japan’s LNG imports are forecast to decline by 10 per cent in 2009 to 62 million tonnes.
In 2010, LNG imports by Japan are forecast to increase by 3 per cent to 64 million tonnes as economic conditions begin to improve.
LNG imports by the Republic of Korea in the first quarter of 2009 were at 9 million tonnes, largely unchanged from the same period in 2008. LNG import demand is expected to be weak in the second half of 2009, consistent with an assumed annual contraction in the economy of 4 per cent. In addition, new coal-fired electricity generation capacity has been brought into operation over the past 12 months and is expected to result in gas losing its share of electricity generation input. For 2009 as a whole, LNG imports by the Republic of Korea are forecast to fall by 4 per cent to 26 million tonnes.
Imports for 2010 are forecast to recover to 2008 levels as the Korean economy is assumed to recover moderately. Increased gas imports in 2010 will be supplied by new long-term contracts with suppliers in Indonesia, the Russian Federation and Yemen.
LNG imports are anticipated to continue to grow for China and India during 2009 and 2010. China and India have the potential to absorb some of the surplus LNG supply, as the gap between demand and contracted supply could increase to almost 4 million tonnes in 2009 and 2010.
Reflecting continued economic growth in China, energy imports, including LNG, are expected to be strong in 2009. In the first quarter of 2009, China’s LNG imports increased year on year by around 70 per cent to 0.9 million tonnes. For 2009 as a whole, China’s LNG imports are forecast to double from 2008 levels, to 6.4 million tonnes.
In 2010, China’s LNG imports are forecast to increase to 9 million tonnes, reflecting increased energy consumption in a growing economy. The increased LNG imports will be supplied to the Dapeng (6.2 million tonnes), Fujian (2.6 million tonnes) and Shanghai (1.1 million tonnes) LNG terminals through long-term contracts with Australia, Indonesia, Qatar and Malaysia.
India’s LNG imports in 2008 declined by around 3 per cent, reflecting a switch from natural gas to naphtha in fertiliser production and electricity generation, because oil prices fell faster than LNG prices in the second half of 2008. However, imports are expected to increase in 2009. This is a result of surplus LNG from spot market suppliers to the Asia Pacific region, which could increase the competitiveness of spot LNG supply relative to naphtha and domestically-produced gas. In addition, the slower than expected ramp-up of domestic gas production from the Krishna-Godavari Basin and a decline in production from the Panna-Mukta-Tapti fields are expected to support LNG imports in 2009.
In 2010, India’s LNG imports are forecast to increase by about 26 per cent to 10 million tonnes and will be supplied primarily through a long-term contract with Qatar. India’s LNG import capacity is expected to reach 13.6 million tonnes, which will be supported by the expansion of the Dahej terminal (from 6.5 million tonnes to 10 million tonnes).
Despite an expected decline in natural gas consumption in the Atlantic market in 2009 associated with the economic downturn, LNG imports by the region are expected to rise. Lower spot LNG prices and the availability of natural gas storage capacity in the European Union are expected to underpin LNG imports in this market. In the European Union, natural gas storage capacity has been increasing as a measure to mitigate potential supply disruptions, such as that occurred in early 2009 as a result of the dispute between the Russian Federation and the Ukraine.
In the first quarter of 2009, LNG imports by the Atlantic market were around 15 million tonnes, which is a year on year increase of 8 per cent. For 2009 as a whole, LNG imports by this region are forecast to increase by 7 per cent to 58 million tonnes.
In 2010, Atlantic LNG imports are forecast to increase by a further 5 per cent to 61 million tonnes, as gas demand increases with improved economic conditions.
Global LNG production capacity at the end of 2008 was around 202 million tonnes. During 2008, two new LNG trains were commissioned: the fifth train at the North West Shelf project in Australia (annual capacity of 4.4 million tonnes) and a sixth train at Nigeria’s NLNG project (annual capacity of 4.1 million tonnes).
In 2009, the global economic downturn, coupled with the recent start-up of new liquefaction capacity, is expected to create a surplus of LNG supply.
World LNG production capacity could increase by 24 per cent to 251 million tonnes by the end of 2009, under the assumption that projects scheduled for completion will be completed on time. About two-thirds of these additional supplies are located in the Middle East, including Qatar (23.4 million tonnes) and Yemen (6.8 million tonnes). Additional capacity scheduled to be completed in 2009 is located in the Asia Pacific region, including the Russian Federation (9.6 million tonnes), Indonesia (7.6 million tonnes) and Malaysia (1.3 million tonnes).
In 2010, world LNG production capacity could increase by a further 12.1 million tonnes, underpinned by the addition of a seventh train at Qatar’s RasGas project (7.8 million tonnes) and the start-up of the Pluto project (4.3 million tonnes) in Australia.
Over the next two years, some of the older LNG production plants could reduce their output in response to an oversupplied market. For example, some LNG plants in Brunei, Malaysia, Indonesia, Nigeria and Oman have reduced production to either carry out maintenance or divert natural gas for domestic consumption. However, it is unlikely that a reduction in supply from these plants will offset increased capacity associated with the start-up of new capacity.
Australia’s gas production (including coal seam methane) in 2008-09 is estimated to increase by 5 per cent to 45 billion cubic metres. The increased production largely reflects the start-up of production from the Angel gas field, which will supply the North West Shelf’s LNG trains. Production from the Angel field commenced in October 2008, with an annual production capacity of 8.3 billion cubic metres.
In 2009-10, Australia’s gas production is forecast to increase by another 13 per cent to 50.7 billion cubic metres. Supporting this increase will be the start-up of new gas fields, such as: Blacktip (an initial volume of 650 million cubic metres) off the north-west coast of Australia; Henry (300 million cubic metres) and Longtom (670 million cubic metres) off south-east Australia; and Pyrenees (620 million cubic metres) off Western Australia.
Coal seam methane is also expected to make an important contribution to higher gas production in Australia. A number of projects are under construction and scheduled for completion in 2009-10, which could increase production of coal seam methane by 40 per cent. These projects include the Spring Gully and Talinga fields (with a combined annual production capacity of 1.2 billion cubic metres) and the Lacerta field (160 million cubic metres) in Queensland.
Australia’s LNG exports in 2008-09 are estimated to have been 16.4 million tonnes, which is an increase of 11 per cent from the previous year. This reflects the start-up of the fifth processing train at the North West Shelf project in September 2008.
In 2009-10, Australian LNG exports are forecast to increase by another 11 per cent to 18.2 million tonnes. This forecast increase reflects a full year of operation at the fifth train at the North West Shelf project.
Although the global economic downturn is not expected to affect the volumes of Australia’s LNG exports because the bulk of the exports are under long-term contracts, it will have an effect on Australia’s value of LNG exports in the short term. The value of exports is estimated to be around $9.9 billion in 2008-09 and is projected to fall to $6.9 billion in 2009-10.
| Natural gas outlook | ||||||||
2007-08 |
2008-09 |
s |
2009-10 |
f |
% change |
|||
|
||||||||
| Australia | ||||||||
| Production | Gm3 |
42.9 |
45.0 |
50.7 |
12.7 |
|||
| LNG exports | Mt |
14.80 |
16.40 |
18.20 |
11.0 |
|||
| – value | A$m |
5 854 |
9 929 |
6 904 |
– 30.5 |
|||