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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Asian LNG Demand To Quadruple By 2030

The biggest buyers of liquefied natural gas (LNG) in Northeast Asia—which account for more than half of the world’s LNG market—could see their total uncontracted demand rising fourfold by 2030, new research by Wood Mackenzie has shown.

At the same time, U.S. LNG export capacity is set to significantly increase in the coming years with several projects awaiting final investment decisions (FIDs) and several others currently in commissioning stages.

Rising LNG demand in Asia is welcome news for the variety of projects under construction and commissioning in the U.S. Gulf Coast and Atlantic Coast.

With the massive surge in Chinese natural gas demand and legacy contracts of other Asian buyers expiring, the seven largest LNG buyers in the world are set to soon embark on a hunt for a mix of contracts to cut average costs and enhance security of supply sources, according to WoodMac.

These seven major LNG buyers—CNOOC, PetroChina, Sinopec, CPC, JERA, KOGAS, and Tokyo Gas—account for more than 50 percent of the global LNG market.

On the supply side, next year could be a record year for FIDs on more than 220 million tons per annum (mmtpa) taken.

“Some of the less prepared or competitive projects will slip into 2020 and beyond, but nonetheless a bumper year beckons,” WoodMac says.

In 2019, the favorites to reach FID include the US$27-billion Arctic LNG-2 project in Russia, at least one project in Mozambique, and three projects in the United States. Expansion and backfill projects in Australia and Papua New Guinea—closer to the Asian market—could also see FID next year, according to Wood Mackenzie.

As the LNG market is changing with more short-term and spot purchases, LNG suppliers have to ensure that they can meet the buyers’ needs of a variety of contracts. Buyers will be looking not only at prices, but also at contract flexibility, diversification of sources, seasonality, and upstream participation, WoodMac said.

“Market liberalisation and uncertainty on longer-term demand in more mature markets, such as Japan, South Korea and Taiwan, will mean more room for spot and short-term purchases,” research director Nicholas Browne said. Related: Libya’s NOC Won’t Pay ‘Ransom’ For Biggest Oil Field

“While oil indexation will continue to dominate markets due to familiarity and ability to hedge, Asian buyers should be more inclined towards hub indexation to boost diversity and enable sales into Europe,” Browne noted. 

In the United States, export capacity of LNG is expected to more than double by the end of 2019—to 8.9 billion cubic feet per day (Bcf/d), which will make the United States the world’s third-largest LNG export capacity holder behind Australia and Qatar, the EIA said last week.

The United States is now exporting LNG from Sabine Pass in Louisiana—the first LNG facility that began operations in 2016, from Cove Point LNG in Maryland, and most recently—from Corpus Christi in Texas. Cheniere Energy said last week that its first commissioning cargo of LNG had loaded and departed from Corpus Christi in Texas, marking the first LNG export from the state.

Cameron LNG in Louisiana and Freeport LNG in Texas are currently being commissioned, with all three trains at Cameron LNG and two trains at Freeport LNG expected to be placed in service in 2019.

Another four export terminals—Magnolia LNG, Delfin LNG, Lake Charles, and Golden Pass—plus a sixth train at Sabine Pass have been approved by both the U.S. Federal Regulatory Commission and the Department of Energy, and they are expected to make FIDs in the coming months, the EIA said. Related: Chinese-Venezuelan Joint Venture Doubles Oil Production

Other projects are also planned in the United States, although they still hinge on regulatory approvals. Tellurian expects to receive a final environmental impact statement on its proposed Driftwood LNG project in January 2019 and to take FID in the first half of 2019. Tellurian has just signed a preliminary agreement to sell LNG from Driftwood to commodity trader Vitol based on the Platts Japan Korea Marker (JKM).

“The LNG business is evolving into a true commodity market, which includes LNG purchases and sales based on actual LNG prices rather than indexing to other energy products. JKM has emerged as the most liquid and transparent pricing mechanism for LNG,” President and CEO Meg Gentle said.

Another LNG developer, NextDecade, received last week a series of air permits from the Texas Commission on Environmental Quality for its Rio Grande LNG project in South Texas. The project must receive final environmental impact statement and a review by the Federal Energy Regulatory Commission (FERC). NextDecade anticipates a final investment decision on Rio Grande LNG in the third quarter next year.

Asia is set to dominate long-term LNG demand growth and rising U.S. export capacity can play a role in meeting it.

By Tsvetana Paraskova for Oilprice.com

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