global lng supply and demand

8/3/2019 Global LNG Supply and Demand

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6 HYDROCARBON ASIA, OCT-DEC 2010 Visit our website at: http://www.safan.com

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Global LNGSupply and Demand Review and Outlook

Despite the economic cri-sis effects on worldeconomies and overallenergy demand, global

LNG trade in 2009 did not fare too badly. Thanks in large part tomarkets of last resort in north-west Europe and North America,global LNG trade puttered along

as sellers were able to effectivelypush unwanted cargoes intothese liquid gas markets. Giventhe combination of weak LNGdemand in Asia with almost 45million tonnes per annum (mtpa)of nameplate LNG export capac-ity entering service in 2009, north-western European and NorthAmerican markets were instru-mental in balancing the globalmarket by accepting cargoes un-

wanted elsewhere. The openingof new LNG receiving terminalsin Italy and the UK facilitatedgreater access to these markets,thereby helping the situation. Con-sequently, we witnessed dramaticchanges in 2009 LNG trade flowscompared to the previous year:while Asian LNG imports fell,trade movements improved sig-nificantly in the Americas andEurope. The Middle Easts entry

With natural gas being the primary alternative for crude LNG plays a

critical role in the global energy scenario. This article gives an in-depthlook at the demand and supply of 2009, 2010 and 2011.

mega-train volumes. Meanwhile,Spanish and French LNG require-ments could come in lower in 2011compared to 2010 as pipeline gassupply is expected to rise. Shouldthis be the case, it will temper in-cremental LNG imports from therest of the countries in the regionin 2011.

The Middle East is slated to im-port a greater amount of LNG in2010 and 2011 as gas demand forpower generation remains robustand new LNG import centersDubai is slated to joint Kuwait asthe regions next LNG importerconsolidate their demand.

LNG DemandDespite the global economic

slowdown, world LNG trade rose

around 6.5% (or around 11 milliontonnes, mt) to over 180 mt. WeakerAsian LNG imports in 2009 (downnearly 3.0% compared to 2008)were offset by strong double-digit growth in LNG imports byEurope and the Americas (Figure1) where markets of last resortsuch as the US and to a lesserextent, the UK, helped to absorbcontracted volumes that were un-wanted east of Suez, or destina-

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into the LNG importers club wasalso timely in light of the rela-tively bearish LNG prices in 2009compared to 2008.

Global LNG trade dynamics areexpected to shift again in 2010and 2011, largely on the back ofrecovering Asian LNG demand.FGE expects Asian LNG imports

to improve markedly over thenext two years, thanks not only tothe improved economic outlookbut also as volumes under exist-ing contracts ramp up further andnew supply contracts take effect.LNG imports into the Americasare projected to grow positivelyduring the same period as termi-nals in the region, especially inthe US, continue to absorb flex-ible LNG not required by some

markets in Asia and Europe. Theramp-up of deliveries to new LNGregasification terminals in theAmericas such as Brazil, Chile andthe US will also result in higherLNG deliveries to the region.

Despite the possibility of lowerSpanish LNG imports, Europe asa whole is projected to import moreLNG in 2010 compared to last yearas countries like Italy and the UKreceive higher amounts of Qatari


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tion-flexible volumes tradition-ally sold to the highest bidders,again usually located east of Suez.Strong demand by new, high-value markets in South Americaand the emergence of the MiddleEast as an LNG demand centeralso made a small contribution tooverall LNG import growth, ef-fectively creating a new outlet for

sellers to place spare cargoes.

Asia PacificAsias LNG demand is very

much dependent on so-calledpull factors, such as economicgrowth, variations in weather

2)so did LNG imports. For someAsian LNG buyers, the situation

became so dire that downwardquantity tolerance (DQT) clauseswere exercised. This was evenmore pressing in light of long-term LNG supply contracts withRussia and Yemen taking effect.

Overall Asian LNG importsin 2009 were down nearly 3.0%y-o-y or 3.4 mt (see Table 1) to113.6 mt, owing to the weak de-mand in Japan, South Korea andTaiwan (JKT). These core markets

collectively saw LNG importsdrop by 6.5 mt. The relativelystrong LNG import growth inChina and India (+3.1 mt combined) were insufficient to stemthe plunge in JKT LNG imports.

Japan, the global leader in LNGconsumption, saw LNG importsin 2009 deteriorate by 6.8% (or -4.7 mt) y-o-y to 64.6 mt. The glo-bal economic slump not only put

a dent on industrial sector gasdemand but also negatively im-pacted gas usage in the powersector amid lower overall elec-tricity demand. Gas usage in thepower sector was also weaker dueto improved nuclear utilizationrates and hydropower output. Onthe city gas front, overall demandwas 7.8% lower y-o-y in 2009,largely on the back of a massive12.8% y-o-y drop in industrial sec-

patterns, power sector develop-ments and government policies to-wards gas utilization, to name afew. As Asias economy went intoa tailspinq u a r t e r l yy e a r - o n -year (y-o-y)g r ow t h i nrea l gross

d o m e s t i cp r o d u c t(GDP) con-t i n u e d t ocontract dur-ing much of2009 (Figure


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tor gas demand. Industrial end-users are the city gas sectors larg-

est consumer base.South Korean LNG imports fell

5.3% y-o-y (or -1.4 mt) to 25.8 mtin 2009 as sluggish economicconditions depressed gas demandin the power and industrial sec-tors. Oils lower per-unit costscompared to natural gas during1Q 2009 also played a part inreducing LNG imports, powerand industrial sector end-usersfavored oil over gas. With the

start of new long-term contracts(1.5 mtpa from Sakhalin II and 2.0mtpa from Yemen LNG) againsta weak gas demand backdrop,Korea Gas Corporation (KOGAS)was forced to exercise DQTclauses in 2009. LNG imports onlyreally began to recover in 4Q2009, thanks to stock building,frigid winter weather and powersector gas demand recovery.

Like Japan and South Korea,

Taiwan was also negatively im-pacted by the global economicrecession. The country importedan estimated 8.6 mt of LNG in2009, down 3.7% y-o-y (or -0.3 mt).The sharpest drop in LNG im-ports occurred in the first half ofthe year. The power sector, whichaccounts for three-quarters of thenations LNG demand, consumed5.7% less LNG in 2009 versus2008 as demand for electricity fell

nearly 4.0% y-o-y. This in turnwas attributed to reduced elec-tricity use by the industrial sec-tor. However, it is worth notingthat the y-o-y decline in LNG im-ports was tempered by the strongrecovery in LNG demand by thepower sector in 2H 2009.

From an LNG demand stand-point, India was one of Asiasfew bright lights in 2009. Thenation imported 9.1 mt of LNG,

2009 compared to 2008, under-pinned mainly by the startup of

commercial operations at SakhalinII. This reinforced further the Pa-cific Basin as Asias dominant sup-plier of LNG with a 62.5% sharein 2009, up from 55.8% in 2008.

The Middle East continued todeliver a consistent amount ofLNG to the Asia-Pacific region,but saw y-o-y exports decline bymore than 5.0% (or -2.0 mt) in2009 as some buyers exercisedDQT clauses and cut back on spot

demand. Nonetheless, the Mid-dle East still accounted foraround 31.0% of Asian LNGtrade in 2009.

After a record intra-basintrade in 2008, Atlantic BasinLNG (accounting for 12.0% ofAsian LNG imports in 2008) de-liveries to Asia were down sig-nificantly in 2009 as demand,especially from JKT, for spotvolumes, dried up. Moreover,

with geographical proximity inits favor, new Asian supplies es-sentially crowded out sellersof Atlantic Basin cargoes look-ing to place shipments intoAsia. As a result, we saw greatervolumes of Atlantic Basin LNG being shipped to their originalmarkets west of Suez in 2009.Nonetheless, the Atlantic Basincontinued to supply around 6.2%of Asian LNG imports in 2009.

EuropeEuropean LNG imports surged

by 23.5% y-o-y (or 9.8 mt) to over51.0 mt in 2009. The regions stel-lar performance is attributable tohigher LNG deliveries to north-west Europe, specifically Belgiumand the UK, although Italy showeda healthy y-o-y demand growthalso. Only Spain, which is thelargest LNG consumer in Europe,

an increase of over 10.0% com-pared to 2008. Indias improved

performance was underpinned by higher spot and short-termdeliveries, especially duringthe first three quarters of 2009.Demand for spot/short-termcargoes during 1H 2009 receiveda boost from companies thatwere not allocated gas fromReliance Industries Limiteds(RIL) Krishna-Godavari Basinand/or received insufficient vol-umes. The competitiveness of

spot LNG prices compared tonaphtha prices supported spot/short-term LNG demand. India benefitted from the availabilityof reasonably-priced LNGcargoes as a result of the reduc-tion in LNG imports from de-pressed gas markets in JKT.Moreover, a deluge of additionalLNG supply was made avail-able in 2009 by existing projectssuch as Australias North West

Shelf (NWS; Train 5 only startedcommercial operations in Sep-tember 2008) as well as newprojects like Sakhalin II andQatari mega-trains.

Asias other pillar of strengthduring 2009 was China. LNG im-ports spiked 65.8% y-o-y to 5.5 mtin 2009. This impressive per-formance was partly due to theramp-up in CNOOCs contractualvolumes with NWS, plus the

startup of new long-term deliver-ies from Indonesia, Malaysia andQatar. In addition, China receivedhigher quantities of spot volumeswhich it mainly sourced fromneighboring Asian suppliers aswell as the Middle East.

On the supply side, only thePacific Basin managed to stave offthe decline in LNG exports to Asia,supplying roughly 9.0% (or 5.8mt) more LNG to the region in


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and Greece fell into the red.Northern Europe proved to be a

veritable sink for LNG volumes in2009, with the UK heading the listof willing buyers. Besides the com-mencement of new LNG importterminals in the UK (South Hookand Dragon LNG) and Italy (Adri-atic LNG), LNG sellers were eagerto place unwanted cargoes byAsian buyers into more liquidmarkets such as the UK andthe US (see Table 2 for de-tails). The competitiveness

of UK gas prices relative toUS levels, especially during1H 2009, also helped to pullcargoes away from the USand into the UK. The major-ity of other northwest Euro-pean countries witnessedpositive growth in LNG im-ports. This was in partdriven by the disruption inpipeline gas supplies ow-ing to the Russia-Ukraine

gas dispute. Turkey andFrance for instance bol-stered purchases of spot car-goesTurkey received itsfirst Omani cargo in Janu-ary 2009noticeably in 1Q 2009.

In 2009, Belgian LNG importsmore than doubled mainly due tothe ramp-up in long-term contrac-tual volumes from Qatar. How-ever, relatively ample pipeline gassupplies and attractive spot prices

offered by buyers outside of Bel-gium motivated the re-export ofseveral cargoes in 2H 2009. One ofthe cargoes was delivered to Ku-wait in 2009interestingly, theoriginally sourced from Qatarwhile one of two cargoes deliv-ered in 2010 was purchased byCNOOC.

One of Europes poorest per-formers in 2009 was Spain. After asolid import performance in 2008,

Spanish LNG demand fell by morethan 7.0% to under 20.0 mt in 2009,

in line with a more than 10.0% y-o-y plunge in domestic gas demand.Domestic gas demand in 2009 de-teriorated significantly on the backof a marked decline in gas con-sumption by both the power sec-tor as well as the conventional gasmarket as the economy contacteddue to the financial crisis.

AmericasLNG imports in the Americas

rose by more than 35.0% in 2009compared to 2008 (Ta- ble 3). In a turn ofevents, US LNG im-ports were 28.3%

higher y-o-y in 2009 de-spite robust domesticgas production. Weakdemand for AtlanticBasin LNG cargoesfrom Asian buyersmotivated flows backto the US. ArgentineanLNG imports morethan doubled in 2009amid strong gas de-m a n d du r i n g t h e

Southern Hemisphere winter sea-son when hydroelectricity genera-

tion was at a seasonal low. TheAmericas also saw higher LNGinflows owing to the introductionof new LNG terminals from first-time importers like Brazil (0.5 mt),Canada (0.7 mt) and Chile (0.4 mt). Brazil imported LNG for the

first time when PetrobrasTransporte S.A. (Transpetro), theoperator of the Flexible LNGTerminal of Pecm, was able tofinally receive its inaugural

cargo in January 2009. Due toconstruction delays, the floatingstorage and regasification unit(FSRU), Golar Spirit, was unableto deliver the cargo in July 2008.The second FSRU, Golar Winter,located at Guanabara Bay (Riode Janeiro) delivered its firstcargo in March 2009.

C h i l e s Q u i n t e r o L N Gregasification terminal, ownedby GNL Quintero S.A., received

its maiden LNG cargo fromBG in July 2009. BG has a 21-year sale and purchase agree-ment to supply up to 1.7 mtpa tothe terminal in which it has a40.0% interest.

Canadas Canaport LNG, ma-jority owned by Repsol, started


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importing LNG in June 2009when it received its first cargo

from Trinidad and Tobago.Naturally, this was the case

since Repsol owns at least a20.0% stake in the multi-train

Atlantic LNG project in Trini-dad and Tobago. The Spanishcompany also has long-termcontracts for delivery to Spainand/or the US, which it candivert to other markets.After decades of being an LNG

export province, the Middle Eastentered the LNG import scene in2009 with the startup of KuwaitiLNG imports (Table 4). Kuwaitunloaded its first LNG cargo in

August 2009, which was the startof a string of cargoes that wasimported to meet the countryspeak summer electricity demand.A total of 11 cargoes were un-loaded at the Mina Al-Ahmadi

GasPort terminal, a permanentlymoored regasification vessel sup-

plied by Excelerate Energy, for atotal of 0.7 mt for the year.

LNG SupplyUnlike in 2008 where demand

for Atlantic Basin LNG was strongand represented the sole supplygrowth region, 2009 was fraughtwith LNG production hiccupsthat reduced output. In 2009, LNGtrade from the Pacific Basin andthe Middle East were higher bynearly 10.0% and 17.0% (Figure3), respectively, as new liquefac-tion trains came online.

In the Pacific Basin, amongstmature LNG producers, only

Australia managed to buck thenegative growth trend (thanks toramped-up production fromNWS Train 5). Other sellers ex-perienced marginal declines inLNG trade. The solid y-o-y gain

of nearly 8.0 mt from Australiaand Russias Sakhalin II in 2009

was more than enough to arrestthe combined 1.5 mt y-o-y de-cline by Alaska, Brunei, Indone-sia and Malaysia. The feedgasproblems confronting Indonesian(Arun and Bontang LNG plants)and Alaskan LNG projects weredownplayed in 2009 on the backof weakened LNG demand inAsia. The combination of anemicLNG demand in JKT and the startof new long-term contracts moti-

vated JKT to exercise DQT clausesand caused some sellers of PacificBasin LNG to send unwanted car-goes to Europe. The Pacific Basinremained Asias largest LNG sup-plier, capturing over 60.0% ofAsias total imports.

The Middle East exportedabout 17.0% more LNG globallyin 2009 compared to a year ago,underpinned by the commence-ment of new LNG trains in Qatar

and Yemen. Qatargas II startedthe worlds first 7.8 mtpa mega-train in May 2009 (Train 4) andfollowed up with a secondmega-train (Train 5) in 3Q 2009.Meanwhile, RasGas III completedits first mega-train (Train 6) in July 2009. Yemen LNG finallystarted production at one of itstwo 3.35 mtpa trains in mid-Oc-tober 2009 after a long delay, al-most 10 months than originally

planned. While Middle East LNGexports to Asia fell y-o-y in 2009,European LNG imports from theMiddle East (the bulk of whichoriginated from Qatar) morethan doubled in 2009. The startof new LNG import terminalssuch as South Hook in the UKand Adriatic LNG in Italy, bothpartially owned by Qatar Petro-leum, provided new outlets forQatari LNG.


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In addition, most of the OmaniLNG, which were previously di-

verted from the Spanish market toAsia in 2008 (at a time when Asian

LNG demand was strong) eitherreturned to their original marketin Spain or were shipped to Tur-key and Kuwait in 2009. Turkeyimported its first Omani cargo fol-

lowing the Russia-Ukraine gasdispute, which disrupted pipelinegas imports and raised depend-ence on LNG. Kuwaits maidenOmani cargo was part of a stringof LNG cargoes secured from Shellto meet its peak summer electric-ity needs. Apart from deliveries toSouth Korea under a long-termcontract, limited appetite for spotcargoes by other Asian buyers sawYemeni LNG being sent to higher

priced markets in Spain andMexico by Total, another long-

term contract holder that was origi-nally intended for the US market.

Atlantic Basin LNG trade fell4.4% y-o-y in 2009, led by Ni-geria, Egypt and Algeria. Thesethree countries were confrontedwith either feedgas and/or pipe-

line-related problems, whichlowered LNG production. For-tunately, supply interruptionsin 2009 were less disruptive asLNG demand in key Asian andEuropean markets were tem-pered by the world economicdownturn. For instance, Niger-ias largest LNG market, Spain,witnessed a severe decline ingas demand that resulted in34.0% less Nigerian LNG im-

ports. Meanwhile, Asian LNGimports from Nigeria dropped

by more than half in 2009 com-pared with 2008. Only theAmericas saw a positive y-o-ygrowth in Nigerian LNG im-ports in 2009, thanks largely toincreased imports by Mexico.

Trinidadian LNG exports rose14.1% in 2009 compared with2008 due partly to increaseddeliveries to the UK followingthe commencement of BGsmajority-owned Dragon LNG in

2H 2009. The start-up of newregasification terminals in theAmericasBrazil, Canada andChileand Kuwait in the Mid-dle East also offered sellers ofTrinidadian cargoes new outletsfor their LNG.

Algerian LNG trade was downnearly 5.0% y-o-y in 2009 amidsupply problems that originatedfrom a pipeline leak which af-fected feedgas deliveries to the

Arzew complex. As such, FGEgathers that Algerian LNG pro-duction was down some 20.0%in earlier months of 2009. Tradedata collaborates with this: weobserved a double digit y-o-ydrop in Algerian LNG importsduring 1Q 2009. Improvementsin LNG trade were subsequentlyobserved for ensuing quartersof 2009.

Unlike Algeria, which saw re-

duced LNG production due topipeline problems that limitedfeedgas to the liquefaction plant,Egypts Damietta LNG train isunderstood to be producing be-low its nameplate capacity as aresult of feedgas diversions tothe hungry domestic market.This caused Egyptian LNG ex-ports to suffer in 2009.

Norways Snhvit LNG project,which has been fraught with pro-


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duction hiccups since its 2007startup, made strides in address-

ing its equipment failures andmanaged to produce more LNGin 2009 compared to 2008. How-ever, unlike in 2008, all of itscargoes were delivered to mar-kets west of Suez.

For the Rest of 2010 and2011

FGE forecasts global LNG tradeto continue growing positively in2010 and 2011, underpinned by

several key developments. On thesupply side, besides several newLNG trains entering service in2010/2011, we suspect that Atlan-tic Basin LNG output will recoverin 2010/2011 as production hic-cups are resolved. As in the prioryears, trade will remain mostlyregional with intra-basin trafficbeing dictated by the strength ofrecovery in Asian LNG demand.

On the demand side, the global

economy is expected to stage arecovery in 2010/2011 and thisshould provide a conducive en-vironment for a recovery inAsian LNG demand. Organiza-tions such as the InternationalMonetary Fund (IMF) forecastedin April 2010 that global outputwill expand by over 4.0% in 2010and 2011 after a 0.6% contractionin 2009. Nonetheless, we remaincautiously optimistic about the

global growth prospects in lightof the recent economic crisis inEurope and its possible negativecontagion effect on world out-put and trade.

DemandAsian LNG imports are ex-

pected to rebound strongly in2010, growing some 8.0% y-o-y,after a dismal LNG import yearin 2009. India and China are ex-

pected to import greater amountsof LNG in 2010 and 2011 after a

relatively solid import year in2009. Meanwhile, the pace of re-covery in JKT LNG imports is

expected to vary, with SouthKorea making the most strides

in 2010. Taiwan is expected tooutperform Japan and SouthKorea in 2011.


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Although Japanese LNG im-ports are set to pick up in 2010

(+0.4% y-o-y) and improve fur-ther in 2011 (+2.3% y-o-y), itcould take four years beforeLNG imports recover to pre-cri-sis levels. Nuclear utilizationrates in Japan are expected toimprove in 2010 and 2011 asTEPCO slowly restarts shut-innuclear units at its Kashiwazaki-Kariwa power plant, which washit by an earthquake in 2007.While this will likely temper

demand for thermal fuels in-cluding LNG for power genera-tion, an uptick in industrialsector gas demand is expectedto lend support to the recoveryin Japanese LNG imports. Eventhough Japanese industrial sec-tor gas demand has reboundedquite nicely y-o-y during thefirst four months of 2010, it stillfell short of 2008 levels (first fourmonths and prior to the eco-

nomic crisis), suggesting thatthere is still room for recovery.

Meanwhile, the rebound inTaiwanese and South KoreanLNG demand is expected to bemore pronounced in 2010 and2011 relative to Japan (prelimi-nary estimates seem to suggestthat Taiwanese LNG importsrose over 50.0% y-o-y during thefirst four months of 2010. Thiscompares against13.1% and

9.0%, respectively, for SouthKorea and Japan during thesame period). FGE forecasts amore than 15.0% y-o-y recoveryin South Korean LNG importsin 2010 and for LNG imports togrow by 3-4% y-o-y in 2011.Similarly, Taiwan is expected tosee higher LNG import growthin 2010 (+10.1% y-o-y) follow-ing a weak import tally in 2009.For 2011, Taiwanese LNG im-

ports are forecasted to climb4.2% y-o-y.

Gas demand in both coun-tries is expected to recoverfully and surpass 2008 levels in2010, led by gains in the powersector amid favorable LNG perunit generation costs comparedto fuel oil and stronger electric-ity demand in general as theeconomy recovers. The indus-trial sector is also expected toplay a key role in South Koreaand Taiwans LNG demand re-

vival. In South Korea, expan-sion of city gas demand is alsoexpected to boost LNG importsin 2010 and 2011.

FGE predicts LNG imports inChina to spike by over 65.0% y-o-y and 45.0% y-o-y in 2010 and2011, respectively. Indeed,China could surpass India as anLNG import province by 2011,despite the fact that Indian LNGimports themselves are ex-

pected to grow at a rate of 8.5%and 11.7% during the same pe-riod. Chinas appetite for LNGstems from the inability of do-mestic gas production andTurkmenistan to keep abreastof Chinas strong gas demand,which is led by the power andindustrial sectors. IncrementalLNG supply will be largely met by the ramp-up in long-termcontractual volumes in 2010

Tangguh, MLNG Tiga, QatargasIIand the start of PetroChinascontract with Qatargas IV in2011. Meanwhile, China is ex-pected to see three new LNGregasification terminals locatedin Liaoning/Dalian, Jiangsu/Rudong and Shenzhen startcommercial operations in 2011.

In India, incremental gas de-mand across all consuming sec-tors is expected to outstrip

increased domestic gas supplies.This will ensure the increased

reliance of LNG to meet Indiasgas needs. Apart from the ramp-up in Qatari LNG contractualvolumes and a short-term con-tract with Repsol, India may re-sort to importing more spotcargoes in 2H 2010, assuminginfrastructure bottlenecks are re-solved and spot LNG prices arecompetitive. We saw how gasdemand requirements coupledwith favorable pricing moti-

vated a buyer to procure a spotcargo for under $5.00/MMBtufor an April 2010 delivery andless than $5.50/MMBtu for acargo delivered in June 2010.

Overall European LNG im-ports could expand, albeit at aslow rate of roughly 5.0% y-o-yin 2010 and could turn negativein 2011, pulled down mainly bysluggish Spanish LNG demand(it is worth noting that forecast-

ing LNG imports for Europe andthe Americas is akin to shootinga moving target. Since marketsin northwestern Europe andNorth America play an instru-mental role in helping to bal-ance the global LNG market,most of the LNG imported bythese markets represents re-sidual volumes. As such, theamount of LNG imported notonly depends on LNG demand

in Asia, the Middle East andother premium markets but alsothe availability of supply). Al-though gas demand in Spain,the largest European LNG im-porter, is recovering (the Euro-pean Commission expects Spainto be the last European Unioncountry to come out off the re-cession, probably in 2011, dueto the collapse of its decade-longhousing boom as well as the glo-


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bal economic crisis. The Span-ish government appears to be

more bullish, expecting a turna-round in 2010. However, itshould be noted that the Span-ish economy was still in nega-tive territory with real GDPcontracting sequentially in 1Q2010), the expected modest in-crease in 2010/2011 gas demandwill likely be met by higher pipe-l ine gas imports when theMedgaz pipeline starts opera-tions sometime in 4Q 2010.

Moreover, the Spanish govern-ments aim towards paringdown domestic coal inventoryis expected to impact negativelyon gas-fired power generation,thereby reducing further theneed for LNG. In other key Eu-ropean markets such as the UKand Italy, LNG deliveries areprojected to increase in 2010 and2011. While some conventionalQatari mega-trains were closed

for maintenance during theshoulder months of 2010, theramp-up in Qatari mega-trainsthat started production in 2009,along with the start-up of newmega-trains in 2010 and 2011will likely ensure that Europeanterminals such as UKs SouthHook and Italys Adriatic LNGcontinue to receive a healthyamount of LNG.

The Americas are forecasted

to import more LNG in 2010 (upby more than 50.0% y-o-y) and2011 (higher by more than 15.0%y-o-y). The US will likely re-main a key outlet for AtlanticBasin and Qatari LNG, espe-cially when the partially QP-owned Golden Pass receivingterminal comes online in thesummer of 2010. The latest offi-cial US LNG import forecast bythe Energy Information Admin-

istration (EIA) for 2010 and 2011is about 11.6 mt (down from an

earlier estimate of 12.8 mt), and12.8 mt (some 0.4 mt lower thanits prior monthly estimate) re-spectively. EIA believes thatdomestic gas production willcontinue to expand in 2010 butmay contract in 2011. EIAsprojection is a function ofhigher supply and the inabil-ity of still weak markets in ab-sorbing the incremental LNGcoming online, essentially act-

ing as a secondary marketafter satisfying LNG needs inhigher priced markets in Asiaand Europe.

FGE also subscribes to thesame view that US LNG importswill come in higher in 2010(during the first four months of2010, LNG imports have indeed jumped strongly) and 2011.However, it is possible that theUS may import more LNG than

what the EIA has projected ifdemand elsewhere does not re-cover or pick up as strongly.Also, should the price differen-tial between UK prices at theNational Balancing Point (NBP)and US Henry Hub (HH) nar-row and turn negative, the USmay see higher deliveries. Thereis a strong likelihood that thiscould occur in the nearer termas the US enters the hurricane

season. The US Climate Predic-tion Center in May 2010 fore-casted that the 2010 hurricaneseason will be relatively busywith up to 14 hurricanes andseven being major hurricanes.During the same month a yearearlier, the center predicted thatbetween four and seven hurri-canes and up to three major hur-ricanes could hit the US (as wehave witnessed in the past, the

amount of LNG heading to USshores can be highly variable,

dictated by demand from therest of the world, especially inAsia, as well as NBP-HH gasprice differentials when deter-mining which Atlantic Basinmarket LNG would be pushedinto as witnessed in 2009).

Meanwhile, the start-up ofnew LNG regasification termi-nals in Chile and Mexico mayhelp increase Americas shareof global LNG imports. The 1.4

mtpa Chilean LNG receivingterminal at Mejillones, owned by GDF Suez and copper pro-ducer Codelco, started commer-cial operations in May 2010.Meanwhile, the ManzanilloLNG terminal in Mexico mayreceive its first LNG cargo inlate 2011.

Middle Eastern LNG deliver-ies are forecasted to grow sub-stantially in 2010 and 2011.

Kuwait secured around 30 car-goes from two suppliersShelland Vitolto meet increasedelectricity demand during thepeak summer season. Moreover,Kuwait Petroleum Company(KPC) could bring in more car-goes, procured on a spot basis,if demand warrants it. Dubai isset to become the second Mid-dle Eastern country to bring inLNG. The reconfigured vessel

Golar Freeze, which was deliv-ered to Dubai Supply Authority(DUSUP) in May 2010, will actas Dubais LNG floating storageand regasification unit.

SupplyGlobal LNG supply in 2010 is

expected to benefit from theramp-up in production at theeight new LNG trains (combinednameplate capacity of 44.0 mt)


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that entered service in 2009. Be-sides the three Qatari mega-

trains (However, incrementalQatari supply is expected to betempered by maintenance pro-grams at some of Qatargas andRasGas liquefaction trains.While there have been conflict-ing reports about the timing andduration of maintenance pro-grams at the mega-trains, theycome amid sluggish gas prices(compared 2008 prices) and con-cerns about the strength of the

recovery in gas demand), theMiddle East added Yemen LNGto its list of LNG exporters in2009. Meanwhile, the Asia-Pa-cific region introduced four newLNG trainstwo from RussiasSakhalin II project and a pair ofequal sized-trains from Indone-sias Tangguh LNG project. TheTangguh LNG project is ex-pected to reach full productionby the end of this year. BP had

earlier in February 2010 indi-cated that about 100 cargoes willbe shipped in 2010.

New LNG train additions in2010 and 2011 will come fromAsia, the Middle East and forthe first time, South America.The dearth of final investmentdecisions (FIDs) in the AtlanticBasin essentially means thatonly Angola LNG will comeonline from the Atlantic Basin

in 2012. A total of six new lique-faction trains with a combinednameplate capacity of 36.0 mtthree quarters coming from theMiddle Eastare expected to beadded in 2010 and 2011. TheMiddle East saw the start up ofRasGas III (Train 7) and YemenLNGs second train in 1Q 2010and 2Q 2010, respectively. YemenLNG is aiming for an average95.0% availability and average

production of 85.0% of capacityfor 2010. Meanwhile, given the

relatively bearish gas prices(compared to 2008), Qatargashas not shown much urgency tocomplete construction at its tworemaining mega-trains. Qatargasis reportedly looking to startLNG production in the last quar-ter of 2010.

Peru LNG became the thirdLNG project to start operations in2010. It is the second liquefactionterminal to be built on the Ameri-

cas Pacific coast after the agingKenai LNG plant in Alaska some40-years previously. The 4.45mtpa project was inaugurated inJune 2010 and is currently con-ducting a trial test. In the mean-time, the project could shipseveral spot cargoes while wait-ing to start long-term deliveriesto the delayed Manzanillo ter-minal. Australias Pluto LNG,the worlds fastest upstream dis-

covery to LNG constructionproject, is slated to start LNGproduction in 2011. The projectwas almost 87.0% complete asof end March 2010.

Atlantic Basin projects such asNigeria LNG and NorwaysSnhvit LNG project are ex-pected to see improvements inLNG production this year andrising the following year. Effortsare underway to increase feedgas

to the Soku gas processing facilityand to bring production back toits full capacity. Nigerian LNGproduction suffered immenselyin 2009 amid feedgas problemswith intermittent closures at itsSoku gas processing facility dueto pipeline damage caused bycondensate theft. The plant iscapable of producing around1.1 billion cubic feet per day(bcf/d) at full capacity.

In conclusion, we believe that2010 and 2011 could prove to be

a more fruitful year for LNGtrade compared to 2009 as a fairamount of LNG supply is ex-pected to hit the market in 2010and 2011 prior to a supply lull in2012. Moreover, LNG supplierswill have more supply outlets toplace their LNG with the start-up of new regasification termi-nals. Although improvements ingas demand have been encour-aging thus far, we remain cau-

tious regarding the strength ofrecovery in gas demand by LNGimporting countries, especiallyfor some European countries,going forward. This comes amiduncertainty over the extent ofthe impact, following the debtcrises in some European coun-tries, on global economic growthand trade. Should the recoveryin gas demand in Asia and partsof Europe falter, this is expected

to reinforce the importance ofmarkets of last resort and en-ergy hungry markets in soakingup the additional LNG supply.

This publication thanks

Sook Ching Wong and

Shahriar Fesharaki, both

of FACTS Global Energy,

headquartered in Singapore,

for providing this article.

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global lng supply and demand

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