Trend of Natural Gas and LNG Prices
- The assessed spot LNG price for delivery to northeast Asia, JKM recovered to USD 5 per million Btu in late September and continued to rise to well above USD 7 in late October for delivery in December. Although some troubles in liquefaction facilities affected to the excessively higher price, the trend was subdued by increasing utilisation rate of LNG production plants in the United States. The JKM rose slightly in excess of USD 6 in early November, partly due to problems at some liquefaction facilities, but this was mitigated by an increase in the capacity utilization rate of the liquefaction facilities in the United States, and the price remained in the lower half of USD 6 in early November. The price then dropped to the lower half of USD 6 due to the recent warm winter in Northeast Asia and concerns about a drop in demand caused by strengthening measures to prevent the re-spread of COVID-19, but as of November 25 (for delivery in January 2021), the price had risen to US$7.12 due to concerns about new supply disruptions in Qatar and other countries. The average spot LNG price published by METI was USD 4.9 for October delivery (USD 1.5 higher than September).
- The Henry Hub price for delivery in the following month was at USD 2.90 as of 25 November 2020. After a brief dropping to USD 1.8 because of the shutdown of some liquefaction facilities in mid-September, the price rose to above USD 3 since then to late October. The increase in the price level was contributed by the domestic heating demand in winter and modest natural gas production, as well as increasing LNG export. While the price was hovering around USD 3 level in early November, it dropped by USD 0.3 on 16 November because of warm weather in the United States in early November. The trend is expected to continue until late November following the increase in natural gas production. As it is expected that the winter 2020/2021 is going to be colder than 2019/2020, the HH price will continue to remain at a stable level in winter.
- Meanwhile, the TTF price for delivery in the following month was at USD 4.79 as of 25 November. It was at above USD 5 in late October and has been staying around USD 5. The European gas storage utilization turned to decrease and TTF price is expected to increase as there will be more heating demand in winter. However, the overall demand outlook is still uncertain as some of the regions are facing the second wave of COVID-19 and the re-introduction of lockdown measures.
- Based on the preliminary figures from Japan's customs statistics from the Ministry of Finance, the country's average LNG import price was USD 5.81 in October 2020. The average landed prices of LNG in Japan from the Middle East in October was USD 5.62, which was below the overall average of USD 5.81. On the other hand, the average landed price of LNG in Japan from the United States in the same month was USD 7.54, although it was lower than previous month’s USD 8.08, still much higher than the overall average import price of USD 5.81. Japan’s average LNG import price of USD 5.81 in October was 1.35 times lower than JKM’s average delivery price of USD 4.31 in October, down from 1.9 times in September.
- As most of the long-term LNG contract prices in Japan are linked to oil prices except for the LNG from the United States, the collapse of international crude oil prices also affected long-term LNG contract prices. Reflecting on the downward trend of crude oil prices, the average landed LNG price in October was under USD 6 for three months in a row. Reflecting the fact that oil prices have been rising since August, the average import price for November is expected to increase. Meanwhile, Japan imported 5.943 million tonnes of LNG in October 2020, 5.7% lower than the previous year and the lowest for October in the past ten years.
Mid- to long-term trend
- Japan's average LNG import price has fallen from a peak of USD 18 in 2012 to the USD 18 level in the last decade, and due to the decline in crude oil prices from March 2020 onwards, Japan's average LNG import price between August and October fell to the USD 5 level, the lowest level since January 2005. This is basically due to the downward trend in the price of crude oil, which is linked to the price of LNG in long-term contracts. The oil prices will be reflected in Japan's average LNG import price after a time lag of about three to four months.
- The JKM price for delivery between November 2019 and January 2020 briefly stayed at around USD 6 and declined dramatically to below USD 2 in late April for delivery in June 2020. This is a remarkable decline to a historically low level. In recent years, the JKM price was within the range between the lower end of European spot gas prices and the higher end of crude oil equivalent prices. Starting from 2019, the JKM price became closer to the lower end of European spot prices. However, the spread between JKM and TTF has been widening since the middle of October 2020.
- Japan's average LNG import price had been significantly higher than the JKM price. The reason for this trend is believed to be that a high percentage of LNG was procured under long-term contracts, as demand from Japan and South Korea declined due to COVID-19, while supply from the U.S. and the rest of the world expanded, and demand for spot LNG was less willing to buy it due to the inventories at high levels. The widening gap between Japan's average LNG import price and the JKM price is expected to be limited due to the impact of lower oil prices and higher JKM. The combined LNG imports by Japan, Korea, and Chinese Taipei from January to October of 2020 decreased year-on-year by 2.0%, or 2.26 million tonnes, and were less by 9.4%, or 11.14 million tonnes than those during the same period in 2018. Any significant rise in LNG imports is not expected because of the slow economic recovery.
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Henry Hub price: NYMEX Futures and Options, CME Group
NBP price: ICE Futures Europe, Intercontinental Exchange
TTF price: ICE Futures Europe, Intercontinental Exchange
JKM: LNG Japan/Korea Marker© 2020 by S&P Global Platts, a division of S&P Global Inc.
METI spot price: Spot LNG Price Statistics, Ministry of Economy, Trade and Industry
Japan’s average LNG import price: Trade Statistics of Japan
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Trend of Natural Gas and LNG Inventories
- Japan's LNG inventories as of the end of July 2020 stood at 4.98 million tonnes, an increase of 1.5% from the preceding month, and an increase of 4.9% from one year earlier. It was 1.07 million tonnes higher than the average in the past five years and was the highest in July since the start of statistics in 2008.
- The LNG inventories for the city-gas supply of the month was 2.12 million tonnes, 2.5% lower than June 2020, and 0.8% higher than July 2019. LNG consumption for city-gas stood at 2.26 million tonnes, decreasing by 6.9% year-on-year in July 2020. City-gas companies received 2.20 million tonnes of LNG in July, which is a decline year-on-year of 11.3%. LNG consumption for city-gas showed signs of recovery in June 2020 after significantly falling year-on-year in April and May 2020 but saw a year-on-year decline again in July 2020. The LNG inventories declined also in July as the consumption was more than the receipts in June. In a press conference held by the Japan Gas Association (JGA) at the end of September, JGA expected that it would still take some time for city-gas sales to recover to pre-COVID-19 levels.
- The LNG inventories for power generation in July 2020 were 2.86 million tonnes, increasing by 4.8% from June 2020 and 8.3% higher than July 2019. Gas-fired power generation output decreased by 4.3% year-on-year in July 2020, and the LNG inventories for power generation are increasing from the previous year but are approaching the same level as the previous year. increased.
- According to the Japan Meteorological Agency's forecast in October, the La Niña phenomenon will likely to continue. The average temperature between December and February is expected to be at the same level or lower than previous years in the southern region of Tohoku. The LNG inventories were at a high-level in winter one year ago as a result of a mild winter nationwide and sluggish demand of city-gas and power generation. However, the LNG demand would increase, and the inventories could be lower than those in the 2019/2020 winter as if the forecast remains the same. On the other hand, there are also concerns that demand for gas may slump again due to the re-emergence of COVID-19 in the country, which could push up LNG inventories.
Compiled based on data from Gas Business and Thermal Power Generation Statistics, Ministry of Economy, Trade and Industry.As the inventory data is available for the period only after January 2008, the five-year average is applicable only after January 2013.
- As of 20 November 2020, working gas in underground natural gas storage in the United States was 3,940 Bcf, a 0.4% decrease from the previous month, according to the U.S. Energy Information Administration (EIA). Gas inventories were 9.1% higher than those at the same time in 2019 and were higher than the past five-year average of 3,690 Bcf. The inventories declined from the peak on 23 October, but began to increase in November.. Although the end of the natural gas storage injection season is traditionally defined as 31 October, injections often occur in November.
- According to the Short-Term Energy Outlook monthly released by the EIA in November 2020, EIA estimated that natural gas inventories were about 4.0 trillion cubic feet (Tcf) in October 2020, 5% more than the five-year (2015 - 2019) average and the second-highest end-of-October level on record. However, as the natural gas production in the 2020/2021 winter is expected to be lower than the 2019/2020 winter, EIA forecasts that the inventory withdrawals will outpace the five-year average during the heating season with inventories ending March 2021 at 1.5 Tcf, 16% lower than the 2016 - 2020 average.
Compiled based on data from the U.S. Energy Information Administration (EIA)
- As of 24 November 2020, the stored volume of natural gas in European underground storage facilities operated by the Aggregated Gas Storage Inventory (AGSI +) members (including European Union [EU] member companies and non-EU [Serbia and Ukraine] member companies) was 1,014 TWh. The inventories were 4.0 % down from the previous month and 3.5 % lower year-on-year, and 94 TWh higher than the five-year average. The inventories reached a record high of 1,066 TWh in the year 2020 on 11 October and started to decline since then. The date of the inventories that started to decline was two weeks earlier compared to 2019. On 24 November 2020, the working gas volume in storage was 91 % full, which was within the range of 83% - 96% in the same period over the past five years.
- The inventory levels in the high gas demand period starting from November will be affected by two factors. The first is winter temperatures. During the winter 2019/2020, as the warm weather in Europe and Asia led to an oversupply of natural gas, there was little room to store additional gas volumes. The 2020/2021 winter in Japan is likely to be colder than the 2019/2020 winter because of the La Niña phenomenon which will increase the heating demand. The other factor is that the economic recovery from the second wave of COVID-19 will be hindered. In the United Kingdom, France, Germany and Italy, the number of new infections has been significantly higher than this spring since October. LNG consumption is expected to be sluggish as lockdowns are taking place again in some areas.
Compiled based on data from Gas Infrastructure Europe, Aggregated Gas Storage Inventory (AGSI). As the inventory data is available for the period only after January 2011, the five-year average is applicable only after January 2016.
Latest Developments in Major Natural Gas and LNG Projects
- In November, the final investment decision (FID) for a large LNG export project on the Pacific Coast of North America was made, making it the first FID in 2020. In addition, there were announcements by the parties involved in several LNG sales and purchase agreements, while media reports revealed an apparently successful medium-term LNG sales deal of LNG from the United States into China and a stalling talk on a potential deal into Europe.
Asia and Oceania
- On 20 October 2020, the LNG bunkering vessel (LBV) Kaguya, owned by Central LNG Shipping Japan Corporation, supplied LNG fuel to an NYK pure car and truck carrier (PCTC) "Sakura Leader" at the berth of Shin Kurushima Toyohashi Shipbuilding Co., Ltd. (Toyohashi City, Aichi Prefecture) - the first time in Japan for LNG fuel to be supplied to a vessel via Ship-to-Ship bunkering. The LNG fuel had been loaded at JERA's Kawagoe Thermal Power Station.
- Shanghai Petroleum and Natural Gas Exchange (SHPGX) on 2 November 2020 executed its first international LNG tender transaction. CNOOC will purchase 65,000 tonnes of LNG to be delivered in March 2021 from Aramco Trading Singapore.
- Total announced on 20 October 2020 that it delivered its first shipment of carbon neutral LNG to the Chinese National Offshore Oil Corporation (CNOOC) on 29 September. The cargo was from the Ichthys plant in Australia and was delivered to the Dapeng terminal, China. The term "carbon neutral" indicates that Total and CNOOC have offset the amount of carbon dioxide equivalent associated with the whole carbon footprint of the LNG Cargo through VCS (Verified Carbon Standards) certified emission reduction projects.
- Six people were killed and three were injured at the Beihai LNG terminal in Guangxi, China following a fire incident. Local media reported that a fire broke out on Monday, 2 November 2020, at 11:45 a.m. on one of the facility's LNG storage tanks and the fire was extinguished at 11:55 a.m. According to the report, the incident was caused by maintenance personnel. Beihai LNG terminal began operation in 2016 and was initially owned by Sinopec. The terminal is controlled by PipeChina (National Petroleum and Natural Gas Pipeline Network Group) and is capable of handling up to 6 million tonnes per year of LNG. The terminal has four LNG storage tanks each with a 160,000-m3 capacity. The fire reportedly broke out at the storage tank No:2.
- Qatar Petroleum (QP) announced on 9 November 2020 that its LNG trading arm QP Trading had signed its first deal with Singapore's Pavilion Energy Trading & Supply Pte. Ltd. QP Trading will deliver up to 1.8 million tonnes of LNG per year for 10 years to Singapore. The deal represents the first long-term LNG arrangement containing specific environmental criteria and requirements designed to ultimately reduce the carbon footprint of the LNG supplies, QP said.
- Malaysia's PETRONAS announced on 5 November 2020 its aspiration to achieve Net Zero Carbon Emissions by 2050.
- PETRONAS announced on 11 November 2020 that it had officially launched its LNG bunkering business by completing its first LNG bunkering operation at Pasir Gudang, Johor. Through a collaboration with Titan LNG, the operation involved a ship-to-ship LNG bunkering transfer from MV Avenir Advantage, PETRONAS' first LNG Bunkering Vessel (LBV) to SIEM Aristotle. Under the PETRONAS Marine brand, the 7,500 cubic meter MV Avenir Advantage will be offering LNG bunkering business.
- JERA announced on 28 October 2020 that ExxonMobil Hai Phong Energy Pte Ltd (EMPHE), Hai Phong People's Committee and JERA had signed a Memorandum of Understanding (MOU) to work together on a potential integrated LNG to Power project in Hai Phong. ExxonMobil has submitted a master plan application with a project concept for consideration and potential inclusion in Vietnam's National Power Development Plan (PDP). JERA said that the project is in line with the goals of the Japan US Strategic Energy Partnership (JUSEP).
- Venice Energy announced on 4 November 2020 that it had signed a project agreement with Flinders Ports that set out the framework to support the development of a proposed LNG import facility in Port Adelaide. Venice Energy said that the facility was expected to bring around 80 Petajoules per year of LNG into South Australia. In late October Venice Energy submitted its development application to the State Government. The project will include the construction and operation of a new two-berth wharf facility to accommodate an LNG carrier, a moored floating storage and regasification unit (FSRU) and supporting infrastructure. The proposed facility would be located adjacent to the Pelican Point gas fired power station. The facility is expected to be operational by late 2022.
- Origin Energy announced on 17 November 2020 that it would conduct a AUD 3.2 million feasibility study into building an export scale green hydrogen and ammonia plant in Tasmania's Bell Bay. Green hydrogen will be produced from sustainable water using renewable energy. The hydrogen will then be combined with nitrogen extracted from the air to create green ammonia. The greater than 500 MW plant would produce more than 420,000 tonnes of zero emissions ammonia per year. First production of green ammonia is targeted for the mid-2020s. The feasibility study will be part-funded by a AUD 1.6 million grant from the Tasmania Government.
- Australia's Santos announced on 22 October 2020 that it had injected 100 tonnes of carbon dioxide into depleted gas reservoirs in the Strzelecki field in the Cooper Basin as part of the final field trial for the Moomba Carbon Capture and Storage (CCS) Project. Santos will finalise technical and commercial arrangements with the aim of having the 1.7 million tonne per year project ready for a final investment decision (FID) by the end of 2020. Ultimately, the Moomba CCS Project has the potential to store up to 20 million tonnes of carbon dioxide per year, the company said.
- Woodside indicated in the Investor Briefing Day 2020 on 11 November that it was assuming selling down a 50% stake in the planned second train of the Pluto project. The company expects the timing to be right for final investment decisions on Scarborough and Pluto Train 2 in the second half of 2021. The Scarborough Joint Venture is on track for first LNG in 2026, according to the company.
- Shell recognised impairment losses of USD 1,636 million during the third quarter of 2020, mainly relate to Prelude floating LNG in Australia (USD 1,327 million pre-tax). The company said the impairment reflects the revised outlook for production, with no output expected to resume at the venture in 2020.
- According to EIA's (U.S. Energy Information Administration) October 2020 Natural Gas Monthly, in August 2020, for the fourth consecutive month, dry natural gas production in the United States decreased year over year for the month. The preliminary level for dry natural gas production in August was 2,801 billion cubic feet (Bcf), or 90.4 Bcf/d, 4.5 Bcf/d (-4.7%) lower than the August 2019 level. Estimated natural gas consumption in August 2020 was 2,407 Bcf, or 77.6 Bcf/d, 1.1 Bcf/d (-1.4%) lower than the 78.7 Bcf/d consumed in August 2019. LNG exports in August 2020 were down 19.4% compared with August 2019, at 3.6 Bcf/d. (2020/10/30)
- U.S. Department of Energy (DOE) announced in October 2020 that it had extended the terms of seven long-term LNG export authorizations through 2050. This action follows through on the DoE's July 2020 policy statement that allows for long-term natural gas export authorizations to non-free trade agreement (non-FTA) countries to be extended through 2050. DOE granted the first seven applications submitted under the new policy. The authorization holders and projects are: Venture Global Calcasieu Pass, LLC; Venture Global Plaquemines LNG, LLC; Rio Grande LNG, LLC; Dominion Energy Cove Point LNG, LP; Corpus Christi Liquefaction Stage III, LLC; and the Freeport entities -- Freeport LNG Expansion, L.P., FLNG Liquefaction, LLC, FLNG Liquefaction 2, LLC, FLNG Liquefaction 3, LLC, FLNG Liquefaction 4, LLC, Cheniere Energy's Sabine Pass and Corpus Christi LNG export terminals, and Sempra Energy's Port Arthur LNG project.
- Cheniere Energy, Inc. reported net loss of USD 463 million for the third quarter of 2020. During the three and nine months until September, the company recognized USD 171 million and USD 932 million, respectively, in revenues associated with LNG cargoes for which customers had notified the company that they would not take delivery. Corpus Christi Train 3 and Sabine Pass Train 6 are expected to be substantially completed in 1Q 2021 and 2H 2022.
- Dominion Energy announced on 2 November 2020 that it had closed on the sale of the majority of its gas transmission and storage assets to Berkshire Hathaway. These operations include more than 5,500 miles (8,851 km) of interstate gas transmission pipelines, about 775 billion cubic feet (Bcf) (16.13 million tonnes) of gas storage that the company operates and an operating 25% stake in Cove Point. The sale of the company's interests in the Questar Pipelines is expected to be completed in early 2021 following receipt of Hart-Scott-Rodino clearance.
- Venture Global LNG announced on 10 November 2020 the arrival of the first two liquefaction trains at the company's Calcasieu Pass LNG export facility in Cameron Parish, Louisiana. The 0.6 million tonne per year LNG trains were fabricated in factories and delivered within 15 months after the project's final investment decision (FID). The two modular liquefaction trains and mixed refrigerant compressor skids were shipped to Louisiana from Baker Hughes's manufacturing facility in Avenza, Italy.
- B.C. ENVIRONMENTAL ASSESSMENT OFFICE announced on 26 October 2020 that Woodfibre LNG Limited had received a 5-year extension for the deadline in the certificate to substantially start the Woodfibre LNG Project. The new deadline is 26 October 2025.
- Sempra Energy announced on 17 November 2020 that the company had sanctioned a new investment to build ECA LNG Phase 1, adding liquification-export capacity at the Energía Costa Azul (ECA) regasification terminal in Baja California, Mexico. ECA LNG Phase 1 is the only LNG export project globally to reach a final investment decision (FID) to date in 2020 and is expected to be the first LNG-export terminal on the Pacific coast to connect the natural gas supplies of the United States to markets across the Pacific Basin. In addition to the approximately USD 2 billion in capital expenditures for ECA LNG Phase 1, a roughly USD 400 million new pipeline in Mexico will be developed and owned by IEnova, leading to a total incremental investment across the Sempra family of companies of nearly USD 2.5 billion.
Europe and Russia
- Engie will not finalize its contract to import LNG, the company confirmed to a local media on Tuesday 3 November 2020, ending discussions with NextDecade.
- LTeW (LNG Terminal Wilhelmshaven GmbH) announced on 6 November 2020 that it was re-evaluating previous plans for an LNG terminal in Wilhelmshaven, Germany. The company said that it had decided to do so because of market players' reluctance to make binding bookings for import capacities at the planned terminal in the current circumstances. The company sponsoring the project is already considering several new options for using the Wilhelmshaven site as an import port for environmentally friendly gas, for example by adapting individual parameters of the terminal or adding new elements.
- Norway's Equinor revealed on 26 October 2020 that surveys of the damage after the fire at Hammerfest LNG on 28 September indicated that the LNG plant would be closed for until 1 October 2021 for repairs. In addition to damage caused by the fire on the air intake on one of the plant's five power turbines, large amounts of seawater from the extinguishing have damaged other auxiliary systems such as electrical equipment and cables in the plant.
- Equinor announced on 17 November 2020 that it had received the report of the Petroleum Safety Authority Norway (PSA) after its inspection of the accident and electrical system at Hammerfest LNG in the period 21 to 24 September 2020. Equinor has started improving the conditions that led to the order, deviations and improvement areas indicated in the PSA report. The PSA's report in writing confirmed the findings communicated in the earlier verbal summary of the inspection and concludes that a systematic approach to the application and execution of deviation handling is missing. The report further indicates a lack of correction and follow-up of conditions pointed to by the PSA during former inspections. The PSA report states that the inspection has proven serious breaches to the regulations on deviation handling and orders Equinor to review the company's system for recording and follow-up of identified deviations, secure handling of identified deviations and implement measures that are required to secure compliance with the company's systems for recording and follow-up of deviations.
- ADNOC announced on 12 November 2020 that it had signed a strategic framework agreement with Total, to explore joint research, development and deployment partnership opportunities in the areas of CO2 emission reductions and carbon capture, utilization and storage (CCUS). The first commercial-scale CCUS facility in the Middle East at ADNOC's Al Reyadah facility has the capacity to capture 800,000 tonnes of CO2 annually. ADNOC plans to expand the capacity of this program six-fold by capturing CO2 from its own gas plants, with the aim of reaching 5 million tonnes of CO2 every year by 2030.
- ADNOC LNG announced on 11 November 2020 that it had signed up to a six-year supply agreement with Vitol for the sale of 1.8 million tonnes per year of post-2022 LNG volumes and a two-year supply agreement with Total for 0.75 million tonnes per year of 2021 and 2022 LNG volumes.