May 2021

Trend of Natural Gas and LNG Prices

Short-term trend

  • The assessed spot LNG price JKM for near-month delivery to Northeast Asia rose to the USD 9s per million Btu in late April 2021, exceeded USD 10 in early May, briefly fell back to the USD 9s, but quickly rebounded to hover around the low USD 10s in late May. The strong demand for LNG in China and other parts of Northeast Asia, along with unplanned outages at some LNG production facilities and steady spot gas prices in Europe, has kept Asian spot LNG prices higher. JKM has been the highest of the past seven years (2015-2021) since the middle of April.
  • According to preliminary figures from JOGMEC’s monthly spot LNG prices for delivery to Japan, the average price of spot LNG cargoes for delivery to Japan contracted in April 2021 and scheduled to be delivered from the month onward (contract-based price) was USD 8.3 (USD 2.2 higher than March) and the average price of spot LNG cargoes that were contracted and delivered in Japan within the month (arrival-based price) was not disclosed because the number of companies that imported spot LNG was one or less.
  • The Henry Hub price continued rising gradually after it reached the mid-USD 2s in early April 2021, it temporarily rose to the low USD 3s in the mid-May, since then, it has been hovering around USD 2.9. The US spot gas prices are expected to remain firm due to increasing LNG exports and increasing natural gas consumption stimulated by the resumption of economic activities, and demand for refilling for natural gas inventories in the storage facilities is expected to grow toward the summer, according to the EIA.
  • The TTF price surpassed USD 7 in mid-April and continued rising to the mid-USD 9s by mid-May, then fell back to the low USD 8s due to the decline in the European carbon market and Brent crude oil prices, and then turned upwards to hover in the mid-USD 9 range. One of the reasons for the high European gas prices is that the gas injection progress rate of the underground storage towards the summer has been sluggish due to lower temperatures than last year in Europe. There is also a strong correlation between the carbon market and the European gas market. Higher carbon price in Europe stimulate incentives to replace coal with gas.
  • Based on the preliminary figures from Japan's customs statistics of the Ministry of Finance, the country's average LNG import price was USD 7.72 in April 2021. The average landed prices of LNG in Japan from the ASEAN region, Middle East and Russia in the month were USD 7.40, USD 7.66 and USD 6.80, respectively, lower than the average price, while the price from the United States was USD 8.88, higher than the average. Japan's average import price in April was higher than China’s USD 6.96, Korea's USD 7.42 and Chinese Taipei's USD 6.75.
  • Japan imported 4.98 million tonnes of LNG in April 2021, 4% lower than the same month of 2020. The import volumes from January to April were 28.23 million tonnes, an increase of 6% from the same period of the previous year. China imported 6.73 million tonnes of LNG in April of 2021, 33.6% more than the same period of 2020, it exceeded Japan's import volumes for the first time since January 2021. Korea imported 2.85 million tonnes, a decrease of 8% from the same month of the previous year, Chinese Taipei imported 1.59 million tonnes, 3% lower than one year earlier. Monthly LNG imports into the four markets combined have increased year-on-year since January 2020. In the period of January-April of 2021, the four markets imported 77.26 million tonnes, a 13% increase year-on-year.

LNG and Spot Gas Prices, Apr 2020 - Apr 2021

Mid- to long-term trend

  • The JKM price was around USD 6 in winter 2019 but started to decline from January 2020, reaching an all-time low of USD 1.83 at the end of April 2020 due to increasing supply and slower growth of demand. After hovering in the USD 2s from May until July, it rose again from August 2020 due to supply disruptions at several production facilities to over USD 10 in December, reaching an all-time high of USD 32.5 in January 2021 because of the cold wave. The price spike, as well as the preceding plunge, was unprecedented. However, there were only a few cargoes that changed hands at such extreme price levels. JKM then fell sharply to the USD 5s towards the end of February, turning upwards in March, and continued rising to the high USD 9s in early May and to the mid-USD 10s later.
  • Japan's average LNG import price had been declining to the USD 5s in August - October 2020, the lowest level since January 2005, due to the collapse of international crude oil prices from March 2020. Then the average price rose to the USD 7s in December 2020 as crude oil prices recovered. The average price further went up to the middle of the USD 8s in January 2021, above USD 9 in February, and fell to the mid-USD 7s in March. It then rose to the high USD 7 in April, as prices of LNG from the ASEAN, Middle East and Russia rose due to steady strong crude oil prices.

LNG and Spot Gas Prices, 2011-2021

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(source)
Henry Hub price: NYMEX Futures and Options, CME Group
TTF price: ICE Futures Europe, Intercontinental Exchange
JKM: LNG Japan/Korea Marker© 2021 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

  • Japan's LNG inventories as of the end of January 2021 stood at 3.16 million tonnes, a decrease of 5.5% or 0.18 million tonnes from the preceding month, and a decrease of 29.4% from January 2020. The LNG inventories of 3.16 million tonnes were lower than the previous five-year average by 0.59 million tonnes and had been lower than the previous five-year average for six consecutive months since August 2020. The amount of LNG received in Japan increased from the previous month, but LNG consumption for city-gas increased because of the colder-than-usual winter weather, resulting in the decrease in LNG inventories, not come back to the anormal inventory range.
  • The LNG inventories for city-gas supply as of the end of January were 1.25 million tonnes, 15.7% lower than December 2020. They also decreased by 38.7% from January 2020. LNG consumption for city-gas was 3.58 million tonnes, increasing by 10.4% year-on-year in January 2021. City-gas companies received 3.34 million tonnes of LNG in January, increasing year-on-year by 11.2%.
  • The LNG inventories for power generation in January 2021 were 1.90 million tonnes, increasing by 2.8% from December 2020 and 21.6% lower than January 2020. LNG consumption in January 2021 increased by 0.1% year-on-year to 5.06 million tonnes, while LNG receipts for power generation in the month increased by 9.6% year-on-year to 5.61 million tonnes.

Japan end of month LNG inventory, 2019-2021

Japan end of month LNG inventory, 2011-2021

(Source)
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.

United States

  • As of 21 May 2021, working gas in underground natural gas storage in the United States was 2.22 Tcf, a 16.7% increase from the previous month, according to the U.S. Energy Information Administration (EIA). Gas inventories were 15.2% lower than those at the same time in 2020 and were 63 Bcf lower than the past five-year average. The latest inventories have been within the past five-year range since November 2020.
  • According to the monthly Short-Term Energy Outlook (STEO) released by the EIA in May 2021, natural gas inventories were nearly 2.0 Tcf in April 2021, which was 3.0% lower than the five-year (2016-2020) average. The withdrawals of natural gas in 2020-2021 winter were more than the five-year average because of the cold February temperature and lower natural gas production. EIA forecasts that natural gas production will grow and gas consumption for power generation will be less than in the past two summers, leading to the storage injections outpacing the five-year average in 2021. In addition, EIA forecasts that natural gas inventories will end the 2021 injection season (end of October) below the level of the five-year average, which is more than 3.6 Tcf.

U.S. Natural Gas Underground Storage, May 2020 - May 2021)

U.S. Natural Gas Underground Storage, 2011-2021

(Source)
Compiled based on data from the U.S. Energy Information Administration (EIA)

Europe

  • As of 26 May 2021, 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 [the United Kingdom, Serbia, and Ukraine] member companies) was 400 TWh. After hitting the lowest level in three years at 322 TWh on 16 April 2021, the inventories gradually increased to 400 TWh as temperatures got warmer. The inventories were 21.3% up from the previous month and 49.3% lower year-on-year, and 147 TWh lower than the five-year average. Although the injection season has started in many countries for summer preparation, on 26 May 2021, the working gas volume in storage represented 35.8% of the capacity. It was lower than 71.5% on the same day in 2020 and the five-year average of 50.4%.

European Natural Gas Storage, May 2020 - May 2021

European Natural Gas Storage, 2011-2021

(Source)
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.

 

  • As of 26 May 2021, the stored volume of LNG in European LNG terminals reported by Aggregated LNG Storage Inventory (ALSI) member operators (including 18 operators in 11 countries) was 4.39 million cubic metres (in liquid), a 22.7% up from the previous month. The inventories are low compared to the same day in 2020 with an 20.7% reduction and  4.6% below the 5-year average. In most EU countries, the changes of LNG inventories are in line with the changes of the send-out volume, the more the LNG drawn out of the facilities, the less the inventories. However, the LNG inventories in Spain increased from 1.2 million cubic metres on 7 May to 1.93 million cubic metres on 23 May and remain high level despite its send-out gas remain stable during the same period.

European LNG Storage, May 2019 -May 2021

European LNG Storage, 2011 - 2021

(Source)
Compiled based on data from Gas Infrastructure Europe, Aggregated LNG Storage Inventory(ALSI). As the inventory data is available for the period only after January 2012, the five-year average is applicable only after January 2017.

Latest Developments in Major Natural Gas and LNG Projects

Highlights

  • In Australia, progress has been made regarding equity allocation alignment and engineering aspects in the Darwin LNG and expected backfilling Barossa field development. In Papua New Guinea, the Papua LNG project development has been reactivated. On the other hand, a sign of delay has emerged in the onshore liquefaction project development in Mozambique, on which the FID was made in 2019.

 

Asia and Oceania

  • Korea's Ministry of Trade, Industry and Energy announced on 27 April 2021 its Long-term Natural Gas Supply Plan which expected the country's LNG demand to rise 15.1% through 2034 on the back of higher LNG demand for bunkering and hydrogen fuel cell cars, as well as a government-led push to reduce power generation by coal and nuclear.
  • The Philippines' Department of Energy (DOE) approved on 22 April 2021 the Notice to Proceed (NTP) application of Vires Energy Corporation (VEC) for its Integrated Natural Gas-Fired Power Plant and LNG Storage and Regasification Terminal Project in the province of Batangas. The proposed LNG terminal and regasification project will consist of a Turret Mooring System for the FSRU, a 1.6 km Subsea Gas Pipeline, and a 500-MW Floating Power Plant (FPP). The target commercial operation date of the project is in January 2023.
  • PETRONAS announced on 7 May 2021 that PETRONAS LNG Ltd had introduced the Canada AECO index as a new LNG price indexation to its customers following the sale of a spot LNG cargo from Bintulu, Malaysia, to a buyer in Asia for August 2021 delivery.
  • PETRONAS announced on 26 April 2021 that PETRONAS LNG Ltd. had commenced the export of LNG to China in ISO tanks from its filling facility in Pengerang, Joho, following a spot contract signed between PETRONAS and Tiger Gas (Hong Kong) Ltd, an affiliate of Tiger Clean Energy Limited (TCEL). In 2020, PETRONAS and TCEL signed a long-term sale and purchase agreement for the supply of LNG to TCEL's LNG ISO tank filling facility in Bintulu, Sarawak.
  • Eni announced on 26 April 2021 that it had started gas production from the Merakes Project, in the East Sepinggan block in the Makassar Strait, offshore East Kalimantan, Indonesia. The project will have a production capacity of 450 million standard cubic feet per day, connected to the Jangkrik Floating Production Unit (FPU), optimizing its producing capacity up to 750 million standard cubic feet per day together with the gas flowing from the Jangkrik gas field. Merakes gas will be partially sold to the domestic market and will also contribute to the extension of the life of the Bontang LNG facility.
  • Total announced on 20 May 2021 that the company and ArcelorMittal Nippon Steel (AMNS) had signed an agreement for the supply of up to 500,000 tonnes of LNG per year until 2026. The LNG will be sourced from Total's global portfolio and offloaded either at the Dahej or the Hazira LNG Terminal, on the West Coast of India. AMNS will use the LNG to run its steel and power plants located in Hazira, Gujarat state.
  • Australia's Santos announced on 30 April 2021 that it had completed the sell-down of 25% interests in Bayu-Undan and Darwin LNG to SK E&S, which is also a partner in Barossa.  First gas from Barossa to backfill Darwin LNG is expected in the first half of 2025.
  • Australia's Santos and Eni announced on 3 May 2021 that they had signed a Memorandum of Understanding (MOU) to cooperate on opportunities in northern Australia and Timor-Leste. The areas of cooperation include assessing the synergies of sharing possible infrastructures associated with gas field developments around Barossa and Evans Shoal, pipeline to Darwin and onshore associated gas processing leading to LNG expansion developments. This also includes investigating options to re-purpose the Bayu-Undan facilities to extend the life of the project.
  • Australia's Venice Energy announced on 5 May 2021 that it had finalised selection of a preferred supplier of an FSRU for its Outer Harbor Project in the Port of Adelaide. The company has signed the Heads of Agreement and Term Sheet with a leading global independent LNG shipowner and operator from Europe and the Time Charter Party agreement is expected to be concluded in the coming weeks.
  • Total announced on 5 May 2021 that and after a year of delay because of Covid-19, the Government of Papua New Guinea (PNG) and Total as Operator had remobilized the Papua LNG project teams and of other required resources. The objective is to launch the FEED in early 2022 and to prepare for FID in 2023.

 

North America

  • Cheniere Energy announced on 4 May 2021 that Sabine Pass Liquefaction, LLC had supplied a carbon neutral cargo of LNG to Shell as part of the companies' long-term LNG Sale and Purchase Agreement. Offsets used were bought from Shell's global portfolio of nature-based projects with Cheniere purchasing the portion attributable to estimated CO2e emissions associated with activities upstream of the FOB delivery point.
  • According to the company's first-quarter 2021 10-Q report to SEC (UNITED STATES SECURITIES AND EXCHANGE COMMISSION) Cheniere Energy's Sabine Pass LNG Train 6 is 83% complete and is expected to be completed by the first half of 2022. Engineering is 99.6% complete, procurement 99.9%, and construction 61.7%.
  • Sempra Energy said during its Q1 2021 Earnings Call on 5 May 2021 that it was more likely that FID at Port Arthur LNG would move to 2022.
  • Venture Global LNG announced on 29 April 2021 a new partnership with Zachry Group in the development of the Plaquemines LNG export project. After VGLNG's previous selection of KBR as the EPC contractor, KBR and Zachry Group will together, through a new joint venture, as KZJV, execute the development, engineering, procurement and construction under the EPC contract for Phase 1 of Plaquemines LNG.
  • NextDecade Corporation and Project Canary announced on 19 April 2021 the formation of a joint pilot project for monitoring, reporting, and independent third-party measurement and certification of the greenhouse gas (GHG) intensity of LNG to be sold from NextDecade's Rio Grande LNG export facility in the Port of Brownsville, Texas.
  • Pivotal LNG announced on 6 May 2021 that the JAX LNG facility located along the St. John's River in Jacksonville, Florida, was expanding its capacity - tripling liquefaction to 360,000 gallons per day (0.224 million tonnes per year) and doubling LNG storage to 4 million gallons (6,813 tonnes). The expansion is expected to be placed in service by early 2022.
  • Woodfibre LNG, Pacific Oil & Gas Limited's (PO&G) subsidiary, announced on 6 May 2021 that the company had signed a second SPA with BP Gas Marketing Limited (BPGM) for LNG from the export facility near Squamish, British Columbia. BPGM will receive 0.75 million tonnes per year of LNG over 15 years on a FOB basis. The latest SPA will increase BPGM's total LNG offtake to 1.5 million tonnes per year, over 70% of Woodfibre LNG's future annual production.
  • Woodside announced on 18 May 2021 that it had decided to exit its 50% non-operated participating interest in the proposed Kitimat LNG development, located in British Columbia, Canada. Woodside will retain a position in the Liard Basin upstream gas resource with a low-cost option to investigate potential future natural gas, ammonia and hydrogen opportunities in British Columbia.

 

Europe and Russia

  • Norway's Petroleum Safety Authority (PSA) said on 22 April 2021 that it had concluded an investigation into the fire accident at Equinor's Hammerfest LNG facility on 28 September 2020, with PSA's investigation unveiling serious breaches of the regulations. Equinor announced on 26 April 2021 that due to the comprehensive scope of work and Covid-19 restrictions, the revised estimated start-up date of the LNG plant on Melkøya is set to 31 March 2022 after the fire on 28 September 2020.
  • Russia's NOVATEK announced on 28 April 2021 that the company had signed a Heads of Agreement (HOA) with Total on the sale of a 10% participation interest in Arctic Transshipment LLC. Arctic Transshipment LLC is NOVATEK's subsidiary that will operate two LNG transshipment complexes currently under construction in the Kamchatka and Murmansk regions. On the day, NOVATEK also announced that its joint venture Arctic LNG 2 had concluded 20-year LNG Sales and Purchase Agreements (SPAs) for the total LNG production volumes with all the project's participants. The LNG sales from Arctic LNG 2's first liquefaction train is planned to commence in 2023. The SPAs provide for LNG supplies from Arctic LNG 2 on FOB Murmansk and FOB Kamchatka basis with pricing formulas linked to international oil and gas benchmarks. The LNG offtake volumes are set in proportion to the respective participants' ownership stakes in the Project.

 

Other regions

  • Morocco's Ministry of Energy, Mines and the Environment published on 28 April 2021 a call for proposals to site a FSRU off either its Mediterranean or Atlantic coasts.
  • Nigeria's Department of Petroleum Resources (DPR) expressed its support to the Nigeria's first floating LNG production plant at the online contract signing of the pre-front end engineering design (Pre-Feed) agreement between UTM Offshore Limited and JGC Corporation (UK) Limited on 11 May 2021. The project is expected to be completed in 2025. The plant would be processing 176 mcfd (1.34 million tonnes per year) natural gas and condensate.
  • Kosmos Energy said in its First Quarter 2021 Results announcement that the Phase one of the Greater Tortue Ahmeyim LNG project ended the quarter around 58% complete with material progress across all the major workstreams, including the FPSO, Floating LNG vessel, hub terminal (concrete breakwater) and subsea infrastructure. The partnership is targeting Phase one to be around 80% complete by year end.
  • Karpowership announced on 25 April 2021 that KARMOL's (a Joint Venture between Karpowership and Mitsui OSK Lines) first FSRU was delivered on 15 March at Sembcorp Marine in Singapore and will begin sea trials off Singapore on 25 April ahead of its deployment to Senegal on the coming weeks. The FSRU KARMOL LNGT AFRICA will enable KARMOL to offer LNG-powered electricity to the West African country for the first time before the end of June.
  • Due to the security situation in the north of the Cabo Delgado province in Mozambique, Total confirmed on 26 April 2021 the withdrawal of all Mozambique LNG project personnel from the Afungi site. This situation leads Total, as operator of Mozambique LNG project, to declare force majeure.
  • Invenergy and BW LNG announced on 12 May 2021 that they had closed a financial package with IDB Invest to finance the FSRU component of the Energía del Pacífico (EDP) LNG-to-power project in El Salvador. The BW Tatiana LNG carrier will be converted to the region's first FSRU and will be permanently moored at the Port of Acajutla, Sonsonate, El Salvador.

 

Supprted by the Institute of Energy Economics Japan (IEEJ)

 

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