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 10s per million Btu in mid-May 2021, and exceeded USD 12s in mid-June, has hovered around the low USD 12s in late June. One of the factors is the strong demand for LNG in Northeast Asia, and in particular, China's total import during the first five months of the year increased by 30% from the same period of the previous year, exceeding the cumulative import volume of Japan. In addition, unplanned outages at some LNG production facilities and the firmer European spot gas market partly due to rising carbon prices in the EU emission trading market, have kept Asian spot LNG prices higher, and the JKM has been the highest of the past eight years (2014-2021) since the early of June.
• JOGMEC announced in its monthly report of spot LNG prices for delivery to Japan that the average price of spot LNG cargoes for delivery to Japan contracted in May 2021 and scheduled to be delivered from the month onward (contract-based price) was USD 9.6 (USD 1.3 higher than April). 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 stayed in the high USD 2s in May 2021. Since it rose to the USD 3s in the early June, it has been hovering around the low USD 3s. According to the EIA (U.S. Energy Information Administration), the two main factors of the rises in spot gas prices are due to increasing LNG exports and natural gas consumption which is stimulated by the resumption of economic activities. In the future, the EIA also predicts that the fuel for thermal power generation will be switched to coal due to the rise in natural gas prices, and the amount of natural gas used will be suppressed.
• The TTF hovered in the range from high-USD 8 to low-USD 9 in May and reached to the USD 10s in early-June, then hovering in the high USD 10s in late June. One of the reasons for the high gas prices has been the gas injection progress rate of the underground storage towards the winter in Europe. There has been also a strong correlation lately between the carbon and gas prices in Europe. The carbon price in Europe that has tripled year-on-year encourages coal to gas switch, leading to higher gas prices.
• Based on the preliminary figures from Japan's customs statistics of the Ministry of Finance, the country's average LNG import price was USD 8.38 in May 2021. The average landed prices of LNG in Japan from the ASEAN region, the United States and Russia in the month were USD 7.85, USD 8.30 and USD 8.04, respectively, and the price from the Middle East was USD 8.40. Other Asian countries’ average import prices in May were USD 7.37 in China, USD 7.84 in Korea and USD 7.35 in Chinese Taipei, which were lower than Japan's. As the price of crude oil remained above USD 70 per barrel in June, the Japan’s average LNG import price is expected to rise in the future, as long-term contracts linked to crude oil prices account for majority of LNG imports.
• Japan imported 4.95 million tonnes of LNG in May 2021, % higher than the same month of 2020. The import volumes from January to May were 33.18 million tonnes, an increase of 7% from the same period of the previous year. China imported 7.03 million tonnes of LNG in May 2021, 36.5% more than the same period of 2020, continued exceeding Japan's imports volumes since April. While Korea imported 3.41 million tonnes, an increase of 15% from the same month of the previous year, Chinese Taipei imported 1.82 million tonnes, 29% higher 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-May of 2021, the four markets imported 94.45 million tonnes, a 15% increase year-on-year.

Mid- to long-term trend

• The JKM price 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. JKM then fell sharply to the USD 5s towards the end of February, turning upwards in March, and continued rising to the high USD 10s in early June, moving along with European indices and increased over the USD12 later in June.
• Because most of the LNG import to Japan based on long-term contract, 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. In response to strong crude oil price movements, the average price further went up to the USD 9 in February, and fell to the mid-USD 7s in March. It then rose to the low USD 8 in May.

Trend of Natural Gas and LNG Inventories

Japan

• Japan's LNG inventories as of the end of February 2021 stood at 4.08 million tonnes, an increase of 29.3% or 0.93 million tonnes from January, and a decrease of 8.2% from February 2020. The LNG inventories were above the five-year average for the first time since July 2020. The LNG receipts for both city-gas and power generation decreased from the previous month, but LNG consumption for city-gas and power generation decreased more than the decrease of LNG, resulting in the increase in LNG inventories.
• The LNG inventories for city-gas supply as of the end of February were 1.52 million tonnes, 21.1% higher than January 2021. They also decreased by 19.6% from February 2020. LNG consumption for city-gas was 3.06 million tonnes, decreasing by 14.5% year-on-year in February 2021. City-gas companies received 3.33 million tonnes of LNG in February, increasing year-on-year by 14.1%.
• The LNG inventories for power generation in February 2021 were 2.56 million tonnes, increasing by 34.8% from January 2021 and 0.3% higher than February 2020. LNG consumption in February 2021 decreased by 17.7% year-on-year to 4.16 million tonnes, while LNG receipts for power generation in the month decreased by 6.3% year-on-year to 5.25 million tonnes.

United States

• As of 11 June 2021, working gas in underground natural gas storage in the United States was 2.43 Tcf, a 15.6% increase from the previous month, according to the U.S. Energy Information Administration (EIA). Gas inventories were 16.1% lower than those at the same time in 2020 and were 126 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 June 2021, natural gas inventories were estimated to be at almost 2.4 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 inventories will end the 2021 injection season (end of October) below the level of five-year average, which is more than 3.6 Tcf.

Europe

• As of 19 June 2021, the stored volume of natural gas in European underground storage facilities operated by the Aggregated Gas Storage Inventory (AGSI +) member companies of the European Union (EU) and the United Kingdom was 494 TWh. The inventories were 30.5% up from the previous month and 42.4% lower year-on-year, and 149.5 TWh lower than the five-year average. On 19 June 2021, the working gas volume in storage represented 44.4% of the capacity. It was lower than 77.4% on the same day in 2020 and the five-year average of 54.1%.
• Even though the natural gas inventories in European underground storage facilities between 1 and 19 June 2021 were still within the past five-year average, they were close to the minimum level within the range. As during the winter Europe did not attract as many LNG cargoes as the preceding winter due to a sharp rise in spot LNG prices and cold weather in Northeast Asia, the gas inventories got much lower. 

 

• As of 19 June 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 4.77 million cubic metres (in liquid), a 7.2% up from the previous month. The inventories are low compared to the same day in 2020 with 4.4% reduction but still 9.3% above the 5-year average.

Latest Developments in Major Natural Gas and LNG Projects

Highlights

• Initiatives continue emerging at LNG projects around the world to make clean LNG even cleaner and greener. Australia's Woodside has announced a solar power plan for its Pluto LNG. Cheniere Energy of the United States has announced an initiative to collaborate with natural gas producers to improve information on GHG footprints. Venture Global LNG has announced plans of CCS at its LNG projects. Russian and Canadian LNG project proponents have been also active in their decarbonisation efforts.

 

Asia and Oceania

• Kogas announced on 28 May 2021 that the company and GS Caltex had signed a MOU for liquid hydrogen production utilising cryogenic energy of LNG. A liquid hydrogen station with a production capacity of 10,000 tonnes per year will supply liquid hydrogen to the Seoul metropolitan area and the country's central region in the future. Hydrogen will be extracted from LNG, converted into liquid hydrogen and stored by utilising cryogenic energy of LNG.
• China's Beijing Gas Group posted a notice on the Shanghai Petroleum and Natural Gas Exchange on 31 May 2021 to invite expressions of interest for supply of LNG from 2023 to 2032. Potential suppliers are required to submit their interest by 21 July 2021.
• Norway's Crown LNG Holding AS announced on 9 June 2021 its plan of an LNG terminal as a gravity-based structure that sits on the seabed approximately 11 kilometres offshore Kakinada, India. The terminal will be built with regasification capacity of 7.2 million tonnes per year. The company is working towards a FID in 2022.
• India's H-Energy announced on 16 June 2021 that it had signed a MOU with Petrobangla. The companies are expected to finalize a long-term supply agreement to supply regasified LNG to Bangladesh through a cross border natural gas pipeline.
• Australia's Santos, as operator of the Bayu-Undan Joint Venture, announced on 25 May 2021 the Phase 3C infill drilling program had commenced at the Bayu-Undan field, in Timor-Leste offshore waters. The program wasgiven a FID in January 2021.
• Woodside announced on 27 May 2021 that the company plans supply of 50 MW of solar energy to the Woodside-operated Pluto LNG facility on Western Australia's Burrup Peninsula. Woodside also announced on 8 June that it had set new interim and long-term targets to achieve net zero greenhouse gas emissions by 2050 at Pluto LNG.
• Santos announced on 8 June 2021 that the company and Beach Energy had been awarded a AUD 15 million grant from the Australian Government's Carbon Capture Use and Storage Development Fund. The Moomba carbon capture and storage (CCS) project in outback South Australia which will store 1.7 million tonnes of carbon dioxide (CO2) per year with capacity for up to 20 million tonnes annually across the Cooper Basin.

 

North America

• Cheniere Energy announced on 10 June 2021 a collaboration with five natural gas producers and several leading academic institutions to implement quantification, monitoring, reporting and verification (QMRV) of GHG emissions performance at natural gas production sites. The initiative will utilize multiple ground-based, drone, aerial, and satellite monitoring technologies to establish baseline emissions levels. The project will monitor sites for carbon dioxide and for both fugitive and vented methane emissions. The initiative will also verify emissions performance and identify opportunities to reduce emissions.
• Venture Global LNG announced on 27 May 2021 plans to the first capture and sequester carbon at its Calcasieu Pass and Plaquemines LNG facilities in the United States. Venture Global claimed the company would capture and sequester an estimated 500,000 tonnes of carbon per year from the two sites.
• Tellurian announced with Gunvor on 27 May and with Vitol on 3 June 2021, respectively, an LNG SPA each, for 3 million tonnes per year for ten years, indexed to a combination of two indices, JKM and TTF, netted back for transportation charges. The LNG would be delivered FOB from Tellurian's Driftwood LNG.
• The Haisla Nation and Pembina Pipeline Corporation announced on 8 June 2021 a partnership agreement whereby Pembina will become the Haisla Nation's partner in the development of the proposed Cedar LNG Project. The project will have a liquefaction capacity of approximately 3 million tonnes per year of LNG and will source natural gas from the Montney resource play in northeast British Columbia. Cedar LNG expects to make a FID in 2023, with the expected in-service date planned for 2027.
• Pieridae Energy announced on 27 May 2021 the creation of the Caroline Carbon Capture Power Complex to be located at the company's Caroline Facility in Alberta, combining carbon capture and sequestration and blue power production. The complex is expected to have the ability to sequester up to 3 million tonnes of CO2 per year into one of the Caroline Facility's depleted gas reservoirs. This amount of carbon captured equals the annual emissions from the Goldboro LNG Facility. Phase 1 of the complex will sequester 1 million tonnes of CO2 per year and produce approximately 200 MW or 1.9 billion kWH of blue power per year.
• Canada's GNL Québec and the Hanseatic Energy Hub announced on 3 June 2021 that they had launched a strategic partnership on "low-GHG emission" LNG exports from Canada to Germany. The parties have agreed to develop standards and processes for importing LNG from LNG Québec's Énergie Saguenay carbon-neutral export plant in Canada to the carbon-neutral regasification terminal in Stade, near Hamburg, Germany.
• Mexico's energy regulator CRE granted on 14 June 2021 New Fortress Energy NFE permits for regasification, storage and distribution of LNG at its planned Pichilingue LNG terminal in Baja California Sur.

 

Europe and Russia

• Russia's NOVATEK announced on 2 June 2021 two Heads of Agreement (HOAs) for long-term supply of LNG from the Arctic LNG 2 project to Zhejiang Energy Gas Group of China and commodity trader Glencore, respectively.
• NOVATEK and TotalEnergies announced on 3 June 2021 a Share Purchase Agreement on the sale to the latter 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. The two companies also announced on the day that they had signed a MOU on decarbonization, hydrogen and renewables.

 

Other regions

• Oman LNG announced on 8 June 2021 that it had signed an agreement with Shell to deliver the Sultanate's first carbon-neutral LNG cargo from Oman LNG facility. According to the announcement, the cargo is the first carbon-neutral LNG from the Middle East using nature-based carbon credits to offset full lifecycle CO2 emissions generated across the LNG value chain.
• Nigeria LNG Limited (NLNG) announced on 8 June 2021 that it had signed SPAs with three Nigerian companies - Asiko Power Limited, Bridport Energy Limited and Gas-Plus Synergy Limited - to supply 1.1 million tonnes per year of LNG to the domestic market. NLNG announced that a ground-breaking ceremony of the Train 7 project was held on 15 June 2021. The project is expected to increase NLNG's capacity by 35% from 22 to 30 million tonnes per year. The project is scheduled to span approximately five years, the company said.
• Karpowership announced on 17 June 2021 that KARMOL's (50/50 joint venture between Karpowership and Mitsui OSK Lines (MOL)) first Floating Storage and Regasification Unit (FSRU), KARMOL LNGT Powership Africa, arrived in Senegalese waters on 31 May 2021 from Singapore. The vessel will connect to a Powership, a floating power plant, owned by Karpowership, through gas pipelines.
• Excelerate Energy announced on 2 June 2021 that the company's floating storage and regasification unit (FSRU) Exemplar had begun operations in Bahía Blanca, Argentine.

 

Supprted by the Institute of Energy Economics Japan (IEEJ)