Trend of Natural Gas and LNG Prices

Short-term trend

• The assessed spot LNG price JKM for near-month delivery to Northeast Asia hovered in the middle of USD 30 per million Btu in early December, then has been above USD 40 since the middle of December, following European spot gas prices. During the strong global winter demand, JKM prices have remained high due to the spot LNG procurement caused by the disruption of LNG production in Malaysia and the strong influence of the soaring European gas market. European gas prices have been higher than JKM in December, causing LNG cargoes to be diverted from Asia to Europe.
• 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 November 2021 and scheduled to be delivered from the month onward (contract-based price) was USD 35.0, the highest since March 2014, when the report began. The average price of spot LNG cargoes that were contracted and delivered in Japan within the month (arrival-based price) was not disclosed as only one or less company submitted the report for the month.
• The Henry Hub Natural Gas Futures price fell from the USD 4 at the beginning of the month to the middle of USD 3 through the end of the month. According to the EIA (U.S. Energy Information Administration), the declining natural gas prices in recent months reflect a relatively warm weather and the demand for heating decreased, and natural gas inventory levels in the United States that have recovered to near the five-year average. On the other hand, global demand for LNG remains strong, and increasing LNG exports are supporting prices. EIA forecasts an average of USD 4.58 from December 2021 to February 2022. Thereafter, as natural gas production increases, with seasonal declines of LNG exports, an average of USD 3.98 for the entire year 2022 is forecast.
• The Dutch TTF Gas Futures price continued rising from USD 30 at the beginning of the month to late USD 40 by the middle of the month, briefly coming close to USD 60 thereafter. In addition to low European gas underground storage, increased demand due to cold weather in Europe and Russia, and declining wind power generation, the German regulator’s suspension of the approval process for the Nord Stream 2 pipeline and concerns about Russia’s confrontation with Ukraine have caused European gas prices to rise sharply to record high.
• Based on the preliminary figures from Japan's customs statistics of the Ministry of Finance, the country's average LNG import price was USD 14.30 in November 2021. The average landed prices of LNG in Japan from the United States, the ASEAN region, the Middle East, and Russia in the month were USD 22.30, USD 12.23, USD 12.28, and USD 18.99, respectively. The average price for LNG from the United States was so high as three cargoes, representing about half of the total from the United States, fetched over USD 30. Other Asian countries’ average import prices in November were USD 17.65 in China, USD 15.42 in Korea, USD 20.89 in Chinese Taipei, making Japan's the lowest price in the region. The Japan’s average landed crude oil import rice (JCC: Japan crude cocktail) rose to USD 82.08 in November 2021, the highest since November 2014, therefore, the Japan’s average LNG import price is expected to continue rising, as long-term contracts linked to JCC prices still account for 70%-80％ of LNG imports.
• Japan imported 5.86 million tonnes of LNG in November 2021, 3% lower than the same month of 2020. The total import volume from January to November was 67.28 million tonnes, an increase of 1% from the same period of 2020. China imported 6.90 million tonnes of LNG in November 2021, 21% more than the same month of 2020. China's total LNG import volume from January to November was 71.36 million tonnes, an increase of 21% from the same period of the previous year, exceeding the total volume of Japan. While Korea imported 3.87 million tonnes in October 2021, an increase of 8% from the same month of 2020, Chinese Taipei imported 1.90 million tonnes, 18% higher than one year earlier. Monthly LNG imports into the four markets combined have increased year-on-year since January 2020 and the import volume during the eleven-month period of 2021 was 198.67 million tonnes, a 12% 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 thereafter. Moving along with the also high European gas prices and briefly surpassing USD 56 in October, JKM remained in the middle of USD 30s in November and above USD 40 in December.
• 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 2021, after falling to the mid-USD 7s in March. It has then been on the rise as crude oil prices have risen, reaching high USD 11 in October, and then climbing to USD 14 in November, the highest since January 2015, due in part to recent high spot LNG prices.

Trend of Natural Gas and LNG Inventories

Japan

• Japan's LNG inventories as of the end of August 2021 stood at 5.02 million tonnes, an increase of 10.5% from July, and an increase of 28.7% from August 2020. The LNG inventories of 5.02 million tonnes were higher than the past five-year average by 1.10million tonnes, and they were also higher than the highest of the past five-years by 0.59 million tonnes.
• The LNG inventories for city-gas supply as of the end of August were 1.97 million tonnes, 22.5% higher than June 2021, 2.5% higher than August 2020. LNG consumption for city-gas was 2.35 million tonnes, increasing by 0.3% year-on-year in August 2021. City-gas companies received 2.71 million tonnes of LNG in August, increasing year-on-year by 33.6%. The LNG inventories for city-gas increased year-on-year for the first time in 13 months since July 2020.
• The LNG inventories for power generation in August 2021 were 3.05 million tonnes, increasing by 4.0% from July 2021 and 54.0% higher than August 2020. LNG consumption for power generation in August 2021 decreased by 24.0% year-on-year to 3.65 million tonnes, while LNG receipts for power generation in the month decreased by 1.2% year-on-year to 4.12 million tonnes.
• According to the "LNG Inventory for Power Generation" released by the Ministry of Economy, Trade and Industry (METI) on 15 December 2021, major power utilities had 2.37 million tonnes of LNG in stock as of 12 December. This is an increase of 0.95 million tonnes from the same period of 2020 and 0.66 million tonnes above the average of the past four years.

United States

• As of 17 December 2021, working gas in underground natural gas storage in the United States was 3.36 Tcf, a 7.2% decrease from the previous month, according to the U.S. Energy Information Administration (EIA). Gas inventories were 5.9% lower than those at the same time in 2020 and were 34Bcf higher than the past five-year average.
• According to the monthly Short-Term Energy Outlook (STEO) released by the EIA in December 2021, natural gas inventories were 3.5 Tcf as of the end of November 2021, 3.0% lower than the five-year average. The injections into storage have been below the previous five-year average during summer, mainly because of hot weather and high levels of exports amid relatively flat natural gas production. However, in recent weeks, storage levels have moved closer to average levels as injections outpaced the five-year average in September, October, and early November. EIA expects that the gas inventories will decline to 1.7 Tcf by the end of March 2021 when the winter withdrawal season ends, which would be 2% lower than the previous five-year average.

Europe

• As of 22 December 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] and the United Kingdom member companies) was 641.8 TWh (42 million tonnes LNG equivalent). The inventories represented 57.5% of the capacity, significantly lower than 77.4% on the same day in 2020 and the five-year average of 68.9%. The inventories were 758.8 TWh, 30 November 2021, which was the lowest since 2014, 18.3% and 12.3% lower than the five-year average and the five-year minimum, respectively. Notably, the inventories in Germany and the Netherlands (which have relatively large storage capacity among the member countries) were 57% and 42% of their respective capacities as of the end of November.
• As of 18December 2021, the stored volume of natural gas in Ukraine was 105.3 TWh. The inventories were 17.3% down from the previous month and 49.6% lower year-on-year, and 69.2TWh lower than the five-year average. The inventories represented 33.1% of the capacity, lower than 65.3% on the same day in 2020 and the five-year average of 53.4%.

 

• As of 18 December 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 4.43 million cubic metres (in liquid), 18.3% down from the previous month. The inventories were lower than the same day in 2020 by 2.6% and 8.0% below the five-year average.

Latest Developments in Major Natural Gas and LNG Projects

Highlights

• While the year 2021 is approaching its end, the LNG industry is filled with uncertainty over supply and demand balance in the midst of high demand period in the northern hemisphere with some unexpected lower supply volumes of both pipeline gas and LNG. At the same time, term-contracting and project development activities have been gaining momentum partly because of higher price expectations and anticipated supply windows around the middle of the decade.

 

Asia and Oceania

• Japan's Agency for Natural Resources and Energy started posting on its website information of collective inventory of LNG owned by the nation's major power generators on weekly basis on 1 December 2021.
• Saibu Gas announced on 30 November 2021 that it signed on 24 November Heads of Agreement (HOA) with Novatek Gas and Power Asia Pte. Ltd., for LNG transshipment and supply to China utilizing the Hibiki LNG Terminal.
• China Gas Holdings Limited announced on 26 November 2021 that the company and Vitol entered into a strategic cooperation agreement on 25 November. The JV company shall supply LNG of no less than 800,000 tonnes to China Gas in 2023, and from 2024 the supply shall be no less than 1 million tonnes per year. In the fifth year since its establishment, the JV company shall achieve an import volume of over 5 million tonnes per year.
• China's Sinopec has reportedly obtained approval from the local government to expand its LNG receiving terminal in Tianjin. The expansion will increase the plant's capacity to 11.65 million tonnes per year and will include five new 270,000 m3 LNG storage tanks.
• Mitsui O.S.K. Lines Ltd. and Royal Vopak announced on 16 December 2021 that an agreement had been reached, whereby Vopak would acquire 49.99% of the shares in the vessel owning company of MOL FSRU Challenger, whose name will be changed to Bauhinia Spirit. The new joint venture company will provide the FSRU based on the long-term contract with Hong Kong LNG Terminal Limited and is expected to be operational around mid-2022.
• Sumitomo Corporation and Tokyo Gas announced on 25 November 2021 that Malaysia's PETRONAS and the two Japanese companies had agreed to conduct a feasibility study to establish a supply chain of carbon-neutral methane to Japan, produced in Malaysia by methanation, using green hydrogen from renewable energy and carbon dioxide.
• Tokyo Gas and Mitsubishi Corporation announced on 26 November 2021 that they would explore feasibility for a synthetic methane supply chain in LNG exporting countries produced from green hydrogen using renewable electricity and CO2.
• PETRONAS announced on 1 December 2021 that the company had awarded two Front End Engineering Design (FEED) contracts to a JGC Corporation-Samsung Heavy Industries consortium and to SAIPEM Spa as part of an international dual FEED design competition for a nearshore LNG project in Sabah with a minimum capacity of 2 million tonnes per year. The FEED design competition is expected to take place over the course of 10 months with the FID planned for end of 2022. The nearshore LNG plant is planned to be Ready for Start Up (RFSU) by end of 2026.
• Russia's NOVATEK announced on 2 December 2021 that the company and PetroVietnam Power had signed the Cooperation Agreement on LNG and power projects in Vietnam.
• Australian Industrial Energy announced on 30 November 2021 that the company and Norway's Höegh LNG had concluded a long-term charter for FSRU Höegh Galleon at the Port Kembla energy terminal and agreed to collaborate on the future design and development of a new generation FSRU capable of receiving fuels such as green hydrogen.
• JERA announced on 8 December 2021 that through its subsidiary JERA Australia Pty Ltd., had concluded an equity purchase agreement with a subsidiary of Santos to acquire a 12.5% stake in the gas Barossa/Caldita field. The production is expected to start around 2025. JERA will receive about 0.425 million tonnes per year of LNG in accordance with its equity stake in the Barossa gas field.
• ConocoPhillips announced on 8 December 2021 that it had notified Origin Energy that ConocoPhillips was exercising its preemption right to purchase up to an additional 10% shareholding interest in Australia Pacific LNG (APLNG) from Origin Energy. The ConocoPhillips subsidiary currently holds a 37.5% APLNG shareholding interest and the transaction is expected to close in the first quarter of 2022.

 

North America

• Cheniere Energy Partners, L.P. announced on 23 November 2021 that LNG had been produced at Train 6 of the Sabine Pass Liquefaction facility. The company expects Substantial Completion of Train 6 to be achieved in the first quarter of 2022, approximately 1 year ahead of the guaranteed completion date. Sabine Pass' total production capacity will be approximately 30 million tonnes per year of LNG.
• Cheniere Energy, Inc. announced on 24 November 2021 that Cheniere Marketing International, LLP had entered into a binding LNG SPA with China's Foran Energy Group Co., Ltd. Foran has agreed to purchase 0.3 million tonnes per year of LNG from Cheniere Marketing on a DES basis for 20 years beginning in January 2023.
• Venture Global LNG announced on 2 December 2021 that the company would develop a fourth LNG export facility in Louisiana. The CP2 LNG project will be located in Cameron Parish, Calcasieu Pass and is expected have a nameplate liquification capacity of 20 million tonnes per year.
• McDermott International announced on 23 November 2021 that the company had signed an Engineering, Procurement, Fabrication, and Construction (EPFC) contract with Woodfibre LNG.

 

Europe and Russia

• Gazprom announced on 1 November 2021 that it produced 422.6 billion cubic meters of gas during the first 10 months of the year, 15.8% more than in the same period of 2020.
• German network regulator Bundesnetzagentur announced on 16 November 2021 that it had suspended the procedure to certify Nord Stream 2 AG as an independent transmission operator. The regulator concluded that it would only be possible to certify an operator of the Nord Stream 2 pipeline if that operator was organised in a legal form under German law.

 

Other regions

• QatarEnergy announced on 06 December 2021 that its LNG producing affiliate, Ras Laffan Liquefied Natural Gas Company Limited, entered into a long-term SPA with Guangdong Energy Group Natural Gas Co., Ltd. (GEG) for the supply of one million tonnes per year of LNG to China over 10 years from 2024.
• QatarEnergy announced on 8 December 2021 that its LNG producing affiliate, Qatar Liquified Gas Company Limited (2), entered into a long-term SPA with S&T International Natural Gas Trading Company Limited (S&T) for the supply of one million tonnes per year of LNG to China over 15 years starting in late 2022.
• Eagle LNG Partners LLC announced on 10 December 2021 that the company had completed a long-term supply contract to establish an LNG receiving terminal in Aruba with WEB Aruba, the local power and water utility. The Aruba LNG Terminal will serve as WEB's LNG receiving terminal for its Balashi power plant.

 

 

Supprted by the Institute of Energy Economics Japan (IEEJ)