Oct 2022

Trend of Natural Gas and LNG Prices

Short-term trend

Asia

  • The assessed spot LNG price for near-month delivery to Northeast Asia, JKM declined to USD 36 per million Btu on 3 October amid stagnant activity in the Northeast Asian market, but on 6 October, JKM rose to USD 33 from USD 29 the previous day after Malaysia LNG declared a force majeure due to a pipeline leak, raising supply concerns. The following week, activity in the Northeast Asian market remained stagnant, hovering around the late USD 20s to USD 30 range. The week of 17 October showed similar price movements, although the price reached USD 33 on 21 October due to a temporary increase in buying interest. JKM generally hovered at USD 30 for the week of 24 October. Japan, China, and Korea appear to have generally completed stocking up on LNG inventories for the winter season. Sporadic commercial activity was seen in the market, but buying interest was generally low.
  • 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 September 2022 and scheduled to be delivered from the month onward (contract-based price) was not disclosed as only one or less company submitted the report for the month. The average price of spot LNG cargoes that were contracted and delivered in Japan within the month (arrival-based price) was not disclosed, either for the same reason.
  • Based on the preliminary figures from Japan's customs statistics of the Ministry of Finance, the country's average LNG import price was USD 22.73 per million Btu and JPY 164,915 per tonne in September 2022, both the highest ever recorded. The average landed prices of LNG in Japan from the United States, the ASEAN region, the Middle East, and Russia in August were USD 15.72, USD 19.03, USD 39.35, and USD 18.81, respectively. Elsewhere in Asia, average import prices in September were USD 17.81 in China, USD 28.26 in Korea, and USD 21.67 in Chinese Taipei. Japan’s average landed crude oil import price (JCC: Japan crude cocktail) was USD 110.79 per barrel in September 2022. The Japanese yen denominated price stood at JPY 97,513 per kilolitre, remaining at high levels. Japan’s average LNG import price, which accounts for 70%-80% of long-term contracts linked to JCC prices, is expected to continue to be affected by current crude oil prices.
  • Japan imported 5.33 million tonnes of LNG in September 2022, 1.6% lower than the same month in 2021. The total import volume during the first eight months of 2022 was 55.30 million tonnes, a decrease of 3% from the same period in 2021. China imported 5.90 million tonnes of LNG in September 2022, 12% less than the same month in 2021. China's total LNG import volume during the first nine months of 2022 was 46.51 million tonnes, a decrease of 20% from the same period of the previous year. While Korea imported 4.30 million tonnes in September 2022, an increase of 16% from the same month of 2021, Chinese Taipei imported 1.73 million tonnes, 1% higher than one year earlier. LNG import volume from these four markets was 151.10 million tonnes during the first nine months of 2022, a decrease of 8% year-on-year.

United States

  • The Henry Hub Natural Gas Futures price rose after reaching USD 6.5 on 3 October and reached USD 7.0 on 6 October. The following week, HH remained at the USD 6s level, but in the following two weeks, it turned down on the back of weaker demand due to a warmer climate outlook and a bullish production outlook, falling from USD 6.0 on 17 October to USD 5.0 on 21 October. The price remained at the USD 5s level for the week of 24 October. U.S. natural gas underground storage inventories were 3,394 bcf as of 21 October, down 4.0% from the previous year and down 5.5% from the average of the past five years, but still at a low but improving level.
  • According to the U.S. Energy Information Administration’s 12 October Short-Term Energy Outlook, the average natural gas spot price forecast for the fourth quarter of 2022 is USD 7.40, and the average forecast for 2023 is USD 6.00, down due to increased natural gas production.

Europe

  • The Dutch TTF Gas Futures price was in the upper USD 40s to 50s range for the week of 3 October, but gradually began to decline the following week from USD 45.2 on 10 October to USD 41.6 on 14 October as European natural gas underground storage exceeded 90% and LNG supply became in excess. The following week, the situation remained the same, with TTF falling further in value, from USD 36.5 on 17 October to USD 32.4 on 21 October. Meanwhile, Nigeria's NLNG declared force majeure on 17 October after flooding reduced some gas supplies, while on 20 October it announced the continuation of the LNG operation. During the same week, the European Commission presented a proposal for emergency measures, including joint gas procurement and a price cap on the TTF. TTF showed a further downward trend during the week of 24 October, hovering in the late USD 20s to USD 30 range.
  • TTF began to show a downward trend, as European natural gas underground storage has started to exceed 90%, and also due to the oversupply of LNG. The discount of the UK gas price NBP to the TTF is USD 7s to 8s, down from the recent trend.

LNG and Spot Gas Prices, 2020 - 2022

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, above USD 40 in December. In January and February 2022, JKM was in the USD 20s, temporarily surged to USD 85 in March due to fears of Russian pipeline gas supply disruptions, and then hovered around the USD 30s. Trading has been slow since April, with JKM falling from USD 36 to USD 22 in April and remaining in the low USD 20s during May and the first half of June. However, the price reached USD 40 in the second half of June and remained at the same level in July, and in August the price was generally USD 50s, temporarily exceeding USD 60 and USD 70, respectively. In September, JKM showed a declining trend, falling to the high USD 30s and generally hovering in the high USD 20s in October.
  • 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 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 USD 9s in February 2021, after falling to the mid-USD 7s in March. The average price then rose to late USD 15s in February 2022 as oil prices rose, falling to mid-USD 14s in March. It rose to late USD 15 in April and May, falling to late USD 14s in June, rising to late USD 17s in July, the high USD 19s in August, and the high USD 22s in September.

LNG and Spot Gas Prices, 2012 - 2022

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(source)
Henry Hub price: NYMEX Futures and Options, CME Group
TTF price: ICE Endex, Intercontinental Exchange
JKM: LNG Japan/Korea Marker© 2022 by S&P Global Platts, a division of S&P Global Inc.
JOGMEC spot LNG price: Monthly spot LNG prices for delivery to Japan, JOGMEC; by March 2021, the source is Spot LNG Prices Statistics, Ministry of Economy, Trade and Industry
Japan’s average LNG import price: Trade Statistics of Japan
EUA(EU ETS): ICE Endex, Intercontinental Exchange

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Trend of Natural Gas and LNG Inventories

Japan

  • Japan's LNG inventories as of the end of June 2022 stood at 5.27 million tonnes, an increase of 2.4% and 0.12 million tonnes from May, and an increase of 16.0% from June 2021, higher than the past five-year average by 0.86 million tonnes.
  • The LNG inventories for city-gas supply as of the end of June 2022 were 2.48 million tonnes, 5.2% higher than May and 31.6% higher than June 2021. LNG consumption for city-gas in June 2022 was 2.23 million tonnes, increased by 8.4% year-on-year. City-gas companies received 2.36 million tonnes of LNG in June 2022, decreasing year-on-year by 1.9%.
  • The LNG inventories for power generation as of the end of June 2022 were 2.79 million tonnes, increasing by 4.9% from May and 4.9% higher than June 2021. LNG consumption for power generation in June 2022 was 3.45 million tonnes, increasing by 3.7% from June 2021. Power generation companies received 3.92 million tonnes of LNG, increasing year-on-year by 7.4%.
  • According to the "LNG Inventory for Power Generation" released by the Ministry of Economy, Trade and Industry (METI) on 26 September 2022, major power utilities’ LNG inventories were 2.56 million tonnes as of 23 October. This is higher by 0.49 million tonnes than the end of October 2021 and 0.72 million tonnes above the average of the end of October of the past five years.

Japan end of month LNG inventory, 2020-2022

Japan end of month LNG inventory, 2012-2022

(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 14 October 2022, working gas in underground natural gas storage in the United States was 3.34 Tcf, 16.3% increase from the previous month, according to the U.S. Energy Information Administration (EIA). Gas inventories were 3.4% lower than those at the same time in 2021 and were 183 Bcf lower than the past five-year average. The latest inventories have been within the past five-year range since November 2020.

U.S. Natural Gas Underground Storage, 2020 - 2022

U.S. Natural Gas Underground Storage, 2012 - 2022

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

Europe

  • As of 24 October 2022, the stored volume of natural gas in European underground storage facilities operated by the Aggregated Gas Storage Inventory (AGSI +) EU member companies was 1044.8 TWh (about 69.11 million tonnes LNG equivalent). The volume was higher than that of one year ago by 21.8% or 187.3 TWh (about 12.39 million tonnes LNG equivalent). The inventories represented 93.8% of the capacity, which was higher than 77.2% on the same day in 2021 and higher than the five-year average of 90.9%. The inventories in Germany and the Netherlands (which have relatively large storage capacity among the member countries) were 97.7% and 92.0% of their respective capacities.

European Natural Gas Storage, 2020 - 2022

European Natural Gas Storage, 2012 - 2022

(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 24 October 2022, 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 5.03 million cubic meters, 3.5% up from the previous month. The inventories were lower than the same day in 2021 by 8.9% and by 15.1% below the five-year average for the same day.

European LNG Inventory, 2020 - 2022

European LNG Inventory, 2012 - 2022

(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

  • As the northern hemisphere winter approaches, the global LNG and natural gas markets have observed supply problems in Nigeria and Malaysia. Short-term LNG supply additions are expected from new LNG production from Mozambique's floating LNG vessel and the anticipated resumption of export from an LNG project in the United States. Project development activities continue in North America and Qatar to increase LNG production capacity.

 

Asia and Oceania

  • The Japan Bank for International Cooperation (JBIC) announced on 6 October 2022 that the bank had signed a loan agreement for LNG purchases with JERA for JPY 130 billion. The loan would be co-financed with private financial institutions, it said.
  • According to Pakistan LNG Limited's (PLL) tender result published on Monday 3 October 2022, it did not receive any bid in two tenders. PLL had originally floated the tender for 72 cargos - one cargo a month from 2023 to 2028.
  • Singapore's Sembcorp said on 11 October 2022 that the company had signed an LNG supply agreement with TotalEnergies to import an LNG supply strip for five years starting from 2025.
  • Malaysia's PETRONAS announced on 8 October 2022 that it had declared Force Majeure on gas supply to MLNG Dua due to a pipeline leak caused by soil movement at the Sabah-Sarawak Gas Pipeline that occurred on 21 September 2022. This has impacted the supply of gas to MLNG Dua's production facility at PETRONAS LNG Complex in Bintulu, Sarawak. PETRONAS has clarified that the FM affects the supply of gas to MLNG Dua's production facility only, while the other LNG production facilities within the PLC continue to operate as planned.
  • PETRONAS announced on 13 October 2022 that it had signed a Production Sharing Contract (PSC) with TotalEnergies EP Malaysia (TE), PETRONAS Carigali Sdn Bhd (PCSB), Sabah Shell Petroleum Company Limited (SSPC) and Shell Sabah Selatan Sdn Bhd (SSS) for Block 2K, an ultra-deepwater block located off the coast of Sabah. TE will be the operator with a 34.9% interest. PCSB holds a 40% interest while the remaining 25.1% is equally split between the other two partners, SSPC and SSS.
  • Tokyo Gas Co., Ltd. announced on 7 October 2022 that it had entered into an agreement to transfer five subsidiaries (stakes in four LNG projects except Darwin LNG) of its Australian subsidiary, Tokyo Gas Australia Pty Ltd, to MidOcean Energy Holdings Pty Ltd, a controlled company of EIG Global Energy Partners, LLC.
  • Chevron Corporation announced on 29 September 2022 that Chevron U.S.A. Inc. had delivered its first shipment of offset-paired LNG cargo. The announcement claims that GHG emissions for the cargo, from the Gorgon project delivered to CPC Corporation, Taiwan, will be fully offset via the retirement of high-quality nature-based and energy efficiency offsets in Cambodia, Indonesia and Nepal.
  • The Australian Government announced on 29 September 2022 that it had signed a new Heads of Agreement (HOA) with the three East Coast LNG Exporters to prevent a gas supply shortfall and secure competitively priced gas for the domestic market. In July, the Australian Competition and Consumer Commission (ACCC) forecast a gas shortfall of 56 petajoules (PJ) (1.029 million tonnes) for the domestic market in 2023. The announcement this time claims that new commitments from LNG exporters will lead to an extra 157 PJ (2.884 million tonnes) for the domestic market in 2023. The new HoA includes that LNG exporters to first offer uncontracted gas to the domestic market, on competitive terms, with reasonable notice, before exporting; and in respect of uncontracted gas, the principle that domestic gas customers will not pay more for the LNG exporters' gas than international customers.
  • Australia's Santos announced on 27 September 2022 that it had received a binding offer from Papua New Guinea's Kumul Petroleum to buy a 5% stake in the PNG LNG project.

 

North America

  • Cheniere Energy, Inc announced on 19 October 2022 that it had joined OGMP 2.0, the United Nations Environment Programme's (UNEP) flagship oil and gas methane emissions reporting and mitigation initiative.
  • Kinder Morgan, Inc. (KMI) announced on 27 September 2022 that it had closed on the sale of a 25.5% equity interest out of its membership interest in Elba Liquefaction Company, L.L.C. (ELC) to an undisclosed financial buyer for approximately USD 565 million, subject to customary purchase price adjustments to reflect an economic effective date of 1 July 2022. KMI and the buyer will each hold a 25.5% interest and Blackstone Credit will continue to hold a 49% interest in ELC. The Elba Liquefaction facility is owned by ELC. ELC delivers the LNG to Southern LNG Company, L.L.C. (SLNG) for export. KMI owns 100% of SLNG, which owns and operates the Elba Island LNG Terminal. The facility is supported by a 20-year contract with Shell LNG NA, L.L.C., who is subscribed to 100% of the liquefaction capacity.
  • Venture Global LNG and EnBW announced on 6 October 2022 the expansion of their existing LNG partnership to 2 million tonnes per year. Under the 20-year SPAs signed in June 2022, EnBW has increased the quantity of its long-term LNG offtake from Venture Global by an additional 0.5 million tonnes per year from Plaquemines and CP2 LNG.
  • Sempra Infrastructure announced on 20 October 2022 that Port Arthur LNG and Bechtel Energy had amended and restated the EPC contract, for the Phase 1 liquefaction project. The amended contract includes an updated price of approximately USD 10.5 billion, according to the announcement.
  • Sembcorp Marine announced on 20 October 2022 that its subsidiary Sembcorp Marine Rigs & Floaters Pte Ltd entered into Master Service Agreements with New Fortress Energy affiliates for conversion of two cylindrical drilling vessels to FLNG liquefaction facilities. The hull conversion and fabrication of topsides for the first FLNG liquefaction facility is scheduled for delivery in the first half of 2024.
  • Siemens Energy announced on 20 October 2022 that it had been selected by Northeast Energy Center (NEC) and Chart Energy & Chemicals to supply a gas/electric hybrid drive system for NEC's small-scale LNG plant being built in Charlton, Massachusetts. The project will be the first LNG facility in the world to feature a system of this type.

 

European and surrounding regions

  • The European Commission announced on 11 October 2022 that it had approved, under the EU Merger Regulation, the acquisition of joint control of German LNG Terminal GmbH ('GLNG') by KfW, both of Germany, and Nederlandse Gasunie of the Netherlands. GLNG will build, own, and operate an LNG regasification facility in Brunsbüttel, Germany. The terminal is expected to be operational in 2026.
  • Deutsche ReGas, the developer of the FSRU-based LNG terminal in Lubmin, Germany, announced on 27 September 2022 that it would launch the binding open season for capacity allocation for the first phase on 10 October. The company also plans to start a non-binding open season on the same date for the second phase which includes an additional FSRU and the capacity would be available from December 2023.
  • Tree Energy Solutions (TES) announced on 5 October 2022 that the company and Fortescue Future Industries (FFI) had agreed to develop a large-scale green hydrogen integrated project. The first phase is to develop and invest in the supply of 300,000 tonnes of green hydrogen. FFI and TES have agreed terms for FFI to make an equity investment of €30 million to become a strategic shareholder in TES and to invest €100 million for a significant stake in the construction of the TES import terminal in Wilhelmshaven, Germany. The first deliveries of green hydrogen into the terminal are expected to take place in 2026. FFI joins strategic investors in TES, including E.ON, HSBC, UniCredit, and Zodiac Maritime.
  • ENI announced on 11 October 2022 that it had begun providing additional volumes of LNG to the regasification terminal of Panigaglia (La Spezia) ahead of the 2022-2023 winter. The first cargo was delivered on Sunday with supplies coming from Angola, reloaded on smaller ships at Spanish terminals for them to be compatible with the terminal in Liguria.
  • According to Enagás, it may limit the number of cargoes its LNG system handles until the first week of November 2022 as a reduction in industrial demand since August and high storage levels have left it little room to absorb excess imports.
  • Finland's Hamina LNG Oy announced on 6 October 2022 that commissioning of its terminal had been completed and Hamina LNG had started to provide services. Hamina LNG provides LNG storage services with a storage capacity of 30,000 m3 and is the first LNG import terminal in Finland connected to the transmission network.
  • Höegh LNG Holdings Ltd. announced on 5 October 2022 that AB Klaipėdos Nafta  had notified Höegh LNG that KN exercises its option to acquire the FSRU Independence. The transfer of ownership is expected to occur in December 2024.
  • Bulgari's Bulgargaz announced on 10 October 2022 that it had secured sufficient LNG volumes for November through a tender procedure. Two suppliers were selected with secured slots for regasification and storage at the Revitusa terminal - Mytilineos SA and DEPA Commercial SA.
  • Mitsui O.S.K. Lines, Ltd. (MOL) announced on 5 October 2022 that it had signed a charter contract with Sakhalin Energy LLC for the LNG carrier Grand Mereya through a subsidiary company 60% owned by MOL. The vessel has been transporting LNG from the project under a long-term charter contract with Sakhalin Energy Investment Company Limited, the former operator of the project, but the contract has now been newly made with Sakhalin Energy LLC and the vessel will continue the same transport services.

 

Other regions

  • QatarEnergy announced on 23 October that it had selected Shell as its second international partner in the NFS expansion project, which comprises 2 LNG mega trains that will have a combined capacity of 16 million tonnes per year. Shell will have an effective net participating interest of 9.375% in the NFS project, out of a 25% interest available for international partners. QatarEnergy will hold the remaining 75% interest.

 

(Note: SPA: Sale and Purchase Agreement, FID: Final Invest Decision, HOA: Heads of Agreement, FSRU: Floating Storage Regasification Unit, CCS: Carbon Capture and Storage)

 

 

Supprted by the Institute of Energy Economics Japan (IEEJ)