Trend of Natural Gas and LNG Prices

Short-term trend

Asia

• The assessed spot LNG price for near-month delivery to Northeast Asia, JKM remained in the low USD 20s per million Btu in the first half of January, as trading was slow at the start of the year. From late January onward, high LNG inventories and relatively mild weather continued, and as the Lunar New Year approached, trading stagnated further, and JKM fell below USD 20s. Thereafter, Northeast Asia experienced a period of severe cold weather, and LNG inventories were drawn down, but this did not cause major price fluctuations, with prices hovering below USD 20s through the end of the month.
• 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 December 2022 and scheduled to be delivered from the month onward (contract-based price) was USD 30.8. The average price of spot LNG cargoes that were contracted and delivered in Japan within the month (arrival-based price) was not disclosed.
• Based on the preliminary figures from Japan's customs statistics of the Ministry of Finance, the country's average LNG import price remained expensive at USD 18.85 per million Btu and JPY 134,859 per tonne in December 2022, although the Japanese yen-denominated figures were lower than those in the previous month. The average landed prices of LNG in Japan from the United States, the ASEAN region, the Middle East, and Russia in December were USD 18.49, USD 18.86, USD 20.25, and USD 16.67, respectively. The annual average was USD 17.25 per million Btu and JPY 117,356 per tonne in 2022. Elsewhere in Asia, average import prices in December were USD 17.34 in China, USD 24.21 in Korea, and USD 17.37 in Chinese Taipei. Japan’s average landed crude oil import price (JCC: Japan crude cocktail) was USD 94.99 per barrel in December 2022. The Japanese yen-denominated price stood at JPY 82,444 per kilolitre, down from the previous month. 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 6.06 million tonnes of LNG in December 2022, 14% lower than the same month in 2021. The total annual import volume was 72.00 million tonnes (preliminary), a decrease of 3% from the same period in 2021. China imported 6.60 million tonnes of LNG in December 2022, 14% less than the same month in 2021. China's annual LNG import volume in 2022 was 63.44 million tonnes, a decrease of 20% from the same period of the previous year. While Korea imported 4.51 million tonnes in December 2022, an increase of 17% from the same month of 2021, Chinese Taipei imported 1.59 million tonnes, 5% lower than one year earlier. The annual LNG import volume from these four markets was 202.10 million tonnes in 2022, a decrease of 7% year-on-year.

United States

• The Henry Hub Natural Gas Futures price fell from USD 4.5 the previous week to USD 3.9 on 3 January on speculation of declining demand, but turned around and rose to USD 4.2 the following day. However, on 4 January, it plunged to USD 3.7 on renewed expectations of a decline in demand. HH then remained in the high USD 3s, but fell to USD 3.3 on 18 January due to widespread above-normal temperatures, and remained in the low USD 3s thereafter. On 23 January, when Freeport LNG applied to the Federal Energy Regulatory Commission for approval to cool down part of its LNG export facility, HH rose to USD 3.4 on speculation that operations were about to resume, before reversing course and falling to USD 3.3 the following day. The tepid drawdown from gas inventories announced by the EIA on 26 January and warmer weather also worked to push HH down to USD 2.9/MBtu and it remained near USD 3s through the end of the month.
• The EIA 10 January Short-Term Energy Outlook forecasts that the average natural gas spot price in 2023 will be slightly below USD 5.0, assuming lower domestic consumption and relatively flat LNG exports. In 2024, it expects the average HH to again be slightly below USD 5.0, assuming higher natural gas production, which will outpace the increase in LNG exports.

Europe

• The Dutch TTF Gas Futures price fell due to continued mild weather and relatively weak demand, falling to USD 22.3 on 3 January and remaining in the low USD 20s since then. Subsequently, temperatures fell but were milder than usual and gas storage volumes were high, and the TTF fell to USD 17.6 on 16 January, but began to rise again with the arrival of a cold snap and rose to USD 21.2 on 21 January. Natural gas underground storage volumes in Europe fell but remained still high and the TTF fell again to USD 17.6 on 27 January.
• The European Union Agency for the Cooperation for Energy Regulators (ACER) has begun publishing European Delivered Spot LNG Assessment Prices on 13 January.

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 downward trend as TTF declined, falling to the high USD 30s, and generally hovering in the high USD 20s during October and November. In December, the market was active during the year-end procurement season and JKM hovered around the USD 30s. In January 2023, trading resumed but was sluggish, with JKM’s downward trend from around USD 20s.
• 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 15s in April and May, fell to late USD 14s in June, rose from late USD 17s to late USD 22s from July to September, and then fell from late USD 20 to late USD 17 in October and November. In December it rosed to late USD 18s.

Trend of Natural Gas and LNG Inventories

Japan

• Japan's LNG inventories as of the end of September 2022 stood at 5.70 million tonnes, an decrease of 3.4% and 0.20 million tonnes from August, and an increase of 3.4% from September 2021, higher than the past five-year average by 1.20 million tonnes.
• The LNG inventories for city-gas supply as of the end of September 2022 were 2.56 million tonnes, 1.0% higher than August and 2.3% higher than September 2021. LNG consumption for city-gas in September 2022 was 2.35 million tonnes, increased by 1.9% year-on-year. City-gas companies received 2.39 million tonnes of LNG in September 2022, decreasing year-on-year by 6.3%.
• The LNG inventories for power generation as of the end of September 2022 were 3.14 million tonnes, decreasing by 6.7% from August and 4.3% higher than September 2021. LNG consumption for power generation in September 2022 was 2.94 million tonnes, increasing by 5.9% from September 2021. Power generation companies received 3.10 million tonnes of LNG, increasing year-on-year by 1.4%.
• According to the "LNG Inventory for Power Generation" released by the Ministry of Economy, Trade and Industry (METI) on 25 January 2023, major power utilities’ LNG inventories were 2.57 million tonnes as of 22 January. This is higher by 0.77 million tonnes than the end of January 2022 and 0.90 million tonnes above the average of the end of January of the past five years.

United States

• As of 13 January 2023, working gas in underground natural gas storage in the United States was 2.82 Tcf, 15.2% decrease from the previous month, according to the U.S. Energy Information Administration (EIA). Gas inventories were 0.4% higher than those at the same time in 2022 and were 34 Bcf higher than the past five-year average. The latest inventories have been within the past five-year range since November 2020.

Europe

• As of 24 January 2023, the stored volume of natural gas in European underground storage facilities operated by the Aggregated Gas Storage Inventory (AGSI +) EU member companies was 855.4 TWh (about 56.59 million tonnes LNG equivalent). The volume was higher than that of one year ago by 85.8% or 395.0 TWh (about 26.13 million tonnes LNG equivalent). The inventories represented 76.4% of the capacity, which was higher than 41.5% on the same day in 2022 and higher than the five-year average of 57.0%. The inventories in Germany and the Netherlands (which have relatively large storage capacity among the member countries) were 83.8% and 71.5% of their respective capacities.

 

• As of 24 January 2023, 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 4.71 million cubic meters, 5.8% down from the previous month. The inventories were higher than the same day in 2022 by 10.4% and by 6.6% above the five-year average for the same day.

Latest Developments in Major Natural Gas and LNG Projects

Highlights

• Several LNG production projects saw notable progresses around the turn of the year. Sempra Infrastructure of the United States announced four long-term SPAs from its Port Arthur Phase 1 project amounting to 9.5 million tonnes per year with buyers including those in Europe and China. NextDecade's Rio Grande LNG project also secured additional offtake commitments for 1.5 million tonnes per year. Japanese companies also made term LNG offtake commitments from the United States and Oman.

 

Asia and Oceania

• Mitsui O.S.K. Lines, Ltd. (MOL) and GAIL (India) Limited, through a wholly owned MOL subsidiary, on 20 December 2022, signed a time charter contract for a newbuilding LNG carrier and agreed on joint ownership of an existing LNG carrier.
• JGC Holdings Corporation announced on 6 January 2023 that JGC Corporation, the overseas EPC business of the JGC Group, as the leader of a consortium with Samsung Heavy Industries, had been awarded the Engineering, Procurement, Construction, Commissioning (EPCC) contract for a nearshore FLNG facility project in Malaysia planned by PETRONAS with a minimum production capacity of 2 million tonnes of LNG per year.
• Japanese joint venture partners (Mitsubishi Corporation, INPEX CORPORATION, JX Nippon Oil & Gas Exploration Corporation, MITSUI & CO., LTD., LNG JAPAN CORPORATION, Sumitomo Corporation, and Sojitz Corporation) of the Tangguh LNG Project led by bp as the project operator, announced on 23 December 2023 that the Government of Indonesia had approved a 20-year extension of Tangguh Production Sharing Contract (PSC). The Tangguh PSC consists of Berau, Muturi and Wiriagar PSCs.
• Shell Australia announced on 19 January 2023 that LNG cargoes had resumed from the company's Prelude FLNG facility following a temporary technical outage in December 2022.

 

North America

• Sempra Infrastructure announced on 28 December 2022 that it had entered into a long-term SPA with RWE Supply & Trading, a subsidiary of RWE, for the supply of approximately 2.25 million tonnes per year of LNG from the Port Arthur LNG Phase 1 project under development on a FOB for 15 years. The agreement also provides a framework to explore ways to lower the carbon intensity of LNG produced from the Port Arthur LNG Phase 1 project through GHG emission reduction, mitigation strategies and a continuous improvement approach.
• Freeport LNG said on 23 December 2022 that the company does not anticipate commencing the initial restart of its liquefaction facility until the second half of January 2023. As of the day, the reconstruction work is substantially complete, and the company is submitting responses to the last remaining questions included in the Federal Energy Regulatory Commission's data request of 12 December.
• INPEX CORPORATION and Venture Global LNG announced on 27 December 2022 that INPEX Energy Trading Singapore Pte. Ltd. (IETS), a Singapore-based subsidiary, and Venture Global CP2 LNG, LLC had signed a 20-year sales and purchase agreement for one million tonnes per year of LNG on an FOB basis.
• NextDecade Corporation announced on 27 December 2022 a volume increase of the 20-year SPA with ENN LNG (Singapore) Pte Ltd (ENN), a subsidiary of ENN Natural Gas Co., Ltd. for the supply of LNG from Rio Grande LNG export project to increase from the original 1.5 million tonnes to 2.0 million tonnes per year.
• NextDecade announced on 19 January 2023 the execution of a 15-year SPA with Itochu Corporation for 1.0 million tonnes of LNG per year from Rio Grande LNG export project. All volumes of LNG are indexed to Henry Hub and on an FOB basis will be supplied from the first three trains targeting an FID during the first quarter of 2023.
• Sempra Infrastructure announced on 22 December 2022 that Energía Costa Azul, S. de R.L. de C.V. (ECA LNG) and Vista Pacifico, S.A.P.I. de C.V. (Vista Pacifico LNG) had received authorization from the U.S. Department of Energy (DOE) to re-export up to 200 Bcf per year of U.S.-sourced LNG from Mexico to non-Free Trade Agreement (FTA) nations.

 

European and surrounding regions

• Germany's Uniper announced on 3 January 2023 that it had brought the country's first full cargo of LNG to the new LNG terminal, operated by Uniper, in Wilhelmshaven. from Calcasieu Pass facility in the United States.
• Germany's Deutsche ReGas announced on 21 December 2022 that the country's second LNG import terminal, at the Baltic Sea port of Lubmin, had imported its first cargo from Egypt. The LNG tanker acts as an FSU (Floating Storage Unit) for the Deutsche Ostsee LNG terminal in Lubmin.
• TotalEnergies announced on 13 January 2023 the start-up of the Deutsche Ostsee LNG import terminal operated by Deutsche ReGas and located in Lubmin. TotalEnergies is contributing an FSRU and supplying LNG to the project.
• Höegh LNG Holdings Limited announced on 19 January 2023 that it had signed the second binding 10-year Time Charter Contract with the German Federal Ministry for Economic Affairs and Climate Action. The FSRU Höegh Gannet is allocated to the contract at the Elbehafen LNG project in Brunsbüttel operated by Deutsche Energy Terminal GmbH.
• Germany's SEFE Securing Energy for Europe announced on 18 January 2023 that it had signed an agreement with Hanseatic Energy Hub (HEH) for regasification capacity in Stade. Starting in 2027, the company plans to import at least 4 bcm per year of LNG via the terminal. The capacities were booked for 20 years and with future flexibility to switch to ammonia as a hydrogen-based energy source.
• Excelerate Energy, Inc. announced on 28 December 2022 that its FSRU Exemplar arrived at the port of Inkoo, Finland. The FSRU Exemplar is chartered to Gasgrid Finland Oy for ten years. Gasgrid Finland announced on 16 January 2023 that the company's LNG floating terminal in Inkoo, was fully ready for use.
• Estonia's Eesti Gaas announced on 17 January 2023 that on the order of Eesti Gaas, the Equinor delivered the year 2023's first shipload of LNG from the United States to the port of Klaipėda in Lithuania.
• Bulgaria's Energy Ministry announced on 3 January 2023 that an agreement had been signed, granting Bulgargaz EAD access to the gas transmission infrastructure including LNG terminals of the Turkey's BOTAŞ. The 13-year agreement enables 1.5 bcm per year of gas to be transferred between the two countries.
• France's GTT announced on 2 January 2023 that after an analysis of European sanction packages prohibiting engineering services with Russian companies, it was ceasing its activities in Russia, by suspending its contract with Zvezda Shipbuilding Complex as of 8 January. GTT has been involved in Russia in the tank design of 15 ice-breaking LNG carriers under construction by Zvezda, as well as in the design of three GBSs.
• European Union Agency for the Cooperation of Energy Regulators (ACER) announced on 13 January that it makes its LNG price assessment report available on a daily basis.

 

Other regions

• Abu Dhabi's ADNOC announced the formation of ADNOC Gas, effective 1 January 2023, its new gas processing, operations and marketing company. The new company combines the operations, maintenance and marketing of the ADNOC Gas Processing and ADNOC LNG businesses. Existing Joint Venture (JV) partners to ADNOC LNG (Mitsui & Co, bp and TotalEnergies) and ADNOC Gas Processing (Shell, TotalEnergies and PTTEP) will continue in their respective JV partnerships with ADNOC Gas.
• Oman LNG announced on 27 December 2022 the signing of binding sheet agreements with three Japanese firms for the delivery of LNG, starting in 2025. ITOCHU Corporation, JERA Co., Inc. and Mitsui & Co, Ltd have agreed to purchase 2.35 million tonnes per year of LNG - based on contracts varying from 5 to 10 years ITOCHU 0.8, JERA 0.8 (for 10 years) and Mitsui & Co. 0.75.
• Oman's Energy Ministry tweeted on 10 January 2023 that Oman LNG Company and Shell International Trading Middle East had signed a binding agreement for LNG supply from Oman LNG to Shell for 0.8 million tonnes per year for 10 years, starting from 2025.
• Oman LNG announced on 18 January 2023 the signing of binding term-sheet agreements with PTT Global LNG Company Limited of Thailand and TotalEnergies of France to supply 1.6 million tonnes per year of LNG starting from 2025. The agreements will see Oman LNG supplying PTT Global LNG with 0.8 million tonnes per year of LNG under a 9-year contract from 2026, and 0.8 million tonnes per year to TotalEnergies for 10 years from 2025.
• Eni announced on 22 December 2022 that the company had signed a contract with Wison Heavy Industry for the construction and installation of a FLNG unit with a capacity of 2.4 million tonnes per year. This will be the second FLNG deployed offshore the Republic of Congo, bringing overall LNG production capacity to 3 million tonnes per year in 2025, according to the announcement.

 

(Note: CCS: Carbon Capture and Storage, EPC: Engineering, Procurement and Construction, FEED: Front-End Engineering Design, FID: Final Invest Decision, FLNG: Floating Liquified Natural Gas, FOB: free-on-board, FSRU: Floating Storage Regasification Unit, HOA: Heads of Agreement SPA: Sale and Purchase Agreement)

 

 

Supprted by the Institute of Energy Economics Japan (IEEJ)