Trend of Natural Gas and LNG Prices

Short-term trend

Asia

• The assessed spot LNG price for near-month delivery to Northeast Asia, JKM fell to the USD 12s per million Btu on 9 March, as the lower price stimulated spot demand from South Asian buyers, but the price continued to fall amid mild weather and high LNG inventories, as Northeast Asian buyers were less willing to purchase. JKM returned to the USD 14s on 10 March, following a rise in European gas prices, and continued to rise to the late USD 14 on the following business day, before falling back to the USD 12s by 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 February 2023 and scheduled to be delivered from the month onward (contract-based price) was not disclosed. 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 17.60 per million Btu and JPY 118,926 per tonne in February 2023, although the 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 February were USD 15.72, USD 17.69, USD 20.84, and USD 14.57, respectively. Elsewhere in Northeast Asia, average import prices in February were USD 15.01 in China, USD 21.21 in Korea, and USD 16.23 in Chinese Taipei. Japan’s average landed crude oil import price (JCC: Japan crude cocktail) was USD 87.71 per barrel in February 2023. The Japanese yen-denominated price stood at JPY 71,913 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 6.40 million tonnes of LNG in February 2023, 10% lower than the same month in 2022. The total import volume during the first two months of 2023 was 13.22 million tonnes, a decrease of 5% from the same period of 2022. China imported 5.21 million tonnes of LNG in February 2023, 8% higher than the same month of 2022. China’s total LNG import volume during the first two months of 2023 was 11.12 million tonnes, a decrease of 12% from the same period of the previous year. While Korea imported 5.14 million tonnes in February 2023, 48% higher than the same month of 2022, Chinese Taipei imported 1.53 million tonnes, 4% lower than one year earlier. LNG import volume in these four markets was 37.66 million tonnes during the first two months of 2023, an 8% increase year-on-year.

United States

• The Henry Hub Natural Gas Futures price rose to USD 3.0 on 3 March on expectations of increased heating demand due to colder-than-expected weather forecast in the Northeast and Midwest. The following week, on 6 March, HH fell to USD 2.6 and further fell to USD 2.4 over the second half of the week. Thereafter, as gas demand forecasts were affected by changes in weather forecasts, HH also showed slight price fluctuations, but followed a downward trend, falling to USD 2.1 on 27 March.
• The U.S. Energy Information Administration (EIA) in its 7 March Short-Term Energy Outlook forecasted an average natural gas spot price of USD 3.0 in 2023, which is more than 50% down from last year.

Europe

• The Dutch TTF Gas Futures price followed a downtrend, falling from USD 14.7 on 1 March to USD 13.1 on 8 March amid continued mild weather and high underground gas storage. However, TTF rebounded to USD 16.4 on 10 March due to a string of malfunctions at a French nuclear power plant, strikes at French LNG terminals, and lower production from a Norwegian gas field. The following week, on 13 March, TTF fall back to USD 15.6, then further fall to USD 13.3 on 17 March, before temporally went up as reports of the Swiss central bank's loan to Credit Suisse Bank partially allayed fears of an economic downturn affecting gas demand. The price of TTF subsequently fluctuated, depending on the situation of the strikes at French LNG terminals, and reached USD 13.1 on 27 March.

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 a downward trend from USD 20s, and a further decline to around USD 12s in March.
• 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. It had then been on the rise along with crude oil prices to the highest ever at USD 22.73 in September, before falling to USD 17.60 in February 2023.

Trend of Natural Gas and LNG Inventories

Japan

• Japan's LNG inventories as of the end of November 2022 stood at 6.08 million tonnes, an increase of 6.0% and 0.35 million tonnes from October, and an increase of 19.3% from November 2021, higher than the past five-year average by 1.46 million tonnes.
• The LNG inventories for city-gas supply as of the end of November 2022 were 2.81 million tonnes, 4.9% higher than October and 16.3% higher than November 2021. LNG consumption for city-gas in November 2022 was 2.43 million tonnes, decreased by 3.0% year-on-year. City-gas companies received 2.56 million tonnes of LNG in November 2022, increasing year-on-year by 6.0%.
• The LNG inventories for power generation as of the end of November 2022 were 3.26 million tonnes, decreasing by 7.0% from October and 22.0% higher than November 2021. LNG consumption for power generation in November 2022 was 3.01 million tonnes, decreasing by 9.4% from November 2021. Power generation companies received 3.62 million tonnes of LNG, decreasing year-on-year by 6.2%.
• According to the "LNG Inventory for Power Generation" released by the Ministry of Economy, Trade and Industry (METI) on 22 March 2023, major power utilities’ LNG inventories were 2.56 million tonnes as of 19 March. This is higher by 0.17 million tonnes than the end of March 2022 and 0.49 million tonnes above the average of the end of March of the past five years.

United States

• As of 17 March 2023, working gas in underground natural gas storage in the United States was 1.90 Tcf, 13.4% decrease from the previous month, according to the U.S. Energy Information Administration (EIA). Gas inventories were 36.8% higher than those at the same time in 2022 and were 351 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 22 March 2023, the stored volume of natural gas in European underground storage facilities operated by the Aggregated Gas Storage Inventory (AGSI +) EU member companies was 625.0 TWh (about 41.34 million tonnes LNG equivalent). The volume was higher than that of one year ago by 119.4% or 340.2 TWh (about 22.50 million tonnes LNG equivalent). The inventories represented 55.6% of the capacity, which was higher than 25.7% on the same day in 2022 and higher than the five-year average of 34.7%. The inventories in Germany and the Netherlands (which have relatively large storage capacity among the member countries) were 64.0% and 58.6% of their respective capacities.

 

• As of 22 March 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 4.36 million cubic meters, 9.6% up from the previous month. The inventories were higher than the same day in 2022 by 42.4% and by 18.4% above the five-year average for the same day.

Latest Developments in Major Natural Gas and LNG Projects

Highlights

• Two positive FIDs for LNG production projects were announced in March 2023 in the Gulf of Mexico region in the United States - Venture Global LNG's second phase of the Plaquemines LNG facility and Sempra Infrastructure Partners' Port Arthur LNG Phase 1 project. Venture Global LNG also announced closing of the project financing for the second phase, making the total investment of the phases one and two combined the largest project financing ever done.

 

Asia and Oceania

• TotalEnergies announced on 7 March 2023 the launch of the fully integrated FEED for the Papua LNG project. Papua LNG partners have selected a concept including four electrical LNG trains (e-trains) with a total capacity of 4 million tonnes per year. Production start-up is scheduled for 2027. JGC Holdings Corporation announced on 17 March that JGC Corporation in partnership with Hyundai Engineering & Construction had been awarded the FEED.

 

North America

• Freeport LNG Development, L.P. announced on 8 March 2023 that it had received regulatory approvals from the Federal Energy Regulatory Commission (FERC) and the Pipeline and Hazardous Materials Safety Administration (PHMSA) to restart Train 1, the final train of Freeport LNG's three train liquefaction facility to receive restart authorization. A conservative ramp-up profile to establish full three-train production is anticipated to occur over the next few weeks, according to the announcement.
• Venture Global LNG and China Gas Holdings Limited announced on 23 February 2023 that China Gas Hongda Energy Trading Co., Ltd. and Venture Global LNG had signed two 20-year LNG SPA. China Gas will buy 1 million tonnes each per year of LNG on an FOB basis from Plaquemines LNG and from the CP2 LNG export facility, respectively.
• Excelerate Energy, Inc. and Venture Global LNG announced on 28 February 2023 a 20-year LNG SPA. Excelerate will purchase 0.7 million tonnes per year of LNG on an FOB basis from the Plaquemines LNG facility.
• Venture Global LNG announced on 13 March 2023 an FID and closing of the USD 7.8 billion project financing for the second phase of the Plaquemines LNG facility. Together, phase one and phase two represent approximately USD 21 billion of investment, the largest project financing ever done. The proceeds of the debt and equity financing fully fund the balance of construction and commissioning of the second phase of the 20 million tonnes per year nameplate capacity project.
• Sempra announced on 20 March 2023 that its 70%-owned subsidiary, Sempra Infrastructure Partners, LP, had reached a positive FID for the development, construction and operation of the Port Arthur LNG Phase 1 project It is designed a nameplate capacity of 13 million tonnes per year. Total capital expenditures are estimated at USD 13 billion. The long-term contractable capacity of 10.5 million tonnes per year is fully subscribed under binding long-term agreements with ConocoPhillips, RWE Supply and Trading, PKN ORLEN S.A., INEOS and ENGIE S.A. The expected commercial operation dates for Train 1 and Train 2 are 2027 and 2028, respectively.
• Chesapeake Energy Corporation and Gunvor Group Ltd announced on 6 March 2023 that Gunvor Singapore Pte Ltd had entered into an HOA with Chesapeake Energy Marketing L.L.C. Chesapeake will supply up to 2 million tonnes per year of LNG to Gunvor with the purchase price indexed to JKM for 15 years. Chesapeake and Gunvor will jointly select the most optimal liquefaction facility in the United States to liquify the gas produced by Chesapeake and deliver the LNG to Gunvor on an FOB basis with a targeted start date in 2027.
• The Haisla Nation and Pembina Pipeline Corporation, partners in the development of the proposed Cedar LNG Project, announced on 14 March 2023 that Cedar LNG had received its Environmental Assessment Certificate from the B.C. Environmental Assessment Office, and has signed an MOU with ARC Resources Limited for a long-term liquefaction services agreement. Cedar LNG is a proposed floating LNG facility located on Haisla Nation-owned land in Kitimat, B.C. with the capacity of 3 million tonnes per year of LNG and an FID for the project is anticipated in the third quarter of 2023.

 

European and surrounding regions

• Maroš Šefčovič, the EC's vice-president, said on 2 March 2023 that 22 EU member states had now signalled a commitment for joint purchases, expressing their preliminary interest in aggregating gas demand of more than 17 Bcm of gas for the next three years. He added that the 17 Bcm would be topped up by close to 4 Bcm signaled by Moldova, Ukraine, and Serbia.
• Lithuania's KN announced on 10 March 2023 that the company had been chosen by Italy's Snam FSRU Italia to cooperate in the start-up of a greenfield FSRU-based LNG terminal project in Tuscany, in the province of Livorno and the west coast port of Piombino.

 

Other regions

• According to a statement by the port of Bahía Blanca in Buenos Aires on 28 February 2023, Argentina's YPF are Malaysia's Petronas have signed an initial land lease deal with the port. The companies signed a joint study and development agreement on 1 September 2022 to work on the potential development of the Argentina integrated LNG project, Argentina GNL.

 

(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)