Trend of Natural Gas and LNG Prices

Short-term trend

Asia

• The assessed spot LNG price for near-month delivery to Northeast Asia, JKM, had been hovering around USD 11 per million Btu, but jumped to USD 12 on 10 August after the possibility of strikes at major Australian projects arose. JKM subsequently rose to USD 14 on 16 August due to uncertainty over supply and remained at the same level thereafter, but returned to the USD 12 level on 24 August after progress were made in negotiations over the strikes and uncertainty eased. Toward the end of the month, JKM was hovering around the USD 12 level.
• 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 July 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 delivered in Japan in July 2023 (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 rose to USD 12.07 per million Btu, and JPY 89,066 per tonne in July 2023, which is higher than those in the previous month due to the ongoing depreciation of the Japanese currency. The average landed prices of LNG in Japan from the United States, the ASEAN region, the Middle East, and Russia in July were USD 9.87, USD 11.59, USD 12.90, and USD 12.42, respectively. Elsewhere in Northeast Asia, average import prices in July were USD 10.45 in China, USD 11.96 in Korea, and USD 10.13 in Chinese Taipei. Japan’s average landed crude oil import price (JCC: Japan crude cocktail) was USD 80.47 per barrel in July 2023. Japanese yen-denominated price stood at JPY 72,055 per kilolitre in July 2023. Japan’s average LNG import price, which accounts for approximately 80% of long-term contracts linked to JCC prices, is expected to continue to be affected by current crude oil prices, as well as recent weak spot LNG prices.
• Japan imported 5.09 million tonnes of LNG in July 2023, 17% lower than the same month in 2022. The total import volume during the first seven months of 2023 was 37.71 million tonnes, a decrease of 14% from the same period of 2022. China imported 5.86 million tonnes of LNG in July 2023, 24% higher than the same month in 2022. China’s total LNG import volume during the first seven months of 2023 was 39.24 million tonnes, an increase of 9% from the same period of the previous year. Japan's monthly LNG imports declined year-on-year for the sixth consecutive month, while China's increased for the sixth consecutive month. While Korea imported 2.62 million tonnes in July 2023, a decrease of 19% from the same month of 2022, Chinese Taipei imported 1.89 million tonnes, 3% higher than one year earlier. LNG import volume in these four markets was 114.44 million tonnes during the first seven months of 2023, a 2% decrease year-on-year.

United States

• The Henry Hub Natural Gas Futures price had been hovering in the mid-USD 2s range, but rose on the back of rising gas demand, hitting USD 2.9 on 9 August. It turned downward and dropped to USD 2.7 on 10 August after the inventory report was released, and has been fluctuating. It is hovering around mid-USD 2s toward the end of the month.
• In its 8 August Short-Term Energy Outlook, the U.S. Energy Information Administration (EIA) forecasts the Henry Hub spot price to average USD 2.41 for the first half of 2023 and USD 3.22 for 2024. In the report, EIA projects that U.S. natural gas production will remain relatively high and flat in the second half of 2023 and 2024, and that gas demand in 2024 will be lower than in 2023. Gas inventories are expected to remain above the five-year average in 2024.

Europe

• The Dutch TTF Gas Futures price had been hovering around USD 9s, but rose to USD 12.8 on 9 August, as the market became aware of supply-demand tensions in the wake of possible strikes at major Australian projects, and remained at the same level thereafter. The price subsequently rose to USD 13.7 on 22 August due to supply uncertainties, as well as rising temperatures in southern Europe and routine repairs at a Norwegian gas field. After progress were made in negotiations over the strikes and uncertainty eased, TTF fell to USD 11.6 on 23 August and remained at the same level through the end of the month.

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 9s in May. In June 2023, JKM was hovering around USD 12s due to European gas prices fluctuations and other factors, but softened slightly in July to hover around USD 11s on the back of high inventories and low demand. In August, the possibility of strikes at major projects in Australia caused the price to briefly rise to USD 14s, but it has since returned to USD 12s.
• 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 mid-USD 9s in February 2021, after falling to the mid-USD 7s in March. It had then been on the largely constant rise for the following 18 months to the highest ever at USD 22.73 in September 2022 along with the rise of crude oil prices until June 2022. Japan’s average LNG import price declined to near USD 12 in June and July 2023, following the declining oil prices from July 2022.

Trend of Natural Gas and LNG Inventories

Japan

• Japan's LNG inventories as of the end of April 2023 is not listed as it has not been updated for August.
• The LNG inventories for city-gas supply as of the end of April 2023 were 2.58 million tonnes, 2.5% lower than March and 32.3% higher than April 2022. LNG consumption for city-gas in April 2023 was 2.13 million tonnes, decreased by 16.9% year-on-year. City-gas companies received 2.07 million tonnes of LNG in April 2023, decreasing year-on-year by 23.4%.
• The LNG inventories for power generation as of the end of April 2023 is not listed as it has not been updated for August.
• According to the "LNG Inventory for Power Generation" released by the Ministry of Economy, Trade and Industry (METI) on 30 August 2023, major power utilities’ LNG inventories were 2.01 million tonnes as of 27 August. This is lower by 0.74 million tonnes than the end of August 2022 and 0.01 million tonnes above the average of the end of August of the past five years.

United States

• As of 18 August 2023, working gas in underground natural gas storage in the United States was 3.08 Tcf, 3.2% increase from the previous month, according to the U.S. Energy Information Administration (EIA). Gas inventories were 19.5% higher than those at the same time in 2022 and were 281.4 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 26 August 2023, the stored volume of natural gas in European underground storage facilities operated by the Aggregated Gas Storage Inventory (AGSI +) EU member companies was 1,049.3 TWh (about 69.41 million tonnes LNG equivalent). The volume was higher than that of one year ago by 19.4% or 170.5 TWh (about 11.28 million tonnes LNG equivalent). The inventories represented 92.3% of the capacity, which was higher than 79.0% on the same day in 2022 and higher than the five-year average of 79.1%. The inventories in Germany and the Netherlands (which have relatively large storage capacity among the member countries) were 93.7% and 94.4% of their respective capacities.

 

• As of 26 August 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 4.81 million cubic meters, 14.2% up from the previous month. The inventories were lower than the same day in 2022 by 2.1% and by 7.1% above the five-year average for the same day.

Latest Developments in Major Natural Gas and LNG Projects

Highlights

• The Q2 2023 financial results announcement reflected the downward trend in LNG prices since the beginning of the year with a noticeable decrease in profit margins across the board. Meanwhile, a number of LNG projects in the United States reported their development progress. In Australia, Chevron’s LNG facilities may take industrial actions in early September if labour negotiations fail to reach an agreement, which may impact LNG supply.

 

Asia and Oceania

• Pakistan LNG announced on 25 July 2023 that the company had signed an LNG supply agreement with Azerbaijan's SOCAR for one cargo per month for one year, with an option to extend the agreement for one year.
• ENI announced on 25 July 2023 the acquisition of Chevron interests, including Operatorship, in the Indonesian Blocks named Ganal PSC (Chevron 62%), Rapak PSC (Chevron 62%) and Makassar Straits PSC (Chevron 72%), in the Kutei Basin, offshore East Kalimantan.
• Petronas, Pertamina and Shell announced on 25 July 2023 that Petronas Masela, and PT Pertamina Hulu Energi had agreed to acquire a 35% stake in the Masela production sharing contract (PSC) offshore Indonesia from Shell Upstream Overseas Services.
• Shell China announced on 28 July 2023 that the company and PipeChina signed the medium- and long-term LNG terminal use agreement on 20 July.
• Woodside and LNG Japan announced on 8 August 2023 a strategic relationship. Woodside has entered into an agreement with LNG Japan for the sale of a 10% non-operating participating interest in the Scarborough Joint Venture. The two companies have entered into a non-binding HOA for the sale and purchase of 12 LNG cargoes per year (0.9 million tonnes per year) for 10 years commencing in 2026.
• Western Australia's Government announced on 15 August 2023 that the government updated the WA Domestic Gas Policy for the Perth and Canning Basin. The update follows the August 2020 update, which prevents the export of onshore gas through the existing pipeline network. The Waitsia Joint Venture has approval to process 7.5 million tonnes of LNG for export at the North West Shelf LNG facilities to the end of 2028, using gas from the Waitsia gas field located onshore in the Perth Basin. The Waitsia Joint Venture's LNG export approval was granted as an exception to the WA Domestic Gas Policy, which prevents the export of WA pipeline gas.
• Indonesia's upstream regulator SKK Migas said on 17 August 2023 that construction and commissioning work at Tangguh LNG Train 3 had been completed. First LNG is targeted for September 2023.
• INPEX and TotalEnergies announced on 21 August 2023 that they had agreed to acquire 74% and 26% of the participating interest held by PTTEP in the AC/RL7 block in Australia. The AC/RL7 block is located off the northern coast of Western Australia and lies approximately 250 km northeast of the Ichthys Gas-condensate Field.
• At the Wheatstone and Gorgon LNG facilities in Australia operated by Chevron, industrial actions may begin on 7 September 2023 if the labour negotiations do not reach an agreement, the unions notified to the company on 29 August.

 

North America

• EQT Corporation announced on 25 July 2023 that the company had signed an HOA for tolling at Lake Charles LNG for 1 million tonnes per year.
• Italy's Edison said on 26 July 2023 that the company's performance in the first half of 2023 was affected by a strong negative impact deriving from the delay in the LNG deliveries from the United States, which led Edison to start an arbitration dispute.
• In its second quarter 2023 report on 3 August 2023, Sempra said construction continued according to plan at the Energía Costa Azul LNG Phase 1 project located on the Pacific Coast, remaining on track to reach commercial operations by summer of 2025.
• Mexico Pacific and ConocoPhillips announced on 3 August 2023 that they had signed SPAs for ConocoPhillips to offtake 2.2 million tonnes per year of LNG across trains 1, 2 and 3 of Mexico Pacific's anchor LNG export facility, Saguaro Energía, located in Puerto Libertad on the west coast of Mexico.
• McDermott revealed on 7 August 2023 that it had started construction of Canada's Woodfibre LNG project at its fabrication yard in China.
• New Fortress Energy said on 8 August 2023 that the first rig for FLNG 1 at Altamira in Mexico was installed in the second quarter of 2023 and targeting a commercial operation date in the third quarter.
• Venture Global LNG announced on 10 August 2023 that its Plaquemines LNG export plant had received its first two liquefaction modules.
• Commonwealth LNG announced on 14 August 2023 that it had closed an investment of development capital from private funds managed by Kimmeridge Energy Management Company, LLC. Commonwealth said it planned to commence delivering LNG to customers in early 2027.
• Energy Transfer requested a new export license for its proposed Lake Charles LNG plant in Louisiana, according to a filing on 18 August 2023 with the U.S. DOE.

 

European and surrounding regions

• bp and OMV announced on 28 July 2023 an SPA for up to 1 million tonnes of LNG per year for 10 years from 2026. bp will provide OMV with LNG from its portfolio, which will be received through the Gate LNG terminal in the Netherlands, where OMV holds regasification capacity, or other terminals in Europe.
• Norway's Equinor announced on 8 August 2023 that the Norwegian government had approved the Snøhvit partners' plans for the future operation of Snøhvit and Hammerfest LNG. The approval entails onshore compression from 2028, and electrification of the plant from 2030.
• Deutsche ReGas, the operator of a privately-owned LNG terminal in Germany's port of Mukran, announced on 9 August 2023 that companies had booked all of the offered regasification capacities, of a total of 4 Bcm per year for at least 10 years at the planned Phase II of the Deutsche Ostsee LNG project.
• Spain's Enagás announced on 11 August 2023 that the LNG terminal of El Musel, in Gijón, received Endesa's first vessel.
• Poland's GAZ-SYSTEM announced on 18 August 2023 that GAZ-SYSTEM and ORLEN had signed an agreement for regasification services at the FSRU Terminal in the Gulf of Gdańsk.

 

Other regions

• bp revealed on 1 August 2023 that its Phase 1 of the Greater Tortue Ahmeyim gas and LNG development offshore Senegal and Mauritania was expected to be online in the first quarter of 2024.
• Abu Dhabi's ADNOC Gas plc announced on 17 August 2023 a five-year LNG supply agreement with JAPEX.
• Oman LNG and Germany's SEFE (Secure Energy for Europe) announced on 14 August 2023 a binding term-sheet agreement to supply 0.4 million tonnes per year of LNG for four years from 2026.

 

(Note: bcm: billion cubic metre, CCS: Carbon Capture and Storage, DES: delivered ex-ship, DOE: U.S. Department of Energy, EPC: Engineering, Procurement and Construction, EPCI: Engineering, Procurement, Construction and Installation, FEED: Front-End Engineering Design, FERC: U.S. Federal Energy Regulatory Commission, FID: Final Invest Decision, FLNG: Floating Liquified Natural Gas, FOB: free-on-board, FSRU: Floating Storage and Regasification Unit, FSU: Floating Storage Unit, HOA: Heads of Agreement, MOU: Memorandum of Understanding, SPA: Sale and Purchase Agreement)

 

 

Supprted by the Institute of Energy Economics Japan (IEEJ)