9/20/2018 September: Q&A on global liquefied natural gas markets

Q&A on global lique ed natural gas markets

6 September 2011

How did LNG markets evolve over the last few years?
The last two years witnessed a dramatic expansion in global liquefaction capacity, which increase
cubic metres (bcm) (+39%). In 2010 alone, LNG trade jumped by an astounding 21%, to around 300
to 9% of the total global demand for gas.

Currently, who are the largest producers of LNG? 

The largest producer of LNG, by far, is Qatar, whose liquefaction capacity is roughly one qu
liquefaction capacity as of mid-2011. Qatar saw a massive expansion of its capacity from 42 bcm
past two years. Indonesia, Malaysia, Australia and Algeria are also signi cant LNG exporters. Othe
recently entered the LNG exporting scene: Russia and Yemen in 2009, and Peru in 2010. Angola
exporting in 2012, and Papua New Guinea in 2014. Australia is set to become the second largest
Qatar by 2016 – six projects are currently committed or under construction, representing 60 bcm of

Will the growth of LNG trade continue at the same pace?

Although LNG trade is still expected to increase by one third over the coming ve years, such aston
the last year will not be repeated any time soon. The reason is that global liquefaction LNG capac
much slower pace after 2011; as of today, only 91 bcm is committed to come online between 201
over ve years is less than the increase which occurred over the past two years, albeit similar to th
that took place over 2004-08. In particular, less than 30 bcm of LNG capacity is set to come over 2
trains are to be decommissioned over that timeframe – in the United States, in Indonesia and pote
IEA expects new Final Investment Decisions to be taken over the coming year but it is doubtful tha
could be built in less than ve years. Moreover, new LNG capacity is geographically concentrated
bcm located in Asia-Oceania and earmarked for Asian markets. There is a risk that this concentratio
due to potential bottlenecks in infrastructure and workforce shortages.

Is there a surplus of gas on the markets?

There was, but it is eroding fast. The past two years witnessed a complete turnaround in the glo
market perspectives. 2009 was more of a buyers’ market as excess supply led to competition betwe
suppliers to get what was left of rapidly dropping import requirements. LNG suppliers won the b
pipeline suppliers with lower spot prices. However, global markets tightened in 2010 as global gas d
7.4%. The appetite for LNG (and spot prices) grew correspondingly in all regions, except in the
unconventional gas supplies minimise LNG import needs. Since the end of 2009, investors deci
seven new LNG export plants to start around 2015. In 2011, gas markets are further tightenin
increasing strongly, notably in Asia.

What are the IEA’s expectations regarding global gas demand for the coming years?
Global consumption of gas is projected to increase by some 510 bcm (roughly equivalent to 75% o
2010) over 2010-16, according to the IEA’s medium-term forecasts issued in the Medium-Term Oil a
report. (These forecasts are based on economic growth of 4.5% on average).

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9/20/2018 September: Q&A on global liquefied natural gas markets

So, how will this new global demand for gas be met?
Around 60% will be met by regional domestic production increases, notably in Middle Eastern cou
will be covered by imports. Many producers, mainly in Asia and the Middle East, will struggle to m
domestic demand for gas as they try to meet existing LNG export commitments. As the unconventi
very slow to spread outside North America, its impact in other regions will still be limited over the co
imports will meet around one fth of the total incremental demand. Global LNG markets are expec
over the coming two-three years due to strong LNG demand, notably in Asia, and modest supply com

Where are most of the LNG exports projected to end up?

Over the next ve years, the bulk of the LNG supplies are projected to go to non-OECD markets. Bes
Taiwan, booming LNG demand is expected to come from South East Asia: Thailand just started im
and will be followed in the next three years by Indonesia, Vietnam, Malaysia and Singapore. LNG im
increase, albeit to a lesser extent, in the Middle East and Latin America. Hence, LNG buyers are alr
LNG supplies as illustrated by the range of binding sales agreements and Heads of Agreemen
between Qatar and LNG buyers worldwide. LNG from the new projects recently agreed upon is al
contracted to Asian countries.

Will the Fukushima disaster in Japan a ect supply of and demand for LNG?
In its August 2011 Oil Market Report, the IEA analysed two scenarios for nuclear generation over
case scenario, nuclear plants come back from maintenance works after an average of six month
scenario, all 54 reactors in Japan will be o ine by May 2012.

With the base case scenario, LNG demand in Japan increases by 18 bcm compared to 2010 levels
scenario, additional LNG demand in Japan would rise to 30 bcm. (This is only just below the global
LNG that is expected to come online between 2010 and 2012).

Photo: © GraphicObsession.

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