BG Group’s outlook on the global LNG market

BG Group has released its view on the global LNG market, in the company’s annual Global LNG Market Overview.

In 2013, Europe imported only 35 million t of LNG, the lowest volumes for almost a decade, as rapidly increasing energy demand in Asia and Latin America drew supply.

European LNG imports

Andrew Walker, VP of Global LNG, explained that volumes diverted from Europe allowed the global LNG market to balance. However, this also left European LNG imports down more than 45% on the peak of 66 million t in 2011.

Walker commented: “In 2013 gas supply to Europe via pipelines increased, while at the same time overall gas demand remained subdued, allowing LNG volumes to feed growth markets including China, South Korea, Mexico and Brazil. In 2014 we expect Europe will continue to balance the global LNG market by ceding volumes, but it’s not clear how much more can be diverted before we reach the minimum level of imports.

“When that floor is reached, LNG will likely be drawn from other, more price-sensitive markets in periods of peak demand. In time, we may see these markets assume Europe’s position as the balancing market for global LNG demand and supply.”

New production capacity

Walker added that total LNG supply had paused at around 2011 levels as the industry awaits the addition of new production capacity. On current industry estimates, 240 million t of LNG was delivered globally in 2013, an insignificant year-on-year increase. This was largely because new production was offset by unplanned outages, declines in output from existing plants and slower ramp up from new projects.

"Today we are in the midst of a LNG supply hiatus; developing new supply, rather than demand, is the principal challenge the industry faces," Walker noted.

New LNG projects in Australasia with combined capacity of 67 million tpa represent the start of the industry’s next major wave of production. However, the outlook for 2014 is for only a slight increase in global supply, as once again overall performance will depend on unplanned outages and declines in output from existing plants.

Global LNG demand growth

Relief from tight supply is also unlikely in the medium term. BG Group expects global LNG demand to grow at a compound annual growth rate of 5% to 2025, driven primarily by Asia and Latin America.

Walker continued: “Limited supply growth in 2013, the prospect that overall production will remain stalled in 2014 and strong demand growth in Asia suggests the global LNG market will continue to tighten, in line with our long-held view.

“Reflecting the tight underlying market, we expect LNG spot prices, assuming normal weather, to remain robust through 2014. In fact, we believe the global LNG market will be tighter for longer than many assume, until the end of the decade at least.”

Conclusion

Walker concluded that, in addition to the impact of weather and the potential for European LNG imports to hit record lows, this year the industry will pay close attention to the rate of gas and LNG demand growth in China, the operational performance of LNG suppliers and the return of nuclear units in Japan.

Image courtesy of BG Group.

Adapted from press release by Katie Woodward

Read the article online at: https://www.lngindustry.com/liquid-natural-gas/18032014/bg_group_global_lng_market_302/