GLM FOCUS: US supply, China demand – LNG in 2021

Edward Cox

05-Jan-2022

LONDON (ICIS)–A total of 382.9m tonnes of LNG was produced in 2021, up by 7% or 24.7m tonnes year on year, according to ICIS LNG Edge.

A smaller production increase of around 4% is forecast by ICIS LNG Analytics for 2022 and this will once again be underpinned by additional US LNG.

On demand, China once again dominated, with almost 12m tonnes of additional LNG imports in 2021 and strong increases from South Korea and Brazil.

High LNG spot prices were a disincentive to some Indian buyers where imports fell by 2.78m tonnes year on year, with decreases also into some European markets.

AUSTRALIA HITS TOP SPOT

Australia finally overtook Qatar to become the world’s largest LNG producer, despite a number of 2021 plant outages.

Australia produced 79.28m tonnes in 2021, a rise of 2.6m tonnes and above Qatar’s 77.9m tonnes, which was up by around 1m tonnes.

While there was no major LNG plant start up in Australia, production outages were shorter in 2021 compared with the previous year, when the 15.6mtpa Gorgon LNG faced rolling shutdowns across its three trains between mid-2020 and early 2021.

In 2021, the Gorgon LNG plant loaded an additional five shipments compared with the same period in the previous year, according to ICIS LNG Edge data.

Production between Australia and Qatar will be at very similar levels in 2022, with much hanging on the reliability of plant operations in a market where prices will likely justify very strong production.

But by far the most significant volume increase in 2021 came from the US where production passed 70m tonnes and rose by almost 24m tonnes year on year.

After production curtailments in 2020 caused by low prices, US production was much closer to full rates in 2021 with high margins for US supply into both Asia and Europe.

The US could become the largest global producer in 2022 and come close to 80m tonnes, in part depending on the ramp-up process at Venture Global’s 11.3mtpa Calcasieu Pass plant.

Venture Global missed its aim to start production before the end of 2021 which will now pass into 2022.

Commercial operations are expected from the fourth quarter of 2022 into early 2023.

EGYPT STANDS OUT

In outright volume terms, Egyptian LNG production showed the second largest growth after Australia.

With both plants in operation and incentivised by record high spot prices, Egyptian LNG exports rose by 5.2m tonnes to 6.7m tonnes in 2021 with cargoes heading into Asia, Europe and the Middle East.

There were major swings in production elsewhere, with both Nigerian and Trinidadian LNG exports falling by over 3m tonnes.

A lack of upstream gas at the Atlantic LNG plant in Trinidad and train outages at Nigeria contributed to the declines.

Malaysian and Algerian LNG production rose in 2021 while the Norwegian Hammerfest LNG plant was offline for the duration of the year.

CHINA PASSES JAPAN

In a year when oil-linked LNG contracts were predominantly much cheaper than spot LNG, China’s structural gas demand growth was again obvious and the country overtook Japan as the largest LNG buyer.

China’s imports surpassed 80m tonnes, a rise of 11.7m tonnes, or over 17%.

Looking to 2022 and China is on course once again to report the largest growth in demand globally, with imports forecast at 87.7m tonnes, according to ICIS LNG Analytics.

In contrast, Japan’s LNG imports were little changed at 74.5m tonnes.

In volume, Brazil and South Korean demand increases stood out, with more than a 5m tonne rise in both cases.

Historic drought conditions in Brazil led to a surge in LNG demand to support gas-fired generation as hydropower generation diminished.

Maintenance delays to nuclear power generation, seasonal coal generation curtailments and LNG stockpiling ahead of the winter came together to boost South Korean demand.

A number of countries also lifted LNG imports by over 1m tonnes, including Taiwan, Kuwait, Bangladesh and Pakistan.

New importer Croatia brought in 1.3m tonnes in 2021.

Declining importers included India – which had in recent years shown consistent growth.

Indian LNG buyers are more price sensitive than other Asian buyers and in many cases preferred to switch to cheaper fuels rather than persisting with LNG buy tenders at record high prices.

Mexican imports fell by over 1m tonnes as US pipeline gas supply took up a greater share of the power generation mix.

EUROPE’S DECLINE

Despite a strong end to the year, and a likely rise in early 2022, European LNG imports fell by 3.3m tonnes to 68.1m tonnes.

While Europe acted as a sink in the weaker market of previous years, there was a greater pull from other regions in 2021.

This is one reason for recent record high TTF gas prices with Europe in need of LNG to offset lower storage and pipeline gas supply.

UK LNG imports were much lower over the summer, with flexible cargoes instead heading to Asia.

Supply was also down sharply into Italy, where the number of cargoes into the OLT Toscana terminal fell as traders again found more profitable options elsewhere.

But LNG into the Netherlands rose by 10% to 6.2m tonnes supported by the wide range of capacity holders at Gate and access to the TTF hub.

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