26 August 2017 | Alex Froley, ICIS LNG Analyst
Global spot LNG indices climbed steadily from mid-July to mid-August on the back of increased consumption from east Asian buyers to fuel gas-fired power generation, and as a result of a number of planned and unplanned production outages.
Japanese and Taiwanese utilities were active in the market as high temperatures increased air conditioning use, while portfolio LNG suppliers found spot market levels attractive compared to their long-term sales prices, and took cargoes to backfill positions.
The ICIS September East Asia Index (EAX) for spot LNG delivered to Japan, South Korea, China and Taiwan averaged $5.820/MMBtu during its period as the front-month assessment. This was up 6% from the previous month, with a gentle upwards trend across the four weeks.
Spot LNG markers for other regions traced a similar path, holding spreads between markets at reasonably tight levels. The South America Index (SAX) averaged $5.464/MMBtu, about 36 cents below the EAX, while the Northwest Europe Index (NEX) averaged $4.880/MMBtu, some 94 cents below EAX.
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The relatively small differentials between regions discouraged cross-basin trade, with any potential profit to be made from reloading a European cargo to Asia, for example, offset by the cost of shipping.
There were, however, two reloads from Europe on the shorter-distance route to the Middle East. The 160,000cbm Maran Gas Mystras took a cargo from the Gate terminal in the Netherlands to Kuwait, while the 174,000cbm Woodside Rees Withers lifted Gate volumes for delivery to Jordan. Both vessels arrived at their destinations in early August.
US Gulf Free On Board prices averaged $5.164/MMBtu during the period, suggesting spot LNG from America would not be competitive against spot gas in Europe, and that traders would prefer to target South America with any prompt cargoes from the US Gulf.
East Asian prices were slightly lower than the previous year. The EAX for September 2017 delivery was down 2% from the $5.932/MMBtu average for September 2016.
Japan, Taiwan buy for power gen
In mid-July some traders thought prices for September cargoes had peaked, but they were soon proven wrong. East Asia was buying to fuel gas-fired power plants to drive electric air conditioning units amid high summer temperatures. Japanese utilities including Kansai Electric and Tohoku Electric were heard looking for volumes, while Taiwan’s CPC made purchases including a spot cargo from Papua New Guinea.
Taiwan’s power consumption hit a record 36.6 GW on 8 August and the country was preparing to start-up new gas-fired power units. In South Korea nuclear power plants were reported to be running at only around 68% of the country’s 25.5 GW capacity, against a more normal level of around 85%, which could also have driven increased gas demand.
In China, meanwhile, both China Huadian and Guanghui Energy were seeking supplies into the newly commissioned Qidong terminal in Jiangsu. India’s GSPC and IOC were also looking for short-term cargoes, Mexico’s CFE was importing LNG due to constraints on pipeline flows, while Argentina’s ENARSA saw its southern hemisphere winter consumption boosted by a wave of cold weather sweeping in from the south.
Peru, Australia see reductions
Planned and unplanned maintenance outages supported global LNG prices for September delivery, although there is also new production capacity ready to enter the market.
Loadings from Peru’s Pampa Melchorita plant slowed in July, with only three tankers departing that month, down from five in June and six in May. Trinidad & Tobago’s Atlantic LNG suffered an unexpected halt at a 3.3 million tonnes per annum train, while Australia’s QCLNG lost volumes after technical problems at the start of August.
Australia’s GLNG had one 3.9 mtpa train out for maintenance from 10 July to 6 August, while the country’s APLNG was expected to shut one 4.5 mtpa train from 19 August to 1 September and carry out further work during 19-25 September. Australia’s Gorgon LNG is also due to undergo work on one of its three 5.2 mtpa trains in September.
New production, first US LNG for Lithuania
There is new production due on in Australia, however, with Woodside Petroleum’s Wheatstone project due to deliver the first cargo from its first 4.4 mtpa train in September.
The first US LNG cargo arrives at Lithuania’s Klaipeda port on 21 August, Source: Lietuvos Energija
In the US, meanwhile, the Sabine Pass facility is now producing the first LNG from its fourth 4.5 mtpa train. US LNG continues to reach a growing number of new buyers. Lithuania received its first ever cargo of US LNG on 21 August, delivered by Cheniere Energy on the 162,000cbm Clean Ocean. The same ship had delivered Poland’s first US LNG a couple of months earlier on 7 June.
Ice-breaker crosses the Arctic
Notable recent voyages include the Yamal LNG project’s first ice-breaking tanker, the 172,000cbm Christophe de Margerie, carrying a cargo for Total from Norway’s Hammerfest terminal through Arctic waters to Boryeong in South Korea. This was the first unescorted merchant vessel to journey along this route. Gazprom took a Norwegian cargo through the Northern Sea Route to Asia on the 150,000cbm Ob River in December 2012, but the tanker was escorted by two atomic ice-breaker ships on that voyage.
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Total says that suitable vessels can reach Asia in as little as 15 days on this route, compared with 30 days for a ship heading from the Arctic down around Europe and then back through the Suez Canal to Asia. Apart from Norwegian production, Russia’s new Yamal LNG project will benefit, with its first 5.5 mtpa train due to start later this year.
Meanwhile, the Excalibur delivered a partial cargo from Trinidad & Tobago to Colombia’s Calamari LNG in late July, the second ever delivery to the country’s Hoegh Grace floating storage and regasification unit, following the first delivery on the British Innovator, also from Trinidad & Tobago, in November 2016.
LNG Analyst, Global, ICIS
Alex Froley follows the global LNG markets as an analyst at energy markets information provider ICIS. As well as following the latest market trends in pricing and trade flows, he is working on the development of new features for the company’s analytics platform LNG Edge.
Alex has over fifteen years’ experience in the wholesale energy markets, with a particular focus on European gas and electricity trading and the rapidly-expanding market for spot LNG. He has worked as a price reporter assessing markets including the UK NBP and Dutch TTF gas markets, the German electricity market and Asian LNG and has been responsible for real-time news, daily and fortnightly publications about the natural gas industry. He has also worked as a European gas analyst tracking supply and demand data for gas flows across Europe.
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