16 May 2017 | Alex Froley, ICIS LNG Analyst
The ICIS June East Asia Index (EAX) for spot LNG averaged $5.690/MMBtu during its period as the front-month assessment, rising 4% from the previous month and up by 27% from the previous year. From a peak of $9.850/MMBtu at the start of January, the front-month EAX fell to $5.250/MMBtu at the end of the northern hemisphere winter in late March. It has started to edge higher since, reflecting growing demand as the southern hemisphere winter progresses, while the Middle East moves towards summer power peaks.
Over the past four weeks the highest prices came at the start of May. In east Asia there was a bump following a bout of purchasing from South Korea’s KOGAS, which came into the market for at least ten June-July cargoes. Traders had not expected this, saying the buyer might have been taking advantage of an attractive spread between spot market prices and long-term contracts.
The Northwest Europe Index (NEX) was boosted in early May by stronger hub prices during unseasonably cool weather. The South America Index (SAX) held more steady across the period, as did the US Gulf Free on Board (FOB) price.
North West Shelf outage
Production outages gave support to the LNG market in recent weeks, in particular a halt at Australia’s 17 million tonne per annum (mtpa) North West Shelf LNG project for almost two weeks, after an electrical fault at the Karratha gas plant on 15 April. Ship-tracking data from LNG Edge shows that only five tankers left the facility during the second half of April, compared with 11 in the first half of the month. Elsewhere in the country, the 5.2mtpa Gorgon LNG train 2 was ramping back up to normal production from mid-April, after shutting in late March. The outage was offset by the start-up of the facility’s identically-sized train 3.
In the US Cheniere Energy continued to ramp up production from its third 4.5mtpa train at the Sabine Pass facility in Louisiana. Overall output was largely steady, with some 15 cargoes departing Sabine Pass during mid-April to mid-May, compared with 16 the previous month.
It was also announced that a Sabine Pass cargo will be delivered to Poland in mid-June. This will be the first US vessel to come to northern Europe and marks a further step in Poland’s ambitions to diversify beyond Russian pipeline supplies. Poland is already an importer of Qatari LNG at the Swinousjcie terminal and in March announced it would increase imports from the country to 2.0mtpa from January 2018. US LNG from Sabine Pass has been delivered to southern European destinations including Italy, Spain and Portugal in recent months, but is yet to reach northwest Europe.
Egyptian exports rise
Egypt’s Idku plant has made a re-entry to the market, with four cargoes departing since late March, after a halt in loadings during January, February and early March. Idku only loaded nine cargoes in 2016, mostly towards the end of the year, with Egyptian gas prioritised for domestic use. Egypt now looks better supplied with new domestic production coming onstream and the country has actually been asking suppliers to its Ain Sukhna regasification plant to defer some contracted deliveries.
Angola’s liquefaction facility at Soyo has continued to tender regular spot cargoes, with recent shipments heading to destinations including France, South Korea and India. Both Algeria and Nigeria have tendered some spot cargoes, as volumes have exceeded the levels needed to meet long-term obligations. Mexico’s CFE has been buying regularly to replace cargoes diverted to other destinations, due to an ongoing pricing dispute with long-term supplier Shell. Argentina is expected to come back into the market soon to look for cargoes for August onwards.
First cargo for Yuedong LNG
Significant voyages during the past month include Qatar’s 216,000 cubic metre (cbm) Al Kharaitiyat delivering the first cargo to Chinese CNOOC’s 2.0mtpa Yuedong LNG regasification terminal in Guangdong.
China’s Jovo Group tested ship-to-ship transfers in Subic Bay in The Philippines. It offloaded a standard cargo from the 153,000cbm Seri Bakti onto the 87,000cm Polar Spirit for onward supply to the 1.0 mtpa Dongguan Guangdong regas terminal, which can only accept smaller vessels.
Looking forward, Japanese demand could be reduced if Kansai Electric goes ahead with the restart of its 879MW units three and four at the Takahama nuclear power plant. In the UK the main seasonal gas storage site Rough was shut down in mid-May for a year, which could increase the importance of LNG as a flexible source of supply. Australian producers are assessing the impact of new regulations that could restrict their ability to export from the eastern seaboard if they are not net contributors to their domestic market.
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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