Fundamentals

Published at 15:24 31 Jan 2018 by

Global LNG imports were 27.9 Mt in December, up by 4.1 Mt y/y. Colder-than-average weather supported high imports into Japan, China and South Korea, while strong power sector gas demand buoyed deliveries to India.  Receipts into Latin America expanded y/y as LNG takes in Mexico filled the supply gap left by delays to domestic pipeline start-ups, while low Brazilian reservoir levels limited hydro generation and pushed more gas into power. In the Middle East and North Africa (MENA) region, LNG takes fell as Egypt’s domestic gas production ramps up.

Chinese LNG imports hit a record high of 5.03 Mt in December, up by a hefty 1.30 Mt (35%) y/y. The surge occurred alongside a large 0.53 Mt (23%) y/y rise in pipeline imports and record high domestic production. For the whole of 2017, LNG imports amounted to 38.28 Mt, an astonishing 12.13 Mt (46%) y/y increase fuelled by the government’s ambitious coal-to-gas switching programme. We expect another year of strong LNG imports into China, and forecast a 9.3 Mt (25%) y/y rise in 2018.  

LNG receipts into Japan were up by 0.4 Mt (5.4%) y/y to 7.95 Mt in December, the largest y/y rise in two years. HDDs were up by 19% y/y and aggregate power demand rose by 5.3 TWh (7%) y/y, to 84 TWh. Total 2017 LNG imports were up by just 0.3 Mt y/y, with gains in H1 17 (2.3 Mt) being offset by y/y drops in most months of H2 17. Across 2018, we forecast that more nuclear and renewable generation will chip away at Japanese LNG demand, eroding 2018 takes by 3.2 Mt y/y. Cold weather and record low available nuclear capacity pushed South Korean imports up by 0.15 Mt y/y (4%) y/y to 4.18 Mt in December. Total 2017 imports were up by 4.1 Mt (12%) y/y, with imports higher y/y every month except October and November. We expect a 0.4 Mt y/y drop in South Korean 2018 LNG takes.

December LNG deliveries into India rose y/y for a seventh straight month, climbing by 0.10 Mt y/y to 1.53 Mt in December. While weather was milder y/y, power sector gas demand edged up by 0.13 TWh (3%) y/y given higher aggregate power demand and lower lignite generation. Total 2017 takes were up by 0.9 Mt (4%) y/y. India’s LNG growth this year will be largely down to how much additional regas capacity comes online and if the Kochi terminal’s downstream pipeline gets completed. While there is considerable uncertainty around the new projects and their ramp rates, we have India adding 3 Mtpa of incremental LNG in 2018.

Despite high LNG prices in Northeast Asia drawing cargoes from the global market, Latin American LNG imports expanded y/y by 0.21 Mt in December to 0.90 Mt. The rise was led by Mexico, which took 0.41 Mt, 0.15 Mt more y/y. Hydro levels in Brazil stood 7.5 percentage points below the five-year average, at 28% full, which limited hydro generation by 3.19 TWh (9%) y/y. Thermal generation plugged the gap, increasing by 1.14 TWh (16%) y/y, and pushed LNG takes 0.05 Mt higher y/y to 0.12 Mt. We have revised our LNG import forecasts for the region for 2018 modestly up, with LNG demand dropping off by 0.1 Mt y/y compared to the previous forecast of a 0.5 Mt fall.

Countries in the MENA imported 0.76 Mt of LNG in December, 0.07 Mt less y/y. Total 2017 MENA imports fell y/y by 1.35 Mt to 16.62 Mt—the first annual decline in our records going back to 2009— as a small 0.9 Mt y/y rise in H1 17 was offset by a 2.3 Mt y/y decline in H2 17, reflecting the structural shift in demand patterns created by rising Egyptian domestic production. This trend is expected to continue in 2018, and we forecast a 2.6 Mt y/y fall in LNG imports.

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