This is the inaugural edition of our new Global LNG Panorama, a weekly report that will help you keep on top of the latest supply, demand and price developments in the global LNG market. It will provide a review of the week’s market events and offer our forecasts for the weeks ahead. As ever, we welcome your feedback on this new report.
The JKM LNG market was unmoved this week despite several supportive events—a force majeure for PNG LNG exports and extreme cold weather in Europe that led to big spikes on the NBP and TTF. It wasn’t all doom and gloom for supply, though. Cove Point exported its maiden cargo, Sabine Pass logged higher w/w loadings as sea fog lifted, and Golar said exports from its 1.3 Mtpa LNG terminal were imminent. Longer-term supply news was also positive, with earnings calls talking up FIDs on several projects. For the week ahead, we expect the +1 $/mmbtu premium of the JKM curve to the TTF to narrow as Northeast Asia has a mild short-term weather outlook.
LNG market unmoved despite a stressed week for Europe
The LNG curve was largely unmoved this week despite record-high daily prices being posted at Northwest European hubs as the ‘Beast from the East’ weather front brought snow and freezing temperatures to the region. The NBP and TTF surged to over 40 $/mmbtu as daily demand hit five-year highs and the inclement temperatures also caused several supply outages. While stockdraws and LNG sendout were both pushed to the maximum, European buyers did not head to the global market for cargoes to rebuild inventories. Though milder weather is set to arrive on Sunday (4 March), the storm has raised big questions over the lack of redundant flexibility in the European system.
In the LNG market, the biggest news was the earthquake in Papua New Guinea that led ExxonMobil to declare force majeure on loadings from the PNG LNG facility for at least one week. The epicentre of the earthquake was in the remote highlands of Hela province and near the Hides gas conditioning plant and Hides production pads. Both of those facilities, which provide the feedstock for the LNG plants on the coast, were closed as ExxonMobil scrambled to try and assess the damage in hard-to-reach areas of the island. There is no suggestion that the two LNG trains were damaged in the quake and an initial aerial survey suggested that the 700-km pipeline between the processing plants and the PNG LNG plant was also undamaged. At the time of writing, loadings were set to be disrupted for at least a week, but if the Hides processing plant needs repair, this could lengthen the disruption given the facility’s hard-to-reach location.
Our latest balances (for details see our Global LNG Outlook: Doubling Down, February 2018) have the Hides plant out for a month, taking 0.6 Mt out of the March market, curtailing some LNG availability to Europe. The biggest buyers of PNG LNG are Japan and China, so if anyone will be looking for more cargoes, it is likely to be these two. The response of the JKM curve to these developments was muted though, with the April contract unchanged at 8.3 $/mmbtu. The summer strip is pricing just under 7.5 $/mmbtu, largely flat w/w but still at a 1.3 $/mmbtu premium to the TTF.
The lack of much of a response could be that other supply news was more positive, with the delayed 5.3 Mtpa Cove Point facility on the US northeast coast finally shipping its first LNG cargo at the very start of March. Sabine Pass resumed higher loadings of LNG following the end of the winter fog event that had affected shipping access to the port—five cargoes loaded this week vs three the week prior. Peru LNG also went back to exporting cargoes, having returned from a three-week outage caused by a damaged pipeline.
For the month ahead, with the Northeast Asian winter looking warmer than normal for the first half of March, we still expect to see those JKM prices to start to ease, and further narrow the gap across the summer with the TTF and NBP.
More positive on supply projects
This is results season, so the week delivered more news than usual on LNG supply projects due to come online this year. Golar put the commercial start-up of its 1.3 Mtpa Hilli project as ‘imminent’, with the maiden cargo due to load in Cameroon. The news on the 4.2 Mtpa Ichthys plant was a little mixed, with Total and Inpex giving slightly different spins to the project’s first LNG exports, although both companies agreed that it would be in Q2 18. We are expecting that this means it will be June before we see much in the way of volumes from this project. Also, Cheniere said that the first of its 4.5 Mtpa trains at Corpus Christi might start producing LNG this year, while it also said it was moving closer to an FID on the third train. ExxonMobil talked up LNG export expansion projects in Qatar, Mozambique (it is involved in the Eni-led project rather than the more advanced Anadarko project), as well as an addition of 8 Mtpa to the PNG LNG facility, although these will all be post-2020 capacity additions.
The demand side was also busy, with Chinese distribution company ENN confirming that its 3 Mtpa regassification plant would be commissioned in the middle of 2018. Sinopec announced the commercial operation of its 3.0 Mtpa Tianjin regas facility, having taken its first cargo at the start of February. Both of these pave the way for an expansion of LNG imports next winter. Total also said that it was looking at taking FIDs on regas projects in both Myanmar and Ivory Coast this year.
As for short-term tenders, India dipped into the market again with GAIL looking for two April cargoes and one for March. Argentina’s Enarsa has kept open its tenders for the 22 cargoes it is looking to take in the May–August period.