Fundamentals

Published at 16:49 28 Mar 2018 by . Last edited 15:12 5 Nov 2018.

Below-average temperatures in Northeast Asia coupled with higher power sector gas demand in Japan and South Korea to support a 2.04 Mt y/y increase in global LNG imports to 25.91 Mt in February, more than offsetting declines elsewhere. Indian LNG imports modestly decreased for the first time since July 2017 on lower gas-fired generation and an increase in domestic gas production. Higher Brazilian and Argentinian gas output in tandem with low heating gas demand as summer in the southern hemisphere peaks, drove Latin America’s LNG imports down by 0.07 Mt y/y. In the Middle East and North Africa, imports were down as Egyptian gas production continued to march higher.

Chinese LNG imports in February dropped by 1.19 Mt (23%) from January’s record 5.18 Mt, but still climbed by 1.56 Mt (68%) y/y to 3.99 Mt. Over January-February, LNG takes hit 9.17 Mt, a massive 3.37 Mt (58%) higher y/y, despite the slowdown in industrial sector gas demand during the week-long Chinese New Year holiday in February. Over all of 2018, we expect Chinese LNG imports to now grow by 11 Mt y/y, revised upwards by 1 Mt on our previous forecast on the policy commitment to again pursue significant levels of coal-to-gas switching.

LNG imports into Japan grew by 0.5 Mt y/y to 8.29 Mt in February, as sustained below-average temperatures in January and February supported higher power generation and gas use. We forecast Japan will import 2.5 Mt less LNG y/y in 2018 as we see the combination of more nuclear and renewables generation continuing to chip away at LNG demand.

South Korean LNG imports rose by a considerable 1.0 Mt (27%) y/y to 4.59 Mt in February, supported by another month of below-average temperatures and low stocks at the end of January. A hefty 10.1 GW—48% of total nuclear capacity—was offline last month, the second highest since at least 2013, boosting power sector gas demand. For all of 2018, we expect a 1.0 Mt y/y increase in LNG imports on continued low levels of nuclear availability and delays to the start-up of new nuclear plants.

Indian LNG imports decreased y/y for the first time since July 2017 in February, falling by a modest 0.02 Mt (1%) to 1.59 Mt on lower gas-fired generation and a 2% y/y increase in domestic gas production to 2.48 bcm. While there is considerable uncertainty around new LNG and pipeline projects and their ramp-up rates, we expect India to add 2.5 Mtpa of incremental LNG demand in 2018, revised down by 0.2 Mt on last month’s forecast due to marginally weaker LNG takes than expected in February.

Latin American LNG takes shrank by 0.07 Mt y/y to 0.93 Mt in February despite LNG imports into Mexico expanding by 0.07 Mt y/y to 0.43 Mt as LNG continues to backfill pipeline constraints. The total decline in LNG imports was driven by low demand given minimal heating consumption during the peak of the southern hemisphere summer, coupled with small domestic gas production gains. We have retained our LNG import forecasts for the region for 2018, with LNG demand dropping off by 0.1 Mt y/y – largely flat y/y. Countries in the Middle East and North Africa imported 0.58 Mt of LNG in February, lower y/y by 0.39 Mt. Egypt accounted for 0.33 Mt of the y/y decline, with imports at just 0.27 Mt as domestic production continued to increase.

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