Fundamentals

Published at 13:32 31 May 2018 by . Last edited 15:12 5 Nov 2018.

Global LNG imports rose by 0.69 Mt y/y to 22.4 Mt in April, driven by continued strength in Chinese demand as well as higher South Korean imports owing to another month of record-high nuclear outages. Indian receipts also increased on higher thermal power generation as low reservoir levels limited hydro generation. In Japan, recent nuclear restarts curbed power sector gas burn which weighed on LNG imports, while the ramp up of domestic production and higher renewable generation curtailed Latin America’s LNG needs. Middle East and North Africa imports also slowed in April, mainly because of rising Egyptian domestic production. For the whole of 2018 we forecast global LNG imports will expand by 26 Mt y/y to 315.6 Mt.

Chinese LNG imports rose by a hefty 1.22 Mt (56%) y/y to 3.39 Mt, another month of strong growth. Demand strength is the result of slowing domestic production growth and high storage injections. If domestic production continues to fall short of expectations, the call on LNG imports will continue to rise, with full-year 2018 imports on course to be up by 13.4 Mt y/y to 51.9 Mt.

South Korean LNG imports increased by 0.85 Mt (37%) y/y to 3.17 Mt in April owing to ongoing record-high nuclear outages (+5 GW y/y) supporting power sector gas burn. In late May, the energy ministry announced measures to reduce coal-fired dust, creating a generation gap that will need to be filled with gas (see E-mail alert: Korea promises air quality restrictions on coal, bolstering LNG demand, 29 May 2018). We have revised up our South Korean demand expectations and for the 2018, we now expect a 2.0 Mt y/y increase in LNG imports to 39.6 Mt.

India imported 1.72 Mt in April, up y/y by 0.07 Mt despite higher domestic gas output. Low reservoir levels continued to curb hydroelectric generation, boosting thermal generation. New Indian LNG import projects are advancing, but unfinished downstream infrastructure at the 5 Mtpa Mundra terminal poses headwinds to import growth. As such, demand growth this year is likely to come from new gas supply contracts at existing terminals and rising power sector gas demand. We expect India to add 2.6 Mt of incremental LNG imports in 2018 to 21.8 Mt.

Japanese LNG imports in April fell by 1 Mt (15%) y/y to 5.6 Mt as mild weather curbed power consumption and the restart of several nuclear plants continued to cut gas-fired generation. We expect the return of the 1.2 GW Ohi Unit 4 to limit gas-fired generation further, providing little support for LNG imports. We forecast Japan will import 81.9 Mt in 2018 (-1.75 Mt y/y).

Countries in the Middle East and North Africa imported just 0.56 Mt of LNG in April (-0.75 Mt y/y). Demand from all main buyers underperformed versus expectations, which poses downside risks to our forecast that the region will import 12.5 Mt (-3.9 Mt y/y) over 2018.

Latin American LNG imports fell by 0.5 Mt y/y to 1.1 Mt in April. Increasing renewable generation in the region and domestic gas production growth in Brazil and Argentina is set to dampen any potential LNG demand increases through 2018. Projected increases in Mexican LNG imports due to ongoing domestic pipeline infrastructure delays are set to be offset with declines elsewhere in the region. We peg Latin American LNG imports at 16.1 Mt (-0.3 Mt y/y) in 2018.

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