We are delighted to present our new Monthly publications, formerly known as Data Review, which will share our short-term forecasts. Please note that users licensed for the data service can access our South Korean gas balances, power by source and nuclear outages data.
South Korean LNG demand strength continued in September ahead of the start of heating season, with imports up y/y by almost 1 Mt y/y (43%). Some of the drivers of gas demand growth, particularly the boost to gas-fired generation (+0.37 GW, 6% y/y) stemming from higher y/y nuclear capacity constraints, will continue in early Q4 18. For October, nuclear availability is lower y/y again, while forecasted average/below-average temperatures across the month (vs warmer weather in much of Northeast Asia) will support some early season res-com demand. From November, however, available nuclear capacity is scheduled to improve considerably y/y, which should see power sector gas demand ease through the rest of winter, particularly if we see mean-reverting temperatures. We forecast that LNG imports will grow by 0.9 Mt y/y (33%) in October and by 0.7 Mt y/y (22%) in November.
We expect restocking demand to remain high in October, supporting import levels. While power sector gas demand was high in September, low inventory levels encouraged a ramp-up in injections, taking stocks to an implied 2.15 Mt by month-end. With last year’s October storage at a much higher implied 4.1 Mt, the country will still be building up stocks over the next month with a view to getting more comfortable levels for the start of the 2018/19 heating season.
We expect to see further LNG demand growth in October thanks to both weather and high levels of nuclear outages. For the first half of October, temperatures have been lower than normal and some of the current commercial forecasts indicate that October will finish as the coldest since 2011, with HDDs 20% above the five-year average. Nuclear outages will be similar to last month, although a 0.7 GW (+10%) y/y increase in offline nuclear capacity should only moderately support gas-fired generation. Both the 0.95 GW Hanbit 1 and the 1 GW Hanul 1 were taken offline in September, reversing a period in July/August when available nuclear capacity rose y/y as units returned to service. Hanbit 1 was taken offline during an inspection in September, which found holes in the containment liner plate (CLP) of unit 2. We forecast for a 1.0 Mt stockbuild this month, we now expect LNG imports to be around 3.7 Mt (+0.93 Mt y/y, 34%) in October.
However, November could then be the last month this winter where we see substantial y/y support for South Korean LNG demand. Despite a few ongoing outages, available nuclear capacity is currently scheduled to improve considerably y/y from November, according to KHNP. Both Hanul 1 and Hanbit 1 are scheduled to return to partial service in November and full capacity in December. Just 3.4 GW of nuclear capacity is scheduled to be offline in November, 14% of total capacity and 5.3 GW less y/y. Scheduled constraints are set to fall to 2.1 GW in December, 8.3 GW lower y/y. If these units do return to service as scheduled, power sector gas demand could post a y/y decrease of up to 0.7 Mt (40%) in December.
Looking further ahead, scheduled outages in Q1 19 would result in gas demand falling by 0.5 Mt/m y/y (31%). The big uncertainty for the market is any slippage on the scheduled dates for those nuclear restarts. Maintenance at nuclear power plants tends to be extended, and any extensions should continue to support power burn. Likewise, the commissioning of the new 1.4 GW Shin Kori unit 4 has been delayed to Q3 19-Q4 19, having previously been scheduled to start up in September 2018. As such, there is some potential upside to our power burn numbers.
Mild weather should also ease res-com demand in Q4 18. The Korea Meteorological Administration is forecasting a greater chance of above-average temperatures in November compared with normal or below-average temperatures, which would ease heating demand compared with the unusually cold November-December 2017.
Given all these variable, we expect to see October imports coming in around 3.7 Mt, up by 0.9 Mt y/y (33%), while November imports should be up by 0.7 Mt y/y (22%).
|Fig 1: Nuclear cap. & gas into power, GW, Mt||Fig 2: Korean LNG stock movement, Mt|
|Source: KHNP, Kogas, Energy Aspects||Source: JODI, Energy Aspects|