Global LNG Fundamentals

Published at 14:17 23 Dec 2015 by . Last edited 09:30 20 Apr 2016.

LNG demand was mixed in Northeast Asia over November. China and India saw their imports grow y/y, up by 0.06 Mt (3.5%) and 0.25 Mt (23%) respectively. In contrast, imports into Japan and South Korea declined y/y by 0.18 Mt (-2.7%) and 0.21 Mt (-7.2%) respectively.

Despite the positive growth seen in the past two months, Chinese LNG imports are still down by around 0.31 Mt (-1.7%) y/y over the first eleven months of 2015. Even with increasing renewable capacity and bearish weather forecasts, we remain cautiously optimistic that Chinese LNG demand will increase y/y in 2016 (by around 1.3 Mt). The extent of the gains will depend on the severity of the winter weather and other external factors, such as further downward revisions to city gate gas prices.

The slow decline in Japan’s appetite for LNG continues. Japanese LNG imports have fallen y/y in seven of the past eleven months, and are down by 3.27 Mt (-4.1%) over the year to November. The usual suspects of nuclear restarts and El Niño are behind the year’s weak numbers. We forecast Japanese LNG imports will be down by another 2.4 Mt in 2016 and by 2.2 Mt in 2017, driven largely by impacts from nuclear plant availability (in particular, Takahama Units 3 and 4 and Ikata Unit 3).

South Korean LNG imports were down y/y in November on weak domestic gas demand. There were fewer nuclear outages in November, with only the Hanbit Unit 4 and Hanul Unit 6 offline. In total, around 2.2 GW (9%) of nuclear capacity was offline, which was 3.8 GW less than last November. This low level of outage was likely behind the decline in gas demand from the power sector. Residential and commercial gas demand fell as El Niño continues to reduce the need for high levels of space heating.

Indian LNG imports in November were at 1.32 Mt (1.8 bcm), higher y/y by 0.25 Mt (23%) according to PPAC data. This follows the good y/y growth of 0.23 Mt (19%) in October. November was again hotter than last year and hotter than normal for India, with CDDs higher y/y by 6% and higher than five-year average by 13%. For 2016, we expect 1.2 Mt (7%) of incremental imports to come from infrastructure enhancements. For 2017, more regasification capacity may be available, with a number of new regas facilities being announced—although progress on these has been mixed.

Over October, total Latin American LNG imports were down y/y by a considerable 0.75 Mt (-39%) at 1.16 Mt. Mexico once again accounted for the majority of the decline, with imports down by 0.52 Mt (-69%) y/y. Argentinian imports were also weak, lower y/y by around 0.18 Mt (-44%). Imports in Chile and Brazil were also down y/y by 0.01 Mt (-6%) and 0.03 Mt (-8%), respectively.

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