Mexico's Expanding Role in Global LNG Markets

Platts, part of S&P Global Commodity Insights, will launch new LNG assessments, including one for the spread between European TTF and LNG prices, with effect from Feb. 15, 2023. This follows the increased market interest in understanding the prevailing price difference between LNG and European gas prices in Eur/MWh after recent legislative announcements in the European Union. The new assessments will include: The price of front-month Platts JKM (AAOVQ00) in Eur/MWh. The price difference between month-ahead Dutch TTF (GTFTM01) and the average of Platts DES NWE (LNNTA00), Platts DES MED (LNMTA00) and Platts JKM in Eur/MWh. A rolling three-day average of the aforementioned spread between Dutch TTF and global LNG. The price difference between the front-month Dutch TTF in $/MMBtu (GTFWM10) and the equivalent month of NWE assessments. For example, from the 1st to the 15th of the calendar month, this would consider Platts NWE (AASXU00) minus Platts Dutch TTF M1 (GTFWM10); for the 16th to the end of the month this would look at Platts NWE (H2 [LNNDA00] + H3 [AASXV00] / 2) minus Platts Dutch TTF M1 (GTFWM10). The price difference between the front-month Dutch TTF in $/MMBtu (GTFWM10) and the equivalent time month of Platts MED LNG assessments. For example, from the 1st to the 15th of the calendar month, this would look at Platts MED (AASXY00) minus Platts Dutch TTF M1 (GTFWM10); for the 16th to the end of the month this would look at Platts MED (H2 [LNMDA00] + H3 [AASXZ00] / 2) minus Platts Dutch TTF M1 (GTFWM10). This decision follows a proposal note published Dec. 20, 2022, available here: https://www.spglobal.com/commodityinsights/en/our-methodology/subscriber-notes/122022-platts-proposes-european-lng-natural-gas-differential-assessments Full details of the existing Platts DES NWE LNG assessments can be found in the Global LNG Specifications Guide: https://www.spglobal.com/commodityinsights/PlattsContent/_assets/_files/en/our-methodology/methodology-specifications/global_lng.pdf. Please send all feedback, comments and questions to lngeditorialteam@spglobal.com and pricegroup@spglobal.com by February 15, 2023. For written comments, please provide a clear indication if comments are not intended for publication by Platts for public viewing. Platts will consider all comments received and will make comments not marked as confidential available upon request.

In this week's Market Movers Europe with Nikolaos Aidinis – Antonopoulos: Demand worries dominate in oil Germany begins commissioning tests at LNG terminals Mild, windy weather subdues energy prices Carbon auctions set to resume

Germany is poised to begin commissioning work at its first floating LNG import terminal in a matter of days, enabling the EU powerhouse to receive direct LNG imports for the first time. Germany has long held the ambition to install LNG terminals on its northern coast, but Russia's invasion of Ukraine and subsequent cuts in pipeline deliveries lent new momentum to German efforts to diversify supply through LNG. In all, six import projects are under development -- five backed by the German state and one privately-funded terminal. The first to start up will be Uniper's state-backed FSRU at Wilhelmshaven -- the Hoegh Esperanza -- which arrived in port on Dec. 15. "The first gas will flow on Dec. 22," a Uniper spokesperson told S&P Global Commodity Insights. During the commissioning phase, gas send-outs of between 15 GWh/d and 155 GWh/d into the Open Grid Europe network are expected. "Commercial operation of the FSRU is currently planned to commence mid-January with an expected maximum capacity of roughly 155 GWh/d," Uniper said in a market transparency note. That is the equivalent of some 15 million cu m/d of gas flow, which on an annualized basis would mean total supply of some 5.5 Bcm/year. That is a far cry from the 158 million cu m/d regularly supplied to Germany from Russia via the now damaged and idled Nord Stream pipeline system before June this year. The loss of Russian gas has hit Germany hard, with record high prices putting significant pressure on German buyers of Russian gas forced to procure substitute gas on the open market. Platts, part of S&P Global Commodity Insights, assessed the benchmark Dutch TTF month-ahead price at an all-time high of Eur319.98/MWh on Aug. 26. Prices have weakened since on the back of healthy storage and demand curtailments, though prices remain historically high with Platts assessing the TTF month-ahead price Dec. 16 at Eur118.23/MWh. Nonetheless, managing the deployment of an FSRU within such a short period of time is impressive, with construction work at Wilhelmshaven only having started in May after the project was revived in February. The Hoegh Esperanza could also have an expanded capacity in the future, with Uniper having flagged a potential send-out capacity of 7.5 Bcm/year. Other startups As well as the FSRU at Wilhelmshaven, two other projects are due to begin operations shortly. Private developer Deutsche ReGas is hoping to commission the Neptune FSRU at the port of Lubmin before the end of December. The FSRU arrived into the port on Dec. 16. "Our goal is to be able to start supplying gas as soon as possible," Deutsche ReGas chairman Stephan Knabe said Dec. 16. "But the commissioning can only take place when all the necessary permits have been obtained. We continue to assume December," he said. Deutsche ReGas had said previously the terminal would be technically ready by Dec. 1, but a number of permits remain outstanding, while work on the FSRU at the nearby port of Mukran was also dependent on weather conditions. RWE, meanwhile, plans to deploy a state-backed FSRU at Brunsbuttel in January, later than originally hoped. "According to current planning, it is expected that the construction work for the operation of the FSRU in the port will be completed in January," an RWE spokesperson said Dec. 15. The FSRU will then be able to dock and be connected to the newly constructed technical infrastructure, the spokesperson said. The FSRU reported to be in line to serve Brunsbuttel is the Hoegh Gannet, which is currently in Brest, France, according to Platts cFlow ship and commodity tracking software from S&P Global Commodity Insights. Earlier this year RWE had flagged that the first cargo to arrive at the port would be LNG it had contracted to buy from the UAE, which was originally intended to be delivered in December. Both the FSRUs at Wilhelmshaven and Brunsbuttel are to be supplied with LNG by Uniper, RWE and EnBW unit VNG under a memorandum of understanding signed with the German economy ministry to guarantee their full use until March 2024. Capacity bookings Three other state-supported FSRUs are under development and are due online by the end of 2023 at: Stade (Hanseatic Energy Hub - HEH); Lubmin (RWE/Stena-Power); and Wilhelmshaven (TES/E.ON/Engie). The German economy ministry said in September that the FSRUs at Brunsbuttel and Stade would be operated only until permanent onshore terminals go into operation in 2026. Both permanent terminals have been buoyed in recent weeks by binding capacity bookings and related supply deals. German utility EnBW said this month it had booked 3 Bcm/year of capacity at HEH's planned 13.3 Bcm/year capacity onshore terminal at Stade from the start of commissioning, expected in 2026. As well as booking LNG import capacity at Stade, EnBW will also have the option to move to ammonia as a hydrogen-based energy source at a later date. "This possibility is open to all Hanseatic Energy Hub customers with a long-term contract of more than 10 years," it said. For the permanent 8 Bcm/year site at Brunsbuttel, the US' ConocoPhillips, chemicals giant Ineos and RWE have all booked long-term capacity. ConocoPhillips said in late November it had agreed two long-term agreements with QatarEnergy for the supply of up to 2 million mt/year of LNG into Brunsbuttel for a period of at least 15 years. The LNG will be supplied on a DES basis from Qatar's major North Field East and North Field South expansion projects, in which ConocoPhillips is a partner. Ineos, meanwhile, said Dec. 1 it had signed a long-term agreement with Sempra Energy's infrastructure unit for the supply of LNG from the proposed Port Arthur export terminal in the US. First deliveries from Port Arthur are expected in 2027. The agreement includes a 20-year commitment for 1.4 million mt/year from the first phase of the project, while the two companies also signed a non-binding deal for an additional 0.2 million mt/year from the project's second phase. The permanent Brunsbuttel terminal is expected to begin operations in 2026, although efforts are underway to accelerate the startup, and its capacity could be expanded to at least 10 Bcm/year.

China's natural gas demand in 2023 is expected to rebound from 2022 levels on the back of a gradual opening up of the economy, but high global energy prices and macroeconomic concerns will continue to pressure gas consumption levels. "We expect Chinese gas demand in 2023 to rebound from the low base in 2022, surpassing the 2021 levels, but it will not be a 'V-shaped' rebound," Jenny Yang, senior director, gas, power and climate solutions, S&P Global Commodity Insights, said. "On one hand, a key assumption is that while China has started to relax COVID-related measures, a full exit from COVID controls will still take time and won't likely happen until the second quarter of 2023," she said. "On the other hand, the economy will still be under the pressure of the real estate market downturn and weak exports." Yang said while China's real GDP growth is forecast to improve from 3% in 2022 to 4.4% in 2023, renewable power generation will continue to surge, and policies to rely on domestic coal production will remain in place, which will impact gas demand growth. As a consequence, China's natural gas demand is expected to reach around 364 Bcm in 2022 and grow by around 6% year on year to around 386 Bcm in 2023, according to S&P Global Commodity Insights data. The 2022 gas demand number is nearly 1.4% lower than the National Energy Administration's 369 Bcm demand figure for 2021, making 2022's gas demand the first year-on-year decline in history. "Chinese natural gas demand is still expected to grow but at a much slower rate than historic levels [in 2023], up by around 6% year on year, in part due to new contracts that are expected to support LNG import growth," Szehwei Yeo, LNG analyst at S&P Global Commodity Insights, said. Roman Kramarchuk, Head of Energy Scenarios, Policy & Technology Analytics at S&P Global Commodity Insights, said that for commodities demand in 2023, the most important fundamental factor will be China's COVID policy, as demand softness in 2022 due to lockdowns was a key safety valve for oil, gas and coal markets, while Europe scrambled to replace Russian energy. LNG imports China has been expanding natural gas import capacity and the new LNG import contracts linked to new terminals will help support imports in 2023. China's LNG receiving capacity is estimated to increase to 130 million mt/year by 2023 and nearly 200 million mt/year by 2025, compared with current capacity of 101 million mt/year, the Shanghai International Energy Exchange said June 15. Around nine new LNG term contracts are scheduled to start deliveries in 2023, more than offsetting the two short-term contracts expiring at the end of 2022, according to market sources. "Spot LNG prices will likely remain high in 2023 as Europe refills storage. China will divert cargoes like it did this year (2022) under the combined impact of weak gas demand growth and high spot prices. A price-sensitive market, China will limit spot purchases until prices fall into the $15-$20/MMBtu range or lower," Yang said. "At the same time, Power of Siberia pipeline imports will continue to ramp up, now that the Kovykta gas field has started production. As a result, China's LNG imports will rise from 2022 lows but only marginally, by about 3 million mt year on year, supported by new term contracts," Yang said. S&P Global Commodity Insights expects China's LNG imports to rise to around 65 million mt (89.8 Bcm) in 2023. In November, state television CCTV reported that annual gas supply from the Russia-China natural gas pipeline's eastern route is expected to rise to 22 Bcm in 2023, 30 Bcm in 2024, and 38 Bcm in 2025, based on the current schedule, up from around 15 Bcm in 2022. Yang also said China will continue to look for term supply to support long-term demand growth while limiting exposure to spot market price volatility. China signed 34 LNG contracts, including short-term, medium-term and long-term contracts, between 2021 and 2022 year-to-date, with a total contract volume of 45.91 million mt, starting delivery from 2022 to 2027, calculations showed. Out of the 34 contracts, 15 were between China and the US with a volume of about 21 million mt/year, accounting for nearly half of the total, and five contracts totaling 11.5 million mt were with Qatar, coming a close second. This included the longest contract between Sinopec and Qatar Energy for 4 million mt/year of LNG for 27 years. Given that China aims to hit nearly 200 million mt/year of LNG imports by 2025, it remains under-contracted, and sources have said several long-term contracts are being negotiated and could be finalized when markets stabilize in 2023. Uncertainties Yang said other factors driving gas demand include weather conditions, particularly this coming 2022/23 winter -- which will determine how much gas from storage needs to be replenished globally -- and unplanned outages at liquefaction projects. Other developments expected to influence gas markets in 2023 are the "14th Five-Year Plan on Natural Gas," a key document guiding China's natural gas market development that is yet to be published, and gas price reforms in the midst of volatile import costs. "The key company-level strategies to watch out for include passing through costs to the downstream market in the current high-cost environment, procuring new supply to avoid exposure in the spot market, developing new LNG receiving infrastructure amid the overall low utilization of existing projects and new capacity already under construction, and proposed, new interprovincial transmission pipeline development for new supply to reach markets," she said. However, China is unlikely to make any major change in its approach to the role of natural gas/LNG in the energy mix in 2023. "Using natural gas to displace oil and coal is consistent with the two long-term carbon goals of peaking carbon emissions by 2030 and carbon neutrality by 2060," Yang said.

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China's natural gas demand in 2023 is expected to rebound from 2022 levels on the back of a gradual opening up of the economy, but high global energy prices and macroeconomic concerns will continue to pressure gas consumption levels. "We expect Chinese gas demand in 2023 to rebound from the low base in 2022, surpassing the 2021 levels, but it will not be a 'V-shaped' rebound," Jenny Yang, senior director, gas, power and climate solutions, S&P Global Commodity Insights, said. "On one hand, a key assumption is that while China has started to relax COVID-related measures, a full exit from COVID controls will still take time and won't likely happen until the second quarter of 2023," she said. "On the other hand, the economy will still be under the pressure of the real estate market downturn and weak exports." Yang said while China's real GDP growth is forecast to improve from 3% in 2022 to 4.4% in 2023, renewable power generation will continue to surge, and policies to rely on domestic coal production will remain in place, which will impact gas demand growth. As a consequence, China's natural gas demand is expected to reach around 364 Bcm in 2022 and grow by around 6% year on year to around 386 Bcm in 2023, according to S&P Global Commodity Insights data. The 2022 gas demand number is nearly 1.4% lower than the National Energy Administration's 369 Bcm demand figure for 2021, making 2022's gas demand the first year-on-year decline in history. "Chinese natural gas demand is still expected to grow but at a much slower rate than historic levels [in 2023], up by around 6% year on year, in part due to new contracts that are expected to support LNG import growth," Szehwei Yeo, LNG analyst at S&P Global Commodity Insights, said. Roman Kramarchuk, Head of Energy Scenarios, Policy & Technology Analytics at S&P Global Commodity Insights, said that for commodities demand in 2023, the most important fundamental factor will be China's COVID policy, as demand softness in 2022 due to lockdowns was a key safety valve for oil, gas and coal markets, while Europe scrambled to replace Russian energy. LNG imports China has been expanding natural gas import capacity and the new LNG import contracts linked to new terminals will help support imports in 2023. China's LNG receiving capacity is estimated to increase to 130 million mt/year by 2023 and nearly 200 million mt/year by 2025, compared with current capacity of 101 million mt/year, the Shanghai International Energy Exchange said June 15. Around nine new LNG term contracts are scheduled to start deliveries in 2023, more than offsetting the two short-term contracts expiring at the end of 2022, according to market sources. "Spot LNG prices will likely remain high in 2023 as Europe refills storage. China will divert cargoes like it did this year (2022) under the combined impact of weak gas demand growth and high spot prices. A price-sensitive market, China will limit spot purchases until prices fall into the $15-$20/MMBtu range or lower," Yang said. "At the same time, Power of Siberia pipeline imports will continue to ramp up, now that the Kovykta gas field has started production. As a result, China's LNG imports will rise from 2022 lows but only marginally, by about 3 million mt year on year, supported by new term contracts," Yang said. S&P Global Commodity Insights expects China's LNG imports to rise to around 65 million mt (89.8 Bcm) in 2023. In November, state television CCTV reported that annual gas supply from the Russia-China natural gas pipeline's eastern route is expected to rise to 22 Bcm in 2023, 30 Bcm in 2024, and 38 Bcm in 2025, based on the current schedule, up from around 15 Bcm in 2022. Yang also said China will continue to look for term supply to support long-term demand growth while limiting exposure to spot market price volatility. China signed 34 LNG contracts, including short-term, medium-term and long-term contracts, between 2021 and 2022 year-to-date, with a total contract volume of 45.91 million mt, starting delivery from 2022 to 2027, calculations showed. Out of the 34 contracts, 15 were between China and the US with a volume of about 21 million mt/year, accounting for nearly half of the total, and five contracts totaling 11.5 million mt were with Qatar, coming a close second. This included the longest contract between Sinopec and Qatar Energy for 4 million mt/year of LNG for 27 years. Given that China aims to hit nearly 200 million mt/year of LNG imports by 2025, it remains under-contracted, and sources have said several long-term contracts are being negotiated and could be finalized when markets stabilize in 2023. Uncertainties Yang said other factors driving gas demand include weather conditions, particularly this coming 2022/23 winter -- which will determine how much gas from storage needs to be replenished globally -- and unplanned outages at liquefaction projects. Other developments expected to influence gas markets in 2023 are the "14th Five-Year Plan on Natural Gas," a key document guiding China's natural gas market development that is yet to be published, and gas price reforms in the midst of volatile import costs. "The key company-level strategies to watch out for include passing through costs to the downstream market in the current high-cost environment, procuring new supply to avoid exposure in the spot market, developing new LNG receiving infrastructure amid the overall low utilization of existing projects and new capacity already under construction, and proposed, new interprovincial transmission pipeline development for new supply to reach markets," she said. However, China is unlikely to make any major change in its approach to the role of natural gas/LNG in the energy mix in 2023. "Using natural gas to displace oil and coal is consistent with the two long-term carbon goals of peaking carbon emissions by 2030 and carbon neutrality by 2060," Yang said.

Extreme volatility in the global LNG market in 2023 will continue to encourage US LNG export terminals to run at high levels, but US Henry Hub prices stand to fall as liquefaction capacity additions flatline, according to S&P Global Commodity Insights' latest 2023 energy outlook. A lack of new liquefaction facilities coming online globally stands to constrain natural gas supply growth despite persistently high prices, according to the outlook. The result will be global gas markets forced to balance on demand destruction and existing stocks instead of LNG supply growth, a dynamic that will be particularly apparent in Europe, where gas and power markets may be even tighter in 2023 as the region faces its first year without significant volumes of Russian pipeline gas. "There is no slack in the system," Michael Stoppard, global gas strategy lead and special adviser at S&P Global, said during a Dec. 8 briefing with reporters. "So we can expect a continuation and a reinvigoration of extreme market volatility that we have seen in both gas and power prices. "Disruptions on the supply side and any clear deterioration of economic output will be met by markets with a volatile price response." Europeans have scrambled to build LNG import infrastructure in an effort to find alternatives to pipeline deliveries from Russia following its invasion of Ukraine in late February. Constraints at existing European regasification terminals in 2022 have led to a dislocation between the northwestern European delivered LNG price and the continental TTF price, with the Platts DES Northwest Europe reaching a record discount of more than $29/MMBtu to TTF in early October before tracing back to around $10/MMBtu currently. S&P Global expects a large increase in European import infrastructure over the next year that could ease the bottlenecks, with some 10 new LNG import terminals proposed or constructed that could be online by the end of 2023. Loosened regasification constraints are expected to tighten the spread between delivered LNG at European terminals and continental gas prices, said Ross Wyeno, lead analyst for LNG Americas at S&P Global. "Our belief is that the net impact of that will be to draw global LNG prices upwards this winter so that Asian buyers are forced to directly compete with the gas buyers within Europe," Wyeno said. "Then potentially we could see prices trailing off a bit more next summer." Across energy markets, China's coronavirus policy is the most important fundamental factor for global energy demand in 2023, said Dan Klein, head of Energy Pathways at S&P Global. Lockdowns softened China's energy demand in 2022, providing relief for gas, oil, and coal markets as Europe scrambled to replace energy supplies from Russia following its invasion of Ukraine in late February. But the S&P Global outlook presumes China's total energy demand will increase by 3.3 million barrels of oil equivalent per day in 2023 from virtually no growth in 2022, representing 47% of the global energy demand growth next year. US LNG export additions flatline in 2023 Persistently high prices have kept existing US LNG terminals running at or near close to full capacity in 2022. US feedgas demand was about 11.5 Bcf/d Dec. 8, after hitting nearly 13 Bcf/d Dec. 1, according to S&P Global data. The Dec. 1 flows marked the highest level of US LNG feedgas deliveries since before an early June explosion and fire at the Freeport LNG plant in Texas pushed some 2 Bcf/d of gas back into the domestic market due to loss of feedgas demand. Freeport LNG is working to resume production by the end of the year. Apart from the Freeport return, S&P Global described a "distinct lack of growth" in North American LNG capacity until late 2024, which is when the developer of the 18.1 million mt/year Golden Pass facility under construction in Texas expects to start production. The lack of new US LNG export capacity and domestic production that is expected to rise by nearly 3 Bcf/d are factors contributing to softer Henry Hub prices in 2023. S&P Global forecasts prices at Henry Hub will average $5.47/MMBtu across 2023, peaking near $7/MMBtu across the first quarter before dipping below $5/MMBtu across the second and third quarters of the year amid tight gas balances and economic headwinds in the US and abroad. Companies close to the heart of the US gas value chain concur that 2023 is likely to offer more gas price volatility, with Freeport LNG's restart one of several factors promising to stir markets in the year ahead. "I think there will certainly be volatility," Kinder Morgan CEO Steve Kean told analysts at the Wells Fargo Midstream and Utilities Symposium on Dec. 8. "And as we get LNG back in ....those are big moves, big chunks of demand coming on."

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Freeport LNG delayed its restart target until the end of the year, about two weeks beyond its previous estimate, as it works with US regulators to secure all approvals necessary to resume production, the operator said Dec. 1. The three-train, 15 million mt/year capacity terminal in Texas, which serves about 15% of US liquefaction output, has been offline since a June explosion and fire. The operator estimated Nov. 18 that it would resume production in mid-December, which represented a delay of about a month from its previous target. The latest timeline reflects some progress on the regulatory front, although work continues to secure all necessary clearances. Freeport LNG has approval from agencies to complete critical repairs and commence reinstatement of certain systems, spokeswoman Heather Browne told S&P Global Commodity Insights in response to questions. Based upon current progress and subject to the operator continuing to meet necessary requirements, Freeport LNG now anticipates that "restart of liquefaction to be achieved around year-end," Browne said. Freeport LNG has long-term offtake deals with South Korea's SK E&S, Japanese utilities JERA, and Osaka Gas, as well as French energy major TotalEnergies. Some counterparties have had to rely more heavily on the spot market for LNG supplies during the outage. Freeport LNG has said its three liquefaction trains will be restarted and ramped up in a slow and deliberate manner, with each train starting separately before restarting a subsequent train. It previously said it expected that about 2 Bcf/d of production would be achieved in January. The terminal's capacity is around 2.3 Bcf/d. Full production utilizing both docks remains anticipated to be achieved in March, Freeport LNG said. Investigators with the US Pipeline and Hazardous Materials Safety Administration have been present at the site throughout the course of the probe and planned to be there to consider restart approval, said a person familiar with the situation.

The message from LNG industry leaders gathered at the annual World LNG Summit & Awards wavered between wariness and optimism Nov. 30 as they discussed changes in contracting, the unprecedented challenges facing the industry and a new pricing mechanism for hedging Atlantic cargoes. Politicians, administrators and trading managers recapped 2022 across various panels and presentations during the 22nd World LNG Summit & Awards, organized by DMG events and taking place in Athens. They were near universal in noting the unprecedented challenges presented by record-high LNG prices, the war in Ukraine and European energy security. "Was it a black swan event [in 2022]? No, it was a flock of black swan events, "said Pat Roberts, Managing Director of LNG Worldwide, who described 2022 as one of the most tumultuous years for the LNG industry. "We clearly have a major crisis as an industry," said Steve Hill, Shell's Executive Vice President for energy marketing. Discussed across several panels were how the war and other factors have caused record high natural gas and LNG prices and an unprecedented decoupling between the Dutch TTF natural gas hub and the Northwest European LNG price. Platts assessed Northwest Europe LNG at a record high of $74.486/MMBtu on Aug. 26 alongside a similarly bullish TTF second-month price of $98.96/MMBtu. On Oct. 3, the difference between the two markets reached a record spread when LNG fell to a $29.55/MMBtu discount to TTF. While many panelists were candid in the challenges facing the LNG market, there was also praise for the speed in which Germany has brought import capacity online as well as other market solutions put forward. "This crisis has revealed there are diverse European indexes and, of course, they have reacted differently," said Patrick Dugas, Vice President LNG Trading in TOTAL Gas & Power Limited (TGP) and Global Head of LNG Trading. "We realized we have been misled in that pipeline gas no more reflects the price of an LNG Cargo." "We will have to find a way to move away from the pipeline gas TTF index to a Northwest Europe LNG index." The LNG North West Europe Marker (Platts) Futures Contract was launched by the CME on Oct. 24 and traded on opening day. The contract is cash settled against the Platts DES Northwest Europe physical assessments, has a size of 10,000 MMBtu and monthly contracts are listed for the current year and the next five calendar years. "We have an LNG marker that we hope will move to gather the liquidity and activity of the LNG players in Europe," Dugas said. "This is an index that reflects the market in Northwest Europe." Panelists were mixed on the viability of short versus long-term LNG contracting, with spot activity strained during high price environments. Hill said the combination of long-term and spot contracting is unconventional but works for LNG. Jonathan Westby, Jera Senior Vice President LNG said his company relies on the spot market to manage their business. ADNOC LNG's Senior Vice President of commercial Rashid Al Mazrouei said a shift to long term contracts are needed to secure countries' energy supplies and ensure capital commitments for long term liquefaction projects.

Japan is poised for more spot LNG trades in 2023 as more than 6 million mt/year of long-term LNG supply contracts are due to expire, a trend likely to persist for the next few years at least. The long-term contractual expiries come at a time when Japan faces stiff competition for LNG from Europe, which has committed to replace Russian gas supply in the wake of Russia's invasion of Ukraine. Roughly 6.1 million mt of long-term LNG contracts held by Japanese companies are up for expiry in 2023, with Brunei LNG accounting for 56% of the contracts due to expire in the year, according to S&P Global Commodity Insights LNG database. The 2023 contractual expiries represent roughly 8% of Japan's annual LNG imports of around 74 million mt, a level that will likely be difficult to replace with incremental supply from other long-term term contracts and short-to-mid-term contracts amid tight LNG markets. "Everybody is seeking term [supplies] including for strip and mid-term [contracts]," a Japanese buyer told S&P Global. "We tapped a few [suppliers] but there are no [suppliers] offering oil-indexed long-term contracts." "So we are in a situation [where we have] to keep room open helplessly for spot [volumes] because sellers are not willing to offer," said the buyer, adding that Japanese buyers cannot secure their LNG requirements in advance. The Russian invasion of Ukraine, which has tightened the LNG supply-demand balance and increased uncertainty over supply, including from the Sakhalin 2 project, is also impacting Japanese companies' LNG procurements in 2023, said Hiroshi Hashimoto, senior analyst and head of gas group at the Institute of Energy Economics, Japan. "Of course, [Japanese companies] must have taken steps for contractual expiries in advance but the situation has slightly changed, which has created the need to move additionally," said Hashimoto, adding that such moves include not only pursuing more long-term LNG supply than previously expected but also seeking spot LNG procurements. Japan's higher exposure to spot LNG procurement in 2023 comes after the Platts JKM price benchmark rose to an all-time high of 84.762/MMBtu March 7 because of supply uncertainty and rising prices in the Atlantic. Platts, part of S&P Global, assessed JKM for January at $31.368/MMBtu Nov. 24. Japanese buyers have mostly secured sufficient LNG for the upcoming winter into March 2023 despite facing some supply issues, including from Malaysia LNG and US Freeport LNG, with some still in the midst of working out their annual delivery programs for 2023, according to market sources. Nuclear restarts The country's overall LNG procurements, however, might fall on the year in 2023 because of expected restarts of Kansai Electric's 826 MW No. 1 and 826 MW No. 2 Takahama nuclear reactors over the course of the year. Kansai Electric's No. 1 and No. 2 Takahama nuclear reactors will be restarted in June and July, respectively, for the first time under Japan's new regulatory standards introduced in 2013 following shutdowns for scheduled maintenance in 2011. The restarts of the No. 1 and No. 2 Takahama reactors would also mark the country's second and third nuclear reactors to see over 40 years of commercial operations following NRA's approvals in 2016, along with Kansai Electric's 826 MW No. 3 Mihama nuclear reactor, which was restarted in 2022. Japan's economic outlook for 2023 remains challenging and the country's overall power demand will be at a similar level to 2022, said Kaori Tachibana, associate director of gas, power & climate solutions at S&P Global. "With the ramp up of up to 10 reactors by February 2023, and a further two scheduled for restart next summer, the pressure on LNG is expected to be lifted," Tachibana said. "With tight supply expected to continue for the next few years, Japan's nuclear restart strategy will help alleviate the situation," she said. "However, nuclear restart remains highly uncertain and delays will place pressure on the tight LNG market as well as on domestic power supply." The 10 nuclear reactors that will be in operation by February 2023 are Kansai Electric's No. 3 Mihama, 870 MW No. 3 Takahama, 870 MW No. 4 Takahama, 1.18 GW Ooi No. 3 and 1.18 GW Ooi No. 4 nuclear reactors; Kyushu Electric's 890 MW No. 1 and 890 MW No. 2 Sendai nuclear reactors, and 1.18 GW No. 3 and 1.18 GW No. 4 Genkai nuclear reactors; Shikoku Electric's 890 MW No. 3 Ikata nuclear reactor. Contractual expiry Japan's exposure to spot LNG trades will continue in the next few years unless it is able to secure some sort of extension to expiring long-term contracts or short-to-mid-term contracts. The country's long-term LNG contractual volumes are slated to fall to around 62.86 million mt in 2030, compared with 85.11 million mt in 2025 and 89.83 million mt in 2023, according to S&P Global data. Despite the approach of long-term contractual expiries, Japanese LNG buyers have not been able to secure new long-term LNG supply contracts because of the demand uncertainty in the years ahead due in part to the country's 2050 carbon neutrality commitment. "Honestly, we have a split view at the company, with some calling for signing long-term contracts," said a Japanese buyer. "Others push for keeping room open for spot [volumes] without signing long-term contracts."

An alternative view of the 2022 FIFA World Cup in Qatar would cast the competition as the world’s first LNG games. The competition, hosted by Qatar – whose wealth is tied to the super-cool fuel – pitches some of the world’s biggest LNG buyers like Japan and South Korea against export heavyweights Australia and the US. Will we see the host nation regain its title as world's biggest exporter LNG, as projected for 2022 by S&P Global Commodity Insights? And how will market entrant Germany get on as it seeks to secure LNG cargoes to replace Russian gas at almost any cost? The fixture list throws up some intriguing match-ups. US vs Wales/England (Nov. 21, Nov. 25) England and Wales both face the US in the group stages in very uneven LNG match-ups. The US has doubled LNG exports since the last World Cup in 2018 and could repeat the feat to 2026 when it will co-host the tournament with Canada and Mexico. Once the Freeport terminal in Texas resumes operations later this year, the US is set to become the world’s biggest exporter. US LNG supplies to the UK have risen strongly so far in 2022, with volumes totaling 7.9 Bcm of gas equivalent in the first nine months, according to S&P Global data. US exports to the UK stood at 4 Bcm for the whole of 2021. The UK has large LNG import capacity at its three operational terminals – two in Wales (Dragon and South Hook) and one in England (Isle of Grain) – totaling more than 35 million mt/year. According to a media report, a new 10 Bcm US-UK LNG import deal could be announced. France vs Australia (Nov. 22) Defending champion and Europe’s biggest LNG importer France kicks off against Australia, which is at risk of losing its LNG export crown to Qatar. Australia led global LNG exports in 2020 and 2021, but has no significant expansion planned beyond the under-construction Pluto T2 terminal. France, meanwhile, faces its own energy crisis this winter due to record-low nuclear availability requiring power imports from LNG-rich markets like Spain and England. Its demand for LNG is forecast to fall once Germany’s LNG infrastructure is up and running and France’s 56-strong reactor fleet returns to normal operation. Japan vs Germany (Nov. 23) LNG import champ Japan faces LNG newcomer Germany in its opening match. Germany’s Uniper and Japan's largest power generator JERA already agreed to find ways to optimize their LNG portfolios, including the swapping of destination-free cargoes. This could potentially see Uniper’s Australian LNG cargoes diverted to Japan and JERA's US LNG supply to Europe to reduce transport days, costs and risks. JERA has already diverted six cargoes to Europe at the request of the Japanese government, the EU and the US. However, there is no new commitment by Japan to divert surplus LNG to Europe for this winter. Meanwhile, Germany is on track to commission a first floating LNG terminal before the final in Qatar after Berlin chartered five FSRUs for deployment on its northern coast. RWE has secured its first LNG cargo for December delivery from the UAE. No Qatar LNG supply deal has been finalized yet, but Berlin has been vocal on its aim to secure long-term supply arrangements with the Qataris. In total, Germany plans to have some 30 Bcm/year of LNG gas import capacity infrastructure ready next summer, replacing over half its Russian gas. Netherlands vs Qatar (Nov. 29) Gas pioneer Netherlands is to phase out production at Europe’s biggest gas field Groningen, while Qatar plans a major expansion of its offshore North Field to feed more mega LNG trains. Related infographic: Where do Qatar's LNG exports go? The Groningen closure will make the Netherlands more dependent on LNG via Rotterdam’s Gate terminal and the new Eemshaven import terminal, which the Dutch developed in record time. Off the pitch, a key development is a plan by the European Commission for a new gas price assessment including LNG as it sees the TTF, trading at a premium to LNG prices, no longer reflecting Europe’s new gas supply landscape. On the pitch, the Netherlands and neighbor Belgium are among talented teams that have never won a World Cup. South Korea vs Portugal (Dec. 2) South Korea, the K in Platts JKM, again qualified and hopes to repeat its success when it co-hosted the 2002 World Cup with Japan. Last time, South Korea’s shock win over Germany saw the world champs exit in the group stages. This time South Korea faces Portugal, one of Europe’s best supplied markets with its own LNG terminal, sharing a common market with Iberian neighbor Spain and its six LNG terminals. Knock-out stages Things get more serious in Qatar with the knock-out stages from Dec. 3. Like football, LNG is a global game where South American giants Brazil and Argentina expected to play key roles. Brazil, which has not won a World Cup since 2002, has become a major importer of LNG. Argentina’s last World Cup success dates back to 1986, but it hopes to reverse not only its football fortunes but also LNG flows, swinging from imports to exports via its Vaca Muerta field – potentially the second largest shale gas resource on earth. Two huge players, meanwhile, are missing in Qatar: China and Russia. Russia is the world’s fourth biggest LNG exporter, while China was the biggest importer in 2021. China’s drop in demand due to COVID-19 restrictions is the biggest overall change to the 2022 global LNG supply-demand balance, according to S&P Global. Competition away from the pitch Europe’s new hunger for LNG has sharply lifted global LNG prices and prices in Asia, traditionally the premium market, against those in Europe. European gas prices soared to all-time highs this summer, but a mild start to winter eased price pressure amid reports of LNG tankers queuing up on Europe’s shores. The lack of Russian pipeline gas, however, means Europe still faces a deficit going into 2023. The DES Northwest Europe LNG marker, assessed by Platts, part of S&P Global, for December is at $26.24/MMBtu, while Europe's gas benchmark TTF maintains a premium. The Platts JKM for December was last assessed at $28.27/MMBtu Nov. 18, S&P Global pricing data showed. With Takeo Kumagai, Claudia Carpenter, Stuart Elliot, James Tavener, Lawrence Toye and Harry Weber

Asian LNG importers are experiencing high inventory levels and tank-tops, which refers to storage terminals reaching full capacity, on the back of a mild start to the winter season that has slowed downstream natural gas consumption, according to several traders and market participants. The tank-top situation is expected to be bearish for spot LNG prices and is resulting in LNG importers taking measures to delay shipments by extending the waiting time for LNG carriers or asking suppliers to push delivery dates further out until terminal capacity is available. Asian spot LNG prices have eased from recent highs when it was trading at over $50/MMBtu in August. Platts assessed JKM for December at $24.330/MMBtu Nov. 10. While it is still elevated, it's dropping to a range where more importers could be incentivized to boost procurement. South Korea's key LNG importer Kogas is facing tank-top, market sources in the country said. If the weather remains warmer than usual in Asia and demand in Europe does not pick up soon, the vessel congestions could get worse, they added. Some entities may need to defer the delivery window or rent other terminals to receive the term volumes in the event of a tank-top, a South Korean market participant said. At least one Japanese power utility said that it has chosen a later delivery window for its December delivery cargo because there's a high chance that high inventory levels will continue into next month. A second Japanese utility confirmed that its supplier had agreed to its request to delay the delivery of its cargo until December as downstream demand has not been that strong so far. Japanese month-end LNG stocks have been hovering above both year-on-year and the five-year average since May, according to the Ministry of Economy, Trade and Industry and latest data showed that Japanese power utilities had 2.53 million mt LNG stock at the end of October, compared with 2.66 million mt at the end of September. "We have a cargo discharging in late December, but a buyer is requesting to have it delivered in January instead," a Japanese trader said separately. China and India China used to be the last resort for most Asian LNG buyers who purchased surplus LNG cargoes ahead of the peak winter season, to sell cargoes at discount, but this outlet may not emerge this year as demand has been sluggish. On Nov. 9, PipeChina posted data showing spare LNG receiving capacity at its seven affiliated LNG terminals for December would be 6.5% higher than previously estimated, indicating underutilized terminal capacity. While lower Chinese LNG imports have been due to weak downstream demand and regulated gas prices, traders said December could see high inventory levels as well. "We are facing tanktop now because of some issues at Tianjin terminal, and cannot afford to add any more injections to our underground storage tanks. We want to issue a sell tender or offer cargoes but are concerned that weather remains mild and deferred cargoes arrive earlier [when storage is not available]," Chinese traders said. Other Chinese traders indicated that natural gas storage tanks in central and north China were high, but not to the extent of tank top. "Weather is warmer, so domestic downstream consumption is quite slow, but it could be colder towards late winter. A lot more cargoes being offered for the prompt in December could be floated into January," one of the traders said. Meanwhile, even in India, which has seen a sharp drop in spot LNG imports this year, importers have reported a tank-top situation at some terminals. Petronet LNG's Dahej LNG terminal and Shell's Hazira terminal are requesting end users to evacuate gas at a higher rate and postpone cargo deliveries by 3-4 days, Indian traders said.

The concern over Malaysia LNG supply has receded among buyers in Japan amid emerging prospects of receiving alternative supplies from the seller following the recent force majeure on some of its supply, sources familiar with the matter told S&P Global Commodity Insights Oct. 27. The change in sentiment comes as a number of Japanese buyers of Malaysia LNG have recently been informed by the seller about the likelihood of ensuring their scheduled supply including from other sources in coming months, sources said. "Now I am hearing that all affected [cargoes] from the force majeure will likely be supplied until March," one source said. "This was an unexpected move by Malaysia." However, some Japanese off takers noted that there is uncertainty over the size of alternative cargo deliveries beyond January. Multiple Japanese buyers of Malaysia LNG have recently been told that they now expect to receive scheduled shipments in the coming months, including alternative supplies from the Petronas Floating LNG Satu, PFLNG Dua plants and the Gladstone LNG in Australia, sources said. "It remains unclear to see whether those cargoes will actually be supplied but at least we have been told about such talks," one source said. Petronas did not immediately respond to an Oct. 27 request for comment on the supply impact to Japanese buyers from Malaysia LNG's recent force majeure. The news of the Japanese buyers' increased prospects of receiving alternative cargoes to Malaysia LNG supply comes to light after at least a few Japanese buyers have already purchased their supplementary cargoes recently. In a signal of ensuring alternative supply to affected Japanese buyers of Malaysia LNG, one Japanese buyer was receiving a cargo from Petronas following changes in its annual delivery program, said a source familiar with the matter. The seller's move to ensure supply affected by the Malaysia LNG force majeure is decreasing some Japanese buyers' appetite for spot LNG procurements during the upcoming winter demand months, sources said. "This appears to be Petronas' maximizing efforts in its response to a request from the Japanese government seeking alternative supplies to Malaysia LNG," said Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National Corp. "Should such moves continue, Japanese end users' needs to procure incremental LNG from other sources will be reduced to make up a supply shortfall from Malaysia LNG following its declaration of force majeure, with the approach of winter heating demand season," Nogami said. Requested substitution The Japanese government has demanded Malaysia's Petronas secure alternative LNG, including from its other supply points, to cover the loss from its recent force majeure on gas supply to MLNG Dua, Minister of Economy, Trade and Industry Yasutoshi Nishimura said Oct. 11. "We have made a strong request to the company [Petronas] from the government for a speedy restoration as well as to minimize the impact from the supply suspension through securing alternative supply for Japan," Nishimura told a press conference in Tokyo. "We are requesting [the company] to minimize the impact by securing alternative supply from its several LNG supply points," Nishimura said. Malaysia LNG has declared force majeure on supply to several customers, including Japanese buyers, following the suspension of supply from the Sabah-Sarawak Gas Pipeline, a spokesperson for Mitsubishi, which has stakes in Malaysia LNG's Satu, Dua, and Tiga projects, said Oct. 6. Malaysia's Petronas declared force majeure on gas supply to MLNG Dua due to a pipeline leak, impacting gas supply to Petronas LNG Complex in Bintulu and subsequently impacting delivery commitments to some LNG buyers, the national oil company said in a statement on Oct. 8. Petronas said the force majeure was due to a pipeline leak caused by soil movement in the vicinity of the exploration block KP201, at the SGP, that occurred on Sept. 21. The bulk of Malaysia's LNG cargoes are exported from the Bintulu LNG complex comprising three trains each at MLNG and MLNG Dua, two trains at MLNG Tiga, and a ninth train operated by Petronas LNG 9. Bintulu LNG boasts nearly 30 million mt/year of capacity, which is among the largest LNG export capacities of its kind at a singular location. The PFLNG Satu has a 1.2 million mt/year capacity at the Kebabangan Gas Field, 90km offshore Kota Kinabalu, Sabah, with the PFLNG Dua at a 1.5 million mt/year capacity at the Rotan Gas Field, 140km offshore Kota Kinabalu. Petronas also has a 27.5% stake in the Gladstone LNG project in Australia. Malaysia was Japan's second-largest LNG supplier in 2021, accounting for roughly 14% of the country's total imports of 74.32 million mt, according to the finance ministry data.

LNG markets are in the spotlight after the Russia-Ukraine war, with Asia and Europe competing for limited cargoes. A harsher than expected winter may trigger unprecedented changes in LNG trade flows and force many Asian governments to implement contingency measures to tackle power outages. In a discussion ahead of the Asia LNG & Hydrogen Gas Markets Conference , S&P Global Commodity Insights' experts Surabhi Sahu , Kenneth Foo and Jeffrey Moore talk about Asia’s LNG winter procurement, benchmark market activity and strategies like fuel switching to mitigate shortages. Subscribe to Platts Dimensions Pro for access to assessments and premium content covering Platts LNG Japan/Korea DES Spot Cargo ( AAOVQ00 ), LNG West India Marker ( AARXS00 ) and many more. More listening options: No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).