May 06 2022
The current European energy crisis is a "stark reminder" of the vital role of LNG in ensuring energy security and economic stability, Jean Abiteboul, the president of industry group GIIGNL, said May 5.
In the latest GIIGNL annual report, Abiteboul said the group would monitor the "paradigm shift" in the sector over the coming year as governments and public institutions become increasingly involved in the LNG business.
Europe in particular is looking to LNG to replace Russian gas imports and is rushing to install new LNG import infrastructure.
Abiteboul said that additional investments "in all stages of the gas and LNG supply chains" would need to be made to meet expected demand growth
According to the report from GIIGNL -- which represents the world's LNG importers and import infrastructure operators -- global LNG imports in 2021 rose 4.5% year on year to 372.3 million mt.
Growth was driven by economic recovery in China, rising gas demand for power generation in South Korea, lower-than-expected pipeline supplies to Europe and reduced availability of hydropower in Brazil.
The increase in global LNG demand came despite spot LNG prices moving higher throughout 2021.
The benchmark Platts JKM spot Asian LNG front-month price averaged $18.60/MMBtu last year, compared with an average of just $4.39/MMBtu in 2020.
Spot LNG prices have remained at sustained highs in 2022, with the JKM last assessed May 5 at $23.70/MMBtu.
Of the total imports last year, 136.3 million mt -- or 37% of the total -- was imported on a spot or short-term basis, short-term meaning under a contract of four years or less.
"True" spot volumes -- those delivered within three months of the transaction date -- accounted for 31% of total imports last year, or 116 million mt, GIIGNL said.
Re-exports of LNG increased to 3.5 million mt, compared with 2.6 million mt in 2020.
GIIGNL said that LNG demand would remain buoyant in the future due to the "much-needed" substitution of coal and polluting liquid fuels as well as the geographical mismatch between gas production and consumption regions.
Asia, GIIGNL said, remained the main demand center for LNG, growing by 7.1% to 272.5 million mt in 2021, with China overtaking Japan as the world's top LNG importing country. Chinese imports rose by 15% to 79.3 million mt last year.
India, however, experienced the greatest decline in LNG imports, falling 9.8% due to the high spot LNG prices and the increase in domestic gas production.
Global regasification capacity rose by 46 million mt/year last year, reaching 993 million mt/year, GIIGNL said.
Four new large-scale terminals were brought into operation in Brazil, Croatia, Indonesia and Kuwait, while five expansion programs were completed -- four in China and one in Japan.
Croatia last year became the 44th LNG importing market, while at least six new markets could start importing in 2022 -- El Salvador, Ghana, Hong Kong, the Philippines, Senegal and Vietnam, the industry group said.
While demand growth remained strong, GIIGNL said LNG production had been struggling to keep pace, which contributed to the spot LNG price strength.
Some 7.4 million mt/year of new capacity came onstream, of which 5 million mt/year in the US. "Global LNG exports were affected by unscheduled maintenance and shortfalls in feedgas," it said.
Increased output from the US, Egypt, Malaysia and Russia was partly offset by lower exports from Angola, Indonesia, Nigeria, Norway, Peru and Trinidad.
Only two final investment decisions on new liquefaction capacity were taken in 2021 -- the North Field expansion project in Qatar and Pluto LNG Train 2 in Australia.
By 2025, more than 120 million mt/year of new liquefaction capacity is planned to progressively come online, "which should partly relieve tensions in the LNG market," GIIGNL said.
The LNG market has also been marked by a revival in long-term contracts given the ongoing supply uncertainties, mostly around risk to Russian pipeline deliveries.
"In an environment marked by geopolitical tensions, risks of energy shortages and price volatility, last year saw a strong return of long-term contracts," GIIGNL said.
"Asian buyers, notably Chinese NOCs and independent importers, played a leading role in securing new term purchases from the US, Qatar and Russia," it said.
GIIGNL also said 68 new LNG vessels were delivered during the year, with the LNG shipping fleet reaching 700 vessels, including 48 FSRUs and 31 LNG bunkering vessels, representing a 9% increase in cargo capacity.
Freight rates remained strong throughout the year and the orderbook at year-end was "remarkably high", with 196 units to be delivered by 2025, it said.