The views expressed are the author’s own, and do not reflect any position on behalf of his former company.
2018 will start by a North Hemisphere winter with Brent oil prices closer to $60-65 rather than $50-55 and a sustained demand for LNG from China and possibly Southern Europe in case of recurrent unavailability of French nuclear power at a time when expected big supply plants are facing delays. This should lead to a sustained level for both LT contract prices (oil) and subsequent “spot” price levels (supply-demand) before the real wave of additional LNG materializes.
New LNG projects are coming to fruition at last
During the course of 2018, the supply side will witness the expected additions from the following new liquefaction plants: Yamal LNG from Russia, Inpex’s Ichtys and Shell’s Prelude in Australia, Perenco’s FLNG in Cameroon and several US export plants from Cove Point (Maryland), Freeport (Texas), and Cheniere’s Sabine Pass (Louisiana) and Corpus Christi (Texas) to Elba Island (Georgia):
Other “additional” LNG should emerge from places where existing facilities recoup their 100% availability ratio, like Oman LNG, Atlantic LNG. More extra quantities will emerge from PNG LNG where Exxon is marketing the excess production, and Indonesia where the non-renewed LT contracts with traditional buyers will lead to a flurry of “spot” export sales for the domestic market cannot absorb such available LNG before 2020.
US exports’ off-takers to make choices
Other than the actual additional LNG quantities, which are substantial in the region of 10% of current global LNG market, what will be worth noting is the way US exports’ off-takers like GAIL from India, Tokyo Gas, JERA, Osaka Gas and Kansai Electric from Japan will market such additional volumes of LNG, not necessarily unloaded in their respective traditional and genuine markets but in other places including the European Sink . To that extent, Europe will be scrutinized and reloads from Western LNG terminals will not be limited to Yamal quantities by far.
The number of tenders and swap deals will increase as a result of the surge of such new volumes implying a greater need for a more transparent pricing mechanism. With the opening of new demand from Pakistan, Bahrain and Bangladesh- which could be partly compensated by a decrease in Egyptian demand, end of year- a flurry of deals through pure traders will develop making the search for risk management a reality.(Worth noting will be the balance of influence between pure traders and the traditional “aggregators”).
As the Northern Spring and Summer arrive the “spot” price level should relax whatever the price of oil which could be ranged between $45 and $65 with subsequent LT Asian contract price between $6.8 and $9.7. Argentina and Brazil will take advantage of lower levels to attract volumes in the Southern Cone while Indian buyers will take advantage of such prices.
Buyers and Sellers prepare for 2022+
On the front of new liquefaction plants’ FID, 2018 could witness a timid renaissance after two years of indigence. Some projects in the US are expected to take FID like Golden Pass, Rio Grande, Driftwood and Delfin LNG while Canadian projects could be still in the starting block. But 2018 could be the year for the long-expected Mozambique FID’s too.
Negotiations for renewals of big LT contracts in Japan will continue in 2018 which will give us an idea of the future trends in committing from traditional utilities which are tempted by trading activities outside their domestic turf due to their former commitment for US LNG exports.
Share your insights and join the conversation: Do you agree with Mr Broggi - Is there another country the industry should watch for 2018? Leave your comments below.
Keen to share your insights at Gastech 2018? Submit your abstract on a variety of topics, including "Consumer Spotlights: India and China's Expanding Gas and LNG Markets" to speak at this year's world-renowned conference.
Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.