95/05851 The LNG industry in 1993

Abstract

The most significant event to mark the LNG trade in 2011 has been the catastrophe that hit Japan in March, in view of both its short-term effect on shifting flows and its long-term demand prospects of LNG as a source for gas-fired power generation. The role of LNG as a flexible and secure energy source as well as the prompt response to provide back-up through additional supplies and cargo diversions to compensate for the sudden loss of nuclear capacity in Japan - with sellers exercising due price restraint in view of the human tragedy - has been a credit to the industry. The increase in production capacity in 2009 and 2010, in particular from Qatar, had permitted the necessary buffer to cope much better with the demand surge than during past disruptions (such as the aftermath of the Chuetsu earthquake in late 2007). Undoubtedly, the marked shift over the last decade in the industry's prevailing business model towards global trade, destination flexibility and portfolio play has also facilitated the rapid response. As the total volume of LNG trade is very much determined by the availability of supply, 2011 has seen a growth of 9.4% over 2010, mainly as a result of the full availability of the six Qatar mega-trains over the past year. On the demand side the two traditional basins have shown a very contrasting trend: 15% higher LNG off-take in Asia (the five major markets all increasing between 37.4% and 8.9%), versus a 1.7% decrease in the Atlantic Basin. Cargo diversions and an increasing number of reloads have boosted the exports from the Atlantic Basin to Asia in 2011 to more than 14 million tons (equivalent to more than 200 large size cargoes). Remarkable is also the fast growth in new markets in Latin America and in the Middle East - albeit from a small base - with counter-seasonal but varying demand, offering attractive arbitrage opportunities to portfolio play. Not surprising then that 2011 has seen another hike in spot and short-term trade, not just in absolute terms but also as a percentage of total trade (50% over 2010 ). The outlook for LNG is strong and its global demand prospects further enhanced in the wake of the nuclear issues, the emergence of new buyers and the decline of indigenous reserves of gas exporters. This has underpinned a growing investment confidence which in turn resulted in 5 FIDs (Final Investment Decisions) in 2011 for a total liquefaction capacity of 27 million tons p.a. An event of great commercial significance in this regard would undoubtedly be one, or more FID's in North America in the near future.