LNG market: 3Q 2023
Summary
LNG supplies decreased slightly in the third quarter of 2023 - shipments (export and re-export) of LNG decreased from 104.0 million tons in the 2nd quarter to 101.8 million tons of LNG in the 3rd quarter, unloading (import and cabotage) decreased from 103.2 to 97.0 million tons . The key factors are the seasonal decline in current demand for gas and electricity in the world as a whole, the high residual level of residual gas reserves in the European gas storage facilities based on the results of the gas winter of 2022-2023, and the rapid accumulation of reserves for the upcoming gas winter.
The top three exports (USA, Qatar, Australia) and imports (China, Japan, Korea) did not change compared to the previous quarter.
Extreme volatility in gas prices in 2021-2022, high spot gas prices, and the planned commissioning of liquidation plants in the US and Qatar continue to encourage LNG importers to enter into long-term agreements for the supply of LNG. The key directions for additional contracts remain Qatar - China and the USA - China.
Spot LNG prices in the 3rd quarter remained at the level of the 2nd quarter with a slight upward trend since July, which corresponds to forecasts and typical practice of the gas summer. The fullness of UGS in Europe and the absence of major accidents and new political restrictions calmed the market and stabilized prices. The arrival of autumn and the expected shortage of gas and gas carriers' capacities to cover a possible gas shortage in the event of a cold winter accelerated the growth of gas futures quotes. The key factors for monitoring in Q4 are temperatures in Europe and East Asia, attempted attacks on Russia's Black Sea underwater gas pipelines, strikes at Australian LNG plants. However, high price volatility is not expected in the 4th quarter - this is the fate of the 1st quarter of next year.
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Global LNG exports in the 3rd quarter of 2023, including re-exports, amounted to 101.8 million tons, which is 2.2 million tons less than in the previous quarter.
United States has confirmed its status as the number 1 LNG exporter. Qatar is number 2. Australia is 3rd. Russia is on the 4th place far beyond top 3. Malaysia closes top 5.
USA
LNG exports from the United States decreased slightly in the 3rd quarter after the all-time record of the 2nd quarter and amounted to 22.3 million tons. The United States will become the largest exporter in the world in 2023 and will remain so for several years. Key strategic growth driver is monetizing of the conflict in Ukraine and the blow up of Nord Stream pipelines.
Also, during the quarter under review, the United States unloaded 437 thousand tons of LNG in its own ports to meet domestic demand.
Qatar
LNG exports by state-owned QatarEnergy LNG (formerly QatarGas) from its two plants Qatargas (the largest in the world) and RasGas continue to remain stable and amounted to 20.2 million tons in Q3, which is close to 100% utilization of plant capacity. A key share of the profits goes to the state-owned QatarEnergy (thanks to which Qatar is one of the richest states in the world), as well as to American and Japanese oil and gas companies.
Qatar's main efforts are focused on the construction and contracting of future supplies for the expansion of the QatarGas plant with a total capacity of 49 million tons of LNG. The launch of 6 lines will be carried out sequentially in 2025-2027. This construction is so large that only new additional capacities would take the honorable 4th place in the ranking of exporting countries.
Australia
Australian LNG exports continued to decline for the second quarter in a row and amounted to 18.0 million tons in Q3. The discussed strikes of workers at Australian LNG plants in fact did not affect the actual level of shipments at these plants.
During the quarter under review, Australia unloaded 150 thousand tons of LNG in its own ports to meet domestic demand.
Russia
LNG export volumes in the 3rd quarter of 2023 decreased to 6.5 million tons from 6.9 million tons. At the same time, Russia remained fourth in the world in this quarter. Shipments are carried out from Sabetta (Yamal LNG plant, with an annual capacity of 19 million tons) and Prigorodnoye (Sakhalin-2 plant, with an annual capacity of 11.3 million tons), as well as Vysotsk (Cryogaz-Vysotsk plant, with an annual capacity of 650 thousand tons).
Malaysia
Malaysian exports continued to decline for the fourth quarter in a row and amounted to 6.4 million tons of LNG in Q3. The decline in exports for the year amounted to a significant 2 million tons. The main LNG exporter is the Bintulu MLNG plant.
Malaysia also imported 689 thousand tons of LNG in the quarter under review to meet domestic demand.
Algeria
Algeria, a pioneer in the LNG industry, exported 3.3 million tons of LNG from its two LNG plants Arzew and Skikda in Q3 2023, which is almost at the level of the previous quarter. The main export of natural gas is carried out through pipelines to Italy and Spain.
Algeria also imported 69 thousand tons of LNG during the quarter under review.
Indonesia
Indonesia continued the negative trend of declining LNG exports - in Q3, exports amounted to 3.2 million tons.
During the quarter under review, Indonesia unloaded 231 thousand tons of LNG in its own ports to meet domestic demand. This indicator is steadily increasing.
Oman
Oman increased exports from the country's only LNG plant Qalhat from 2.5 million tons in Q2 to 3.0 million tons in Q3.
Nigeria
Nigeria has reduced the volume of LNG exports from its only LNG plant - in Q3 exports amounted to 2.9 million tons, which is 554 thousand tons lower than it was in the previous quarter. The plant is controlled for the most part by European oil and gas companies (Shell, TotalEnergy and Eni), which are trying to replace Russian pipeline gas with African resources, which they voluntarily refused.
Papua New Guinea
Papua New Guinea's LNG exports from its only LNG plant continue to be steady and amounted to 2.0 million tons of LNG in the quarter under review, which is close to 100% of the nominal capacity of the plant.
Trinidad and Tobago
LNG exports from the country's only LNG plant Atlantic LNG, owned mostly by European oil and gas companies, amounted to 1.8 million tons in Q3, which is 380 thousand tons less than in Q2. LNG output is significantly lower than the total nominal capacity of 4 lines of the plant, amounting to 4 million tons per quarter.
UAE
Export from the only ADGAS LNG plant in the UAE. in the 3rd quarter it amounted to 1.1 million tons, which is 250 thousand tons less than in the previous quarter. This corresponds to 76% utilization of the nominal capacity of the plant.
Norway
Exports of Norway's only LNG plant Hammerfest LNG Snohvit amounted to 1.0 million tons in Q3, rising from the level of 737 thousand tons a quarter earlier. The main export of gas from Norway is carried out through pipelines and exceeds LNG exports by two orders of magnitude.
All other countries exported less than 1 million tons of LNG in the 3rd quarter of 2023.
Discharge
Global LNG imports in the third quarter of 2023 amounted to 97 million tons, which is 6.2 million tons less than in the previous quarter. This indicator takes into account the import of re-exported LNG, but does not take into account the accumulation of LNG “on the water”.
East Asian countries - China, Japan and South Korea - still top the ranking of LNG importers.
China
China's LNG import by China in 3 amounted to 16.3 million tons of LNG, which is the level of the average of the first two quarters of this year.
LNG re-export in the 3rd quarter amounted to 724 thousand tons. China is trying to monetize the existing long-term contracts for the supply of LNG at oil prices and the supply of pipeline gas.
Details of LNG imports by China are available at the link.
Japan
Japan's LNG imports in the 3rd quarter of 2023 amounted to 16.1 million tons of LNG, which is more than in the 2nd quarter (14.5 million tons), but less than in the 1st quarter (19.1 million tons of LNG).
The re-export of LNG by Japan in the 3rd quarter amounted to 182 thousand tons.
South Korea
South Korea imported 9.6 million tons of LNG, which is the minimum for the last 4 quarters.
The re-export of LNG by South Korea in the 3rd quarter amounted to 273 thousand tons.
France
France was the largest LNG importing country in Europe at the end of the 3rd quarter with an indicator of 4.5 million tons, which, however, is significantly less than 6.4 million tons in the 2nd quarter.
France will further increase its import capacity by the end of this year - the Cape Ann floating storage facility will arrive in Le Havre in the north of the country.
The re-export of LNG by France in the 3rd quarter amounted to 238 thousand tons.
India
India imported 6.0 million tons of LNG in the 3rd quarter of 2023, which is less than the last quarter - 6.4 million tons. The Indian energy sector is dominated by coal, where Coal of India reigns supreme. However, the desire to improve the local environment, operational problems with the operation of coal-fired thermal power plants and the supply of coal, the growing population encourage the government to develop gas generation and LNG imports. At the same time, there is an eye on the price of imported resources.
Taiwan (Province of China)
Taiwan imported 5.5 million tons, which is at the level of the average in recent quarters.
Spain
Spain imported 4.2 million tons in the 3rd quarter of the 23rd year, which is 1.2 million tons compared to the previous quarter.
The re-export of LNG by Spain in the 3rd quarter amounted to 435 thousand tons.
Netherlands
The Netherlands imported 3.9 million tons of LNG in the 3rd quarter, which is less than in the 2nd quarter - 4.9 million tons. LNG re-exports decreased from 111 thousand tons to 27 in the quarter under review.
Kuwait
Kuwait imported 2.7 million tons of LNG in the 3rd quarter, which is more than the indicator of the second quarter - 1.9 million tons of LNG. Kuwait is the largest importer of all among the countries of the Middle East.
Thailand
Thailand's imports amounted to 2.3 million tons of LNG in the quarter under review, at the level of the second quarter.
Singapore
Singapore imported 2.3 million tons in Q3, which is significantly more than in Q2 - 1.5 million tons of LNG.
Re-export of LNG by Singapore in the 3rd quarter amounted to 993 thousand tons of LNG, which is significantly more than in the 2nd quarter - 602 thousand tons. Singapore is a leading energy hub for transshipment of oil, petroleum products and LNG.
Belgium
Belgium imported 2.3 million tons of LNG in the 3rd quarter of 2023, which is less than the indicator of the second quarter - 3.5 million tons. Belgium is a hub for trading both LNG and regasified natural gas. The re-export of LNG by Belgium in the 3rd quarter amounted to 973 thousand tons of LNG. Therefore, the demand for LNG imports in the first place is characterized by price dynamics and arbitrage, and not by demand directly from the local market.
Italy
Italy imported 2.0 million tons of LNG in the 3rd quarter, which is 1.0 million tons less than in the 2nd quarter.
Also in the 3rd quarter there were cases of re-export of LNG with a total volume of 78 thousand tons.
Pakistan
This populous Asian country (224 million people) imported 1.7 million tons of LNG, which corresponds to the average level of imports in previous quarters. Per capita energy consumption is lagging behind at a very low level and has a high potential for growth. But the poverty of the population and high risks for infrastructure projects hinder the growth of LNG imports.
Egypt
Egypt resumed LNG imports in Q3 - 1.1 million tons of LNG. At the same time, Egypt's LNG exports are declining and amounted to 519 thousand tons in the 3rd quarter in total for its two LNG plants Damietta and Idku (17% capacity utilization of the plants). Thus, Egypt turned from an exporter to a net importer in Q3.
Poland
Poland imported 1.1 million tons of LNG in the 3rd quarter through its only Svinoujscie regasification terminal, which is 14% less than a quarter earlier. Poland's energy sector remains predominantly coal-fired, natural gas is used for heating, shunting gas generation and as raw materials for chemical companies. Seasonal low demand for heating and electricity, full occupancy of small UGS, as well as stagnation of production of chemical companies reduced import volumes. It is reasonable to expect a seasonal increase in demand for LNG imports in the 4th quarter.
All other countries imported less than 1 million tons of LNG in the 3rd quarter of 2023. Among them, it is worth noting Great Britain and Germany. The UK reduced the volume of LNG imports from 4.9 million tons of LNG in the 2nd quarter to 0.9 million tons in the 3rd quarter, which is natural for it - the low summer level of demand is covered by its own production, and low UGS capacities do not allow storing gas for the winter. Germany, having sharply broken into the number of the largest importers in 2023, reduced imports to 885 thousand tons of LNG in the 3rd quarter compared to 1140 thousand tons a quarter earlier for similar reasons - the achievement of its maximum capacity by continental UGS. Detailed export statistics by country are available at the link.
Price dynamics
Russia
Domestic gas prices in Russia are still among the lowest in the world, but they do not affect LNG exports from Russia - the systems of gas production, production and export of LNG by Yamal LNG and Sakhalin Energy plants are technologically independent of Gazprom's Unified pipeline Network. Only the medium-tonnage plants of Novatek Cryogaz-Vysotsk and Gazprom Portovaya consume mains gas.
EU
Gas prices in the 3rd quarter of 2023 turned from an annual downward trend and began to grow.
Exchange prices for gas at the TTF hub (Netherlands) in the last 12 months, dollars per thousand cubic meters
Despite the significant decline in gas prices after the energy crisis in Asia in 2021 and Europe in 2022, they are still above long-term averages. Gas in Europe and in the world, on average, is still very expensive.
Exchange prices for gas at the TTF hub (Netherlands) in 2010-2023, dollars per thousand cubic meters
Asia
Averaged crude oil quotes are the basis of formulas for long-term LNG supply contracts. Crude oil prices in terms of energy units of gas is usually a resistance level for the spot gas market. When gas reaches this level, some buyers may switch to burning oil instead of gas, reducing demand. In Asia, three-quarters of LNG supplies are carried out under long-term contracts and depend on oil quotes. Additionally, price fluctuations are smoothed out by averaging the prices of all gas resources imported by China. Thus, East Asian countries are the least sensitive to price fluctuations in the spot gas market.
Brent crude oil quotes in 2021-2023, dollars per barrel
USA
American gas prices (Henry Hub) remained low during the 3rd quarter, which still keeps the margin of LNG supplies from the United States to Europe at a high level.
A brief forecast of the LNG market in the 4th quarter of 2023 - the 1st quarter of 2024 (gas winter)
The volume of supplies in the gas winter of 2023-2024 is expected to reach 220 million tons, which is 9 million tons more than in the previous gas winter.
China and the EU will be the main drivers of LNG demand growth during the gas winter, other Asian countries will also significantly increase LNG demand during the gas winter. The decline in demand in the expected scenario is expected only in South Korea.
Dynamics of LNG demand in the baseline scenario during the gas winter of 2023/24 compared to the gas winter of 2022/23, million tons of LNG per gas winter, million tons in total per gas winter.
Key factors that may lead to an increase in gas demand relative to the baseline scenario:
Low temperatures relative to the long-term norm in East Asia and Europe are key importers of LNG.
Possible attacks and political restrictions on the remaining Russian pipeline exports to Europe (transit through Ukraine) and Turkey (Blue and South Stream) and, accordingly, the growing demand from Europe and Turkey for LNG imports. However, in European countries, the load of regasification terminals is already predicted to be close to 100%.
Key factors that may lead to a decrease in gas demand relative to the baseline scenario:
The temperature is high relative to the long-term norm in East Asia and Europe.
The active growth of Russian gas supplies to Central Asia and transit through it to China and, as a result, a decrease in China's demand for LNG imports.
The United States will make a key contribution to the growth of LNG supply - 7 million additional tons of LNG.
Dynamics of LNG supply in the baseline scenario during the gas winter of 2023/24 compared to the gas winter of 2022/23, million tons of LNG per gas winter, million tons in total per gas winter.
Factors that can reduce the supply of LNG on the world market:
Postponement of the commissioning of LNG plants in the USA
Breakdowns and weather restrictions at US LNG plants
Strikes at Australian LNG plants
Possible future political restrictions on the supply of Russian LNG by Western countries.
Notes:
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