LNG trade falls for first time in 30 years
After an uninterrupted three-decade expansion, global trade of liquefied natural gas suffered its first ever annual drop last year, according to a closely watched report.
The rare drop in LNG global trade marks the first brake in the expansion of the industry since 1980 and comes even as more countries join the market, either as exporters, such as Peru and Yemen, or importers, such as Kuwait and Malaysia.
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The ‘BP Statistical Review of World Energy 2013’ report said that trade in LNG – supercooled natural gas turned into liquid so it can be shipped – declined 0.9 per cent in 2012 even as Japan bought record amounts of the commodity to offset lower nuclear power generation on the back of the Fukushima accident.
The contraction follows several years of strong annual growth. BG Group, the London-listed natural gas company, estimates that global LNG trade fell to 239m tonnes last year, down 3m tonnes from 242m tonnes in 2011. In contrast, trade expanded strongly in 2009 and 2010, with 40m and 19m tonnes of extra flows, respectively, as Qatar expanded production and importers bought.
LNG trade is suffering because of lower demand in Europe amid the economic crisis and a shift to burn cheaper coal at power plants as US coal exports boom, and lower supply after a mix of project delays, outages and maintenance.
But the 2012 drop is likely to be a blip as more countries join the ranks of LNG exporters and importers. Almost 30 countries import LNG, but the number is set to increase as nations including Pakistan, El Salvador, Uruguay, South Africa, Bahrain, Croatia, the Philippines, Jamaica and Lithuania draw plans to build import terminals. Indonesia, once the world’s largest LNG exporter, has approved plans to begin importing to meet rising demand.
The list of exporters is also growing, notably with the approval of several LNG export plants in the US, the start this summer of the first terminal in Angola after more than a year of delays, and longer term project facilities in Israel, Cyprus and east Africa, including in Mozambique and Tanzania.
BG Group anticipates that global LNG trade will grow in 2013 by a relatively small 5.4m tonnes, supported by exports from Angola and new terminals in Australia, and imports from Singapore, Malaysia and a floating facility in offshore Israel.
LNG prices set an average record in 2012 as the market remained tightly balanced and oil costs, which help to set prices in Asia, were high. BP estimates the average price for Japan LNG last year at $16.76 per million British thermal units, up from $14.73 per mBtu in 2011. A decade ago, in 2002, LNG prices were at $4.27 per mBtu.
The Commodities Note is a regular online commentary on the industry from the Financial Times
