Page 4 - GLNG Week 14

GLNG COMMENTARY GLNG
Unprecedented challenges after a boom year
The LNG market grew by 13% in 2019, according to a new report, but now faces unprecedented challenges as suppliers look ahead to the coming months
PERFORMANCE
WHAT:
Global LNG production grew to record levels last year but is now set to slow.
WHY:
The market had already become oversupplied before the COVID-19 pandemic began hitting demand.
WHAT NEXT:
A report by industry group GIIGNL says the industry will have to find a new balance as it moves forward.
THE global LNG market is experiencing a rever- sal of fortunes after it grew to record levels last year. In part, LNG has become a victim of its own success, as new liquefaction capacity coming online in 2019 has led to an oversupplied mar- ket. At the same time, though, the coronavirus (COVID-19) pandemic has created an unprece- dented drop-off in demand that is going to affect how the industry evolves in the short term, and potentially the medium term.
The growth witnessed last year is illustrated in a new annual report published by industry group GIIGNL this week. The group found that the LNG market expanded by 13% or 40.9mn tonnes in 2019, reaching 354.7mn tonnes. Last year marked an all-time record increase in annual LNG production, GIIGNL noted, par- ticularly thanks to new capacity coming online in the US, Russia and Australia.
In total, the group estimates that over the last three years, the LNG industry has added more than 80mn tonnes per year (tpy) of new liquefac- tion capacity – with more set to come online by 2025. Some of this new capacity was also sanc- tioned in the past year, and GIIGNL noted that
2019 was a record year for new final investment decisions (FIDs), which equated to 71mn tpy globally by the end of the year.
Trends
GIIGNL’s report identifies a number of major trends playing out across the LNG industry – some of which were previously well-known and some of which are newly emerging. Among the newer trends is a shift in the pattern of LNG flows, which has resulted in increasingly higher volumes going to Europe. Meanwhile, Northeast Asian demand growth has moderated, which the report has attributed to an economic slowdown, milder weather and competition from nuclear and coal-fired power generation.
Indeed, LNG demand was found to have declined in Japan and South Korea – tradition- ally the leading importers of the super-chilled fuel. This was a result of the energy mix in both countries changing in favour of more nuclear generation and renewables.
China, on the other hand, contributed to the boost in regional LNG demand, despite a slow- down in coal-to-gas switching and the impact of
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w w w . N E W S B A S E . c o m Week 14 10•April•2020