Page 11 - NorthAmOil Week 02 2021

NorthAmOil COMMENTARY NorthAmOil

A positive start to 2021 for LNG

After a tough 2020, this year has started relatively positively for the LNG industry

PERFORMANCE THE LNG industry took a battering in 2020, plants around the world are also thought to
but ended the year and started 2021 on a rela- have played a part.
WHAT: tively positive note. This is in large part owing This combination of factors is reported to
The LNG industry has to higher LNG prices, with demand enjoying its have sent buyers of LNG scrambling to secure
seen a relatively positive seasonal winter boost thanks to cold weather. supplies, which is helping to maintain upward
start to 2021. And despite new lockdowns related to the coro- pressure on prices. Indeed, Reuters reported
navirus (COVID-19) pandemic in various parts last week that Japan’s JERA – the world’s largest
WHY: of the world, there are hopes that the virus could buyer of LNG – was having to operate some of
Higher prices for the fuel soon be contained as several new vaccines are its gas-fired power plants at lower rates owing to
have helped improve the rolled out. lower stockpiles of LNG.
outlook for the industry. These factors are all feeding into short-term “We are trying our best to secure LNG supply
bullishness, but there are also indications of through our long-term contracts and the spot
WHAT NEXT: longer-term confidence, at least among some market which trades supply to be delivered in
Certain developers are developers. And this cautious optimism could about 1.5-2 months,” a JERA spokesman told
demonstrating more ultimately lead to more final investment deci- the news service. He added that his company
bullishness on long-term sions (FIDs) being taken in 2021, even though was also seeking cargoes for quicker delivery
investments. further volatility cannot be ruled out. and running its coal plants at full capacity.
JERA is not the only Japanese company faced
On the up with this situation, with Reuters also citing a
Just nine months ago, in late April, north-east Kansai Electric Power spokesman as saying his
Asian spot prices fell to record lows of around company was seeing declining LNG inventories,
$1.675 per million British thermal units ($46.33 forcing lower run rates at some of its gas-fired
per 1,000 cubic metres). However, last week the power plants.
Japan-Korea Marker (JKM) benchmark set a Demand for LNG from China and South
new record of $21.45 per mmBtu ($593.31 per Korea in particular is also reported to be rising.
1,000 cubic metres). This week, it rose further Indeed, Reuters reported separately last week
still to a new all-time high of above $30 per that China’s monthly imports of LNG had hit
mmBtu ($829.80 per 1,000 cubic metres). a record high of over 9mn tonnes in December,
This has been attributed to a number of according to shiptracking data from Refinitiv
factors, including strong consumer demand, Eikon. This figure means China overtook Japan
colder than expected winter weather and a as the world’s top importer of the super-chilled
shortage of prompt LNG supplies and spot fuel for a second straight month in December.
tankers. Recent outages at various liquefaction The data also showed that Japan was set to

Week 02 14•January•2021 www. NEWSBASE .com P11