​After a record year, LNG industry heads for slump in deliveries

Russia's Yamal LNG plant Image: Yamal LNG

Shipments of liquefied natural gas will decline from record levels as global economic growth weakens and energy consumers work through a glut, an industry group said.

LNG imports surged 13 per cent to 354.7 million tons after production surged from new plants in the U.S., Russia and Australia, the French-based group known as GIIGNL said in an annual report. More projects to manufacture the fuel were approved in 2019, guaranteeing supply will keep rising.

“2019 was a record year for the LNG industry, both in terms of imported volumes and new investments decisions taken,” said Jean-Marie Dauger, president of GIIGNL. “In the near term, the disruptive impact of the COVID-19 outbreak on the economies of importing countries will exert downward pressure on LNG demand in an already oversupplied market.”

The virus has slashed energy use as vast swaths of the economy were forced to close. That prompted some importers to reduce LNG shipments or defer them for later. A new wave of LNG projects has been cast in doubt by plunging gas prices.

The group hasn’t yet quantified the impact it expects on the industry. The following three charts show highlights of the industry’s expansion last year.

Import dynamics

While the number of importing countries remained unchanged at 42, Europe stood out with a 76 per cent increase in net purchases from a year earlier, helping absorb the glut.

Asia remained the leading consuming region, though its share of total imports fell to 69 per cent from 76 per cent in 2018. Shipments into all countries except the established markets of Japan, South Korea and Taiwan rose, though China’s growth slowed to 14 per cent from 38 per cent a year earlier.

Export moves

The U.S. was the fastest-growing producer and Europe became its main market, taking 38 per cent of its exports. Russia expanded its output with the Yamal LNG plant.

The chart below shows the U.S. moving to become the third-biggest exporter, while Qatar maintained its crown with a slight edge over Australia.

Trading and shipping

U.S. supply helped further develop LNG trade. The nation became the biggest supplier of flexible fuel, accounting for a fifth of spot and short-term volumes.

Contracts with duration of less than four years accounted for 34% of total imports, up from 32 per cent in 2018, GIIGNL said. Actual spot volumes, delivered within three months from a deal date, also marginally increased.

There were 601 LNG tankers as of the end of 2019, a net increase of 38 from a year earlier. The average spot charter rate for a 160,000 cubic meter vessel fell more than 20 per cent in 2019 to $69,337 a day.

© 2020 Bloomberg L.P.

Dear user, please be aware that we use cookies to help users navigate our website content and to help us understand how we can improve the user experience. If you have ideas for how we can improve our services, we’d love to hear from you. Click here to email us. By continuing to browse you agree to our use of cookies. Please see our Privacy & Cookie Usage Policy to learn more.