IGU Annual Report 2019_23 loresfinal.pdf

2019 WORLD LNG REPORT Sponsored byThe trademarks and registered trademarks used to designate certain products and services in this presentation are owned by their respective companies. TABLE OF CONTENTS Message from the President of the International Gas Union 3 2. State of the LNG Industry 4 3. LNG Trade 8 4. Liquefaction Plants 26 5. LNG Carriers 48 6. LNG Receiving Terminals 64 7. The LNG Industry in Years Ahead 82 8. Special Topic Small Scale and LNG Bunkering 86 9. Special Topic Floating LNG 90 10. References Used in the 2019 Edition 94 Appendices 96 13 President’s Message Joe M. Kang President of the International Gas Union Yours sincerely, Dear colleagues, It is my honour to have been named President of the International Gas Union IGU for the 2018-2021 triennium. I look forward to building on the great work that has been done under previous Presidencies, and to intensifying collective efforts to advance the role of liquefied natural gas LNG in a sustainable energy future. The IGU is pleased to present the 2019 World LNG Report at LNG19 in Shanghai, highlighting physical and market developments in the LNG industry around the world. The report demonstrates that 2018 was another strong year for LNG by a range of metrics. For the fifth consecutive year, global LNG trade set a record, reaching 316.5 million tonnes MT. This marks an increase of 28.2 MT 9.8 year-on-year from 2017. Specifically, non-long-term LNG trade reached 99 MT in 2018, an increase of 14.5 MT year-on-year YOY and accounted for 31 of total gross LNG trade. This substantial expansion can be attributed to increasingly flexible LNG supply. Most LNG-related prices around the world followed an upward trend in 2018, influenced by rising oil prices and strong LNG demand in Asia. China and South Korea continued to lead demand growth driven by policies to improve air quality. Global liquefaction build-out was driven largely by capacity additions in Australia, the United States, and Russia. Between January 2018 and February 2019, 36.2 MTPA of liquefaction capacity was added. In an engineering milestone, the first project utilizing a floating liquefaction conversion, Kribi FLNG in Cameroon, was brought online. 2018 marked a positive turn for project developers. Four projects took FIDs in 2018 Corpus Christi LNG T3, LNG Canada, Greater Tortue FLNG and Tango FLNG, with a number of significant projects expected to reach FIDs in 2019. The overall global LNG fleet grew by 11.5 in 2018, and spot charter rates soared. As 51.8 MTPA of new liquefaction capacity is expected to start up in 2019, the shipping market may become tighter with only 43 newbuild deliveries targeted in the year. Global regasification capacity has continued to increase, rising to 824 MTPA by February 2019. Of the under- construction capacity, 36.4 MTPA of much needed capacity is anticipated online during 2019, much of it in India and China. Both markets, however, have struggled to develop related infrastructure at the same pace, causing challenges for gas to flow to demand centres. The future looks bright for LNG, and we expect 2019 to be a benchmark year for the industry, with growth in trade and investment. A vibrant LNG industry, and the increased use of natural gas in general, brings great benefits to society. It improves security of electricity supply and offers opportunities to meet emissions targets and facilitate vital access to energy in diverse markets around the globe. It also has a significant impact on improving quality of life by reducing air pollution, especially as population growth continues. A combination of natural gas and renewables will allow the developing world to meet the Paris commitments affordably, without sacrificing economic growth. Our aim at the IGU is to demonstrate that natural gas has a vital environmental and economic role to play in the sustainable energy future, and that the industry is open to co- operate with the global community towards achieving this future. MESSAGE FROM THE PRESIDENT OF THE INTERNATIONAL GAS UNION CONTACT YOUR SHELL LNG EXPERT sdsi- SHELL CARDISSA FUELLING GAGARIN PROSPECT, THE WORLD’S FIRST CRUDE OIL TANKER TO BE POWERED BY LNG CLEANER ENERGY SOLUTIONS IN A CHANGING ENVIRONMENT CLEANER BURNING. Shell LNG can contribute to lower local exhaust emissions and global greenhouse gas emissions. It also supports shipping in meeting current and expected IMO MARPOL Annex VI Sulphur and NOx limits. COST COMPETITIVE. Shell LNG is cost competitive with alternative compliant fuel solutions. LNG AVAILABILITY. Shell offers a worldwide LNG marine bunker network and continues to develop key supply locations to serve customers who have committed to LNG fuel as their bunker fuel. LNG EXPERIENCE although Northeast Asian spot prices fell from an average 9.88 per million British thermal units MMBtu in January 2018 to a low of 7.20/MMBtu in May Global liquefaction capacity remains in the extended phase of build-out that began in 2016, driven largely by capacity additions in Australia, the United States, and Russia. Between January 2018 and February 2019, 36.2 million tonnes per annum MTPA of liquefaction capacity was added, though 5.6 MTPA was assumed to be decommissioned. In an engineering first, the first project utilizing a floating liquefaction conversion, Kribi FLNG in Cameroon, was brought online. The market where the most liquefaction capacity was added during 2018 was Russia, with 11 MTPA of capacity reaching commercial operations across Yamal LNG T1-2, while Yamal online, more than offsetting lower production from several legacy projects. Australia led all exporters in incremental growth 12.2 MT, supported by the new Wheatstone LNG and Ichthys LNG projects. The United States was again the second-largest driver of LNG supply growth, adding 8.2 MT as trains at Sabine Pass LNG operated for the full year and Cove Point LNG came online. Asia remained the driver of international LNG demand growth, as China broke its own record for incremental LNG by importing an additional 15.8 MT in 2018. This was again driven by the strong enforcement of environmental policies designed to promote coal-to-gas switching as well as continued economic growth. Other key markets that drove global LNG growth included South Korea, India, and Pakistan, which took in a combined 12.8 MT of incremental imports. The Pacific Basin continues to be the key driver of trade growth, with intra-Pacific trade flows reaching a record 134.2 MT, supported by Australian production and Chinese demand. 2018, this was 36 higher than their level in May 2017. While this resurgence is notable, spot prices showed some signs of weakness toward the end of 2018, as a thus far mild winter in Asia and Europe, coupled with the continued ramp-up of new supply, started to place downward pressure on spot prices, with average Northeast Asian spot prices falling by 18 between November 2018 and January 2019, landing at 9.36/MMBtu. European spot prices climbed for most of the year, though a large influx of LNG in the fourth quarter of the year began to place some downward pressure on market prices like the United Kingdom’s National Balancing Point NBP, compounded by the fall in oil prices. After hitting a peak of 9.54/MMBtu in September 2018 – over 50 higher than its level in the previous year – NBP began to decline in October and had reached 7.44/MMBtu by January 2019. As new liquefaction capacity is added in 2019, prices could fall further, particularly during traditional seasonal lulls in demand in the spring and summer months. LNG T3 reached commercial operations in February 2019. After Russia, the most capacity was added in Australia, where two trains at Wheatstone LNG reached commercial operations in 2018. By mid-2019, the final projects in Australia’s recent build-out, Ichthys LNG and Prelude FLNG, are expected to have reached full commercial operations a combined 12.5 MTPA. Still, the United States is poised to surpass them both in incremental liquefaction capacity as it brings online over 29 MTPA of liquefaction capacity during 2019. As of February 2019, 101.3 MTPA of liquefaction capacity was under-construction or sanctioned. With increasing optimism for LNG import needs during the 2020s, 21.5 MTPA of liquefaction capacity reached a final investment decision FID in 2018. This includes 14 MTPA of capacity at LNG Canada T1-2 and 4.5 MTPA at Corpus Christ LNG T3. Most recently, FID was reached on the 15.6 MTPA Golden Pass LNG project in February 2019, the largest single FID since 16.5 MTPA of capacity at Yamal LNG T1-3 was sanctioned in December 2013. Non-long-term LNG trade reached 99 MT in 2018, an increase of 14.5 MT YOY, and accounted for 31 of total gross LNG trade. This marks the second year in a row that the non-long-term market has substantially expanded, which can be attributed to growing LNG supply and demand elasticity. As with total global trade, short-term supply and demand growth was strongest in the Pacific Basin. New liquefaction capacity added during the year was contracted mostly to aggregators with diverse LNG trading portfolios. Particularly notable was the increase in short-term supply from Australia, which had the largest increase in non-long- term exports 6.4 MT despite holding long-term contracts directly with many end- markets. The largest growth in non-long-term imports was in China, which took in an additional 10 MT YOY from the short-term market as buyers relied heavily on the spot market to satisfy their strong demand growth. 2. State of the LNG Industry 1 Barcelona LNG Terminal - Courtesy of Enagas6 7 State of the LNG Industry 2While Malta began LNG imports in 2017, its regasification terminal is small-scale at 0.4 MTPA of capacity, and thus is not included in regasification totals. 3This 80.1 MTPA is included in the global regasification capacity total of 824 MTPA quoted above. 4Data for pipeline trade and indigenous gas production comes from the BP Statistical Review. Data for 2018 is not yet available. New Liquefaction Proposals 843 MTPA Proposed liquefaction capacity, February 2019 After a challenging environment for FIDs in recent years, 2018 marked a positive turn for project developers. Many projects that remained under development during these years Regasification Terminals Shipping Fleet Floating Regasification LNG in the global gas market Global regasification capacity has continued to increase, rising to 824 MTPA by February 2019. Unlike in 2017, regasification capacity additions did not outpace increases in liquefaction capacity and global trade, with a total 6.2 MTPA of net regasification capacity added during 2018 22.8 MTPA of new additions minus 16.6 MTPA from floating storage and regasification unit FSRU departures over the course of the year. Much of this capacity was added in China 10.6 MTPA, where suppliers sought to increase regasification The global LNG shipping fleet consisted of 525 vessels at the end of 2018, including conventional vessels and ships in preparation for the 2018-2019 winter after the market had higher than expected demand in the 2017-2018 winter. Two regasification terminals were added in new markets, Panama and Bangladesh, bringing the number of global LNG markets to 36 2 . Along with the rapid increase in liquefaction capacity expected through the end of the decade, additional regasification capacity is expected to be constructed. Additions will be both in mature markets that are experiencing increased gas demand, as well as in new markets where governments have made developing gas demand a priority. There is an additional 129.7 MTPA of regasification capacity under construction as of February 2019. This includes capacity across several new markets, such as Bahrain, the Philippines, Russia Kaliningrad, and Ghana. Of under-construction capacity, 36.4 MTPA of capacity is anticipated online during 2019, much of it in India and China. The single- largest under-construction project is in Kuwait, with 11.3 MTPA of regasification capacity expected online in 2021. acting as FSRUs and floating storage units. The overall global LNG fleet grew by 11.5 in 2018, as 53 carriers were added to the fleet, including four FSRUs. Relative to the previous year, this was a more balanced addition relative to liquefaction capacity, and charter rates for modern fuel-efficient tonnage started the year strong owing to an increase in winter LNG demand in China. After dipping in the spring and summer months to an average of 56,000/ day, there was a significant uptick in charter rates owing to the build-up of winter LNG inventories in Northeast Asian markets, with rates soaring to an average 150,000/day in Q4 2018. However, this was short-lived, and spot charter rates had already returned to around 74,000/day by January 2019. Even with the decline from end-2018, it is unlikely that charter rates will return to their 2017 levels as new liquefaction capacity continues to be added to the market, which will help keep rates higher. Despite the start-up of two offshore projects during 2018, total regasification capacity at operational offshore terminals decreased to 80.1 MTPA. This was due to four FSRUs departing from existing offshore terminals in Brazil, Egypt, the United Natural gas accounts for just under a quarter of global energy demand, of which 10.7 is supplied as LNG. LNG supply previously grew faster than any 824 MTPA Global nominal regasification capacity, February 2019 525 Vessels LNG fleet, end-2018 80.1 MTPA 3 FSRU capacity, February 2019 10.7 of Supply Share of LNG in global gas supply in 2017 4 Gemmata - Courtesy of Shell could now be posed to reach FID in 2019. As of February 2019, the total liquefaction capacity of proposed projects reached 845 MTPA, with the majority in the United States and Canada. Beyond those two markets, projects based on massive resource bases have continued to sign offtake agreements or attract new partners which will help reach FID, as is the case in Mozambique and Russia. Qatar has also proposed expanding capacity in the 2020s to ensure it is the largest liquefaction capacity holder in the world. With currently under-construction projects expected to contribute to strong global supply during the 2019-2022 period, many developers are targeting the mid-2020s as the next period in which to bring new liquefaction capacity online. Despite increased optimism in future LNG demand growth, much proposed liquefaction capacity will be challenged by fierce competition for LNG buyers, project financing, and available engineering, procurement, and construction EPC contractors. Arab Emirates, and Argentina a reduction of 16.6 MTPA. Charters of two FSRUs ended as well, in Kuwait and at Tianjin, China. However, the terminal in the er is likely to receive a replacement vessel, and the latter has already received a replacement FSRU, which boosted r