ERRA Webinar - Impact of COVID-19 on the energy sector
Impact on LNG Markets
Tony Regan
10 February 2021
Relatively little impact from the COVID-19 pandemic
Supply – declined from a peak in Q1 20 but this due to a series of unscheduled shutdowns and cancellation of US
cargoes rather than conscious decision by producers to reduce exports. Full year exports were about 5% higher than
2019.
Demand – weakened in Europe but elsewhere low prices stimulated new demand. Full year consumption about 3% higher
than for 2019.
Blame the weather – a cold snap in NE Asia in Q4 had far more impact on the Asian market than the COVID pandemic
Pricing – extreme volatility in Asian spot prices. JKM hit record low in April 2020 and a record high in Jan 2021.
Term prices less volatile due early recovery of crude prices from Q2 lows.
Contracting – relatively little contracting activity in 2020 – little evidence of a COVID impact on contract terms
Financing – two significant PF deals successfully agreed (Nigeria & Mocambique) but too early to assess Lenders
attitudes to future projects
Project sanctioning – only one project sanctioned in 2020 (Energia Costa Azul) rather than the twenty two forecast (see
slide 15)
COVID -19 had greatest impact here. It burst the potential capacity overhang bubble’. Developers forced to delay and
reconfigure proposed projects. Few likely to come back to the table for FID in 2021 – particularly as Qatar maintaining a
huge expansion programme
Project cancellation - low prices triggered massive write-downs in Q3 and some tweaking of portfolios – but no plant
shutdowns or project cancellation
Tomorrow got closer – no expectation of business as normal post pandemic. Major players announce an acceleration of
their energy transition
Executive Summary – the take-aways from 2020
LNG Market Update January 2021
LNG Supply Demand 2020
LNG Market Update
R/P = 98
R/P = 265 R/P = 41
Asia
260 mill tnNorth America2 mill tn
Caribb, Cent & S. America11.5 mill tn
LNG demand (million tonnes)
Asia Pacific
Middle East7 mill tn
Liquefaction capacity (million tonnes)
Demand 365 million tonnes
Active liquefaction capacity 426 mill tonnes (Dec 2020 )
Europe83 mill tn
Europe
Still very much an Asian business
Asia - 70% of demand
January 2021
Africa
USA
R/P = 98
R/P = 265 R/P = 41Europe
83 mill tn
North America
1.7 mill tn
Cent & S. America
11.5 mill tn
LNG demand (million tonnes)
Middle East
7 mill tn
Global LNG Demand 365 million tonnes
Global LNG Demand 2020
Japan
75 mill tnChina
69 mill tnKorea
41 mill tn
Taiwan
19 mill tnIndia
27 mill tn
LNG Market Update January 2021
Global LNG Demand
January 2021LNG Market Update
0
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Pct
Demand Growth rate
R/P = 98
R/P = 265 R/P = 41
Australia87 mill tn
Norway
Algeria
Nigeria
Eq. Guinea
Trinidad
Peru
Oman
Qatar 78mill tn
Yemen
Abu Dhabi
Brunei
MalaysiaIndonesia
Egypt
Russia
Global LNG liquefaction capacity 2020
Angola
PNG
USA68 mill tn
Russia
Global liquefaction capacity 426 million tonnes
(excl small scale LNG)
Cameroun
Argentina
Liquefaction plants
Global liquefaction capacity (Dec 2020)
LNG Market Update January 2021
Production 2016-2020
0
5
10
15
20
25
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
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Australia Qatar USAXLS: lng production 2015-19 (Dec 2019).xlsx\Sheet1
LNG Market Update January 2021
LNG Production 2020
4 3.7 3.5 3.7
S America
5.2 4.6 4.9 5.2
Europe
24.3 22.9 24 23.1
Middle East
37.634.3 34.2
37.85
Asia
14.210
7.3
15
N America
10.7 10.3 9.9 10.1
Africa
Q2 2020
Million tonnes
96.0
85.8
95.6
Q1 2020
Q4 2020
Q2 2020 84.4
LNG Market Update January 2021
LNG Consumption 2020
2.4 2.9 3.2 3
S America
26.6 2316 17.35
Europe
0.5 2.4 3.1 2.8
Middle East
67.7
56.962.5
73.09
Asia
0.8 0.3 0.3 0.3
N America
Q2 2020
Million tonnes
98.0
85.5
96.5
Q1 2020
Q4 2020
Q3 2020 85.5
LNG Production 2014-2020
LNG Market Update January 2021
Supply ran ahead of demand in 2019. Peaked in Q1 20, fell in Q2 and Q3 but only slightly
less than Q2/3 2019
In 2020 producers did not shut in capacity. Lower exports mainly due to unscheduled
shutdowns and cancellation of US cargoes
0
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40
60
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120
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ion
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N. America S. America Europe Asia Middle East Africa
XLS: lng production 2015-19 (Dec 2019).xlsx\Sheet1
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Mili
on to
nnes
N. America S. America Europe Asia Middle East Africa
XLS: lng production 2015-19 (Dec 2019).xlsx\Sheet1
LNG Demand 2018-2020
LNG Market Update January 2021
Limited impact of COVID -19. European gas demand impacted, lower LNG imports Q3 20
Asian demand (2020) up 5.6% compared with 2019
2020 global demand was 365 million tonnes, 2.9% higher than 2019
0
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120
Q1 18 Q2 8 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 -20 Q4 20
Mill
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C&S Amer N Amer Europe Asia Mid East
0
20
40
60
80
100
120
Q1 18 Q2 8 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 -20 Q4 20
C&S Amer N Amer Europe Asia Mid East
LNG Demand
LNG Market Update January 2021
0
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C&S Amer N. Amer Europe Asia Mid East
Mill
ion
tonn
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Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20
LNG imports by quarter
COVID has had little impact, Europe down in Q2-4 20 but full year up 3.1%
Asia – weak Q2 but full year up 5.6%
Full year 2020 was higher than 2019 (+10 mill tns)
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40
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120
Q1 18 Q2 8 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20
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C&S Amer N Amer Europe Asia Mid East
LNG imports 2019 v 2020
2019 2020 % increase
N America 1.3 1.7 31.0
C&S America 14.7 11.5 -22.0
Europe 85.6 83.0 -3.1
Asia 246.3 260.2 5.6
Middle East 7.0 8.8 25.7
354.9 365.1 2.9
US LNG ramp up LNG liquefaction start ups 2020
New LNG Supply 2020
LNG Market Update January 2021
Project Country mtpa Start up Shareholders
Freeport T2 USA 5 2020 Freeport LNG
Cameron LNG T2 USA 4.6 2020 Sempra, Total, Mitsubishi, Mitsui
Freeport T3 USA 5 2020 Freeport LNG
Cameron LNG T3 USA 4.6 2020 Sempra, Total, Mitsubishi, Mitsui
Elba Island T6 USA 0.25 2020 Kinder Morgan EIG Energy
Elba island T7-10 USA 1 2020 Kinder Morgan EIG Energy
20.45
Liquefaction projects under construction
LNG Market Update January 2021
Project Country mtpa FID Start Up Shareholders
Portovaya Russia 1.5 2020 Gazprom
PFLNG Dua Malaysia 1.5 2014 Q3 20 Petronas,
Yamal T4 Russia 1.0 2017 Q4 20 Novatek 50.1%, Total 20%, CNPC 20%, China Silk Road Fund 9.9%
Tangguh T3 Indonesia 3.8 2016 Q3 21 BP 40.22%, MI Berau 16.3%, CNOOC 13.9%, Nippon Oil 12.23%, KG Berau 8.56%, Others 8.79%
Coral Sul FLNG Mocambique 3.4 2017 2022 ENI, CNPC, ENH, KOGAS, Galp Energia
Corpus Christie T3 USA 4.5 2018 Q2 21 Cheniere Energy
Tortue FLNG Mauritania/Senegal 2.5 2018 2022 BP, KosmosCalcasieu Pass USA 10.8 2019 2022 Venture Global
Sabine Pass T6 USA 4.5 2019 Q4 22 Cheniere Energy
Mocambique LNG Mocambique 12.9 2019 2023 Anadarko, Bharat, ENH, Mitsui, PTT, Oil India, ONGC Videsh
Arctic LNG T1 Russia 6.6 2019 2023 Novatek 60%, Total 10%, CNPC 10%, CNOOC 10%, Mitsui JOGMEC 10%
Arctic LNG T2 Russia 6.6 2019 2024 Novatek 60%, Total 10%, CNPC 10%, CNOOC 10%, Mitsui JOGMEC 10%
Nigeria LNG T7 Nigeria 7.6 2019 2024 NNPC 49%, Shell 25.6%, Total 15%, ENI 10.4%
Golden Pass T1 USA 6.0 2019 2024 Qatar Petroleum 70%, ExxonMobil 30%
LNG Canada Canada 14.0 2018 2025 Shell 40%, Petronas 25%, Mitsubishi 15%, KOGAS 5%, PetroChina 15%
Golden Pass T2/3 USA 12.0 2019 2025 Qatar Petroleum 70%, ExxonMobil 30%
Arctic LNG Russia T3 6.6 2019 2026 Novatek 60%, Total 10%, CNPC 10%, CNOOC 10%, Mitsui JOGMEC 10%
105 mtpa currently under construction and coming
on stream over next five years
R/P = 98
R/P = 265 R/P = 41
Australia87 mill tn
Norway
Algeria
Nigeria
Eq. Guinea
Trinidad
Peru
Oman
Qatar78 mill tonnes
Yemen
Abu Dhabi
Brunei
MalaysiaIndonesia
Egypt
Russia
Angola
PNG
USA105 mill tn
Russia49 mill tn
Global liquefaction capacity 536 million tonnes
(Existing plus under construction)
Cameroun
Argentina
Liquefaction plants
Global liquefaction capacity 2025
Mocambique16.3 mill tn
Canada 14 mill tn
Senegal/Mau
Largest liquefaction capacity
Capacity doubles 2018-2025
January 2021
▪ Weaker demand growth means supply
surplus could continue until 2026
▪ Short about 40 million tonnes by 2030
▪ Pressure removed for prompt
sanctioning of new capacity
Supply/Demand balance
LNG Market Update January 2021
Supply from existing plus under construction
0
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2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Mill
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es
N. America C. Amer/Caribb S. America Europe
Asia Middle East Africa Supply
Market could be tighter than implied above if demand growth rates increase and there are
supply interruptions (non scheduled shutdowns)
Projects proposing to take FID in 2020/2021
LNG Market Update January 2021
Project Country Mill tn FID New FID Start up ShareholdersDelfin FLNG USA 13 2020 2023 Delfin Midstream,
Golboro Canada 10 2020 2021 2023 Pieride EnergyPlaquemines LA USA 10.0 2020 2024 Venture Global
Driftwood USA 27.6 2020 2021 2024 Telurian, Total
Obsky Russia 4.8 2020 2021 2024 Novatek
Energia Costa Azul Mexico 2.5 2020 Q4 2020 2024 Sempra (Sanctioned Nov 2020)
Port Arthur USA 13.5 2020 2021 2024 Sempra
Corpus Christie Phase 3 USA 10 2020 2024 CheniereRio Grande LNG USA 27.0 2020 2021 2024 Next DecadeFreeport T4 USA 4.5 2020 2021 2024 Freeport LNG
Sakhalin T3 Russia 4.8 2020 2024 Gazprom, Shell, Mitsui, Mitsubishi
Far East LNG Russia 6.2 2021 2024 Rosneft, ExxonMobil, ITOCHU, JAPEX, MarubeniBrownsville TX USA 4.0 2020 2021 2024 Texas LNG
Qatar exp T1-4 Qatar 32 2020 2021 2024 Qatar Petroleum
Vystock expansion Russia 1.2 2021 2024 Novatek
Vladivostok LNG Russia 1.5 2021 2024 Gazprom, Mitsui
Woodfibre LNG Canada 2.1 2020 2021 2024 Pacific Oil & Gas
Ust Luga Russia 13.0 2021 2024 Gazprom, RusGazDobycha, Mitsui
Brownsville TX USA 6.0 2020 Delayed 2024 Annova LNG (Excelon)
Commonwealth LNG USA 8.4 2021 Delayed 2024 Commonwealth LNG
Lake Charles USA 16.5 2020 2021 2025 Energy Transfer
Pluto T2 Australia 4.9 2020 2021 2025 Woodside
Rovuma LNG Mocambique 15.2 2020 2021 2025 ExxonMobil, ENI, KOGAS, CNPC
Great Tortue Phase 2 Mauritania/Senegal 3.8 2020 2022 2025 BP
Great Tortue Phase 3 Mauritania/Senegal 3.8 2020 2023 2026 BP
PNG LNG T3 PNG 4.0 2020 2021 2027 ExxonMobil, Oil Search
Papua LNG PNG 5.4 2020 2021 2027 Total
Qatar exp II Qatar 16.0 2021 2021 2027 Qatar Petroleum
271.7
▪ 22 projects aimed to take
FID in 2020
▪ One project sanctioned in
2020
▪ All others have slipped
into 2021 or later
▪ Many unable to give new
FID estimate
▪ Ranked by proposed start
up date (unrealistic)
rather than viability or
credibility
▪ No projects cancelled
(yet) but many in limbo
▪ Only 2 or 3 might take FID
in 2021
The project bubble has burst
Many project were struggling before the pandemic struck – unable to attract customers
Oil v Gas pricing
LNG Market Update January 2021
0
2
4
6
8
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14
16
US
$/M
MB
TU
Brent UK NBP JKM
XLS: LNG Metrics (Updated 16 Nov 2020).xlsx\Summary
Gas – lower for longer
JKM hits record low in April 2020 and record high in Jan 2021
Widening of oil:gas differential
Oil crashes but V shape recovery
Pricing
LNG Market Update January 2021
0
2
4
6
8
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-16
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$/M
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JKM NBP Henry Hub Term @13% slope
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-20
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$/M
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tu
JKM Term @13% slope
XLS: LNG Metrics (Updated 16 Nov 2020).xlsx\Summary
Spot versus term
▪ Henry Hub trading in a narrow band
▪ JKM & NBP much more volatile
▪ Spot prices (JKM & NBP) collapsed 2019 due
over supply
▪ Term prices (oil linked) remained high
▪ Term prices double spot in Q1 20
▪ Term prices half spot prices Q4 20
Spot versus term
▪ Reasonably close correlation 2016-2018
▪ Wide differential in 2019
▪ Pressure to move away from oil linked pricing
formulas
▪ Spot significantly above term in Q4 20
Pricing – LNG versus fuel oil and diesel
LNG Market Update January 2021
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9
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0
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US
$/M
MB
tu
180 HSFO Diesel LNG (JKM)
XLS: LNG Metrics (Updated 16 Nov 2020).xlsx\Summary
Asia
0
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18
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8
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9
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-20
US
$/M
MB
tu
1% fuel oil FOB NW Europe Diesel LNG (NBP)
XLS: LNG Metrics (Updated 16 Nov 2020).xlsx\Summary
Europe
Gas cheaper than oil
LNG cheaper than petroleum products
LNG the cheaper marine fuel
LNG cheaper “at the pump” than diesel
LNG substantially cheaper than diesel for industry
US Exports
LNG Market Update January 2021
0
2
4
6
8
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12
Jan-
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May
-15
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-15
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16
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-16
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-19
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-20
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Jan-
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US
$ pe
r M
MB
tu
US Exports to Europe
HH 15% Liquefaction Freight NBP
0
2
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12
Jan-
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-15
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US
$ pe
r M
MB
tu
US Exports to Asia
HH 15% Liquefaction Freight JKM
US exports “out of the money” since early 2019
Significant deterioration in 2020
Buyers cancelled cargoes – about 175 cargoes cancelled between April & November
Economics look better Q4 20 – no cargoes cancelled for Dec
Liquefaction project financing
LNG Market Update January 2021
0
5
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30
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45
50
2015 2016 2017 2018 2019 2020
Mill
ion
dolla
rd
XLS: LNG Database Feb 20.xlsx\Under construction
Money remains available for projects with strong fundamentals
US$14.9 Bn in project finance loans for Mocambique LNG and US$3 bn for
Nigeria LNG Train 7
Refinancing – Ichthys LNG, Freeport LNG and Cheniere (Sabine Pass & Corpus
Christie)
▪ Limited impact from COVID-19
▪ LNG remains the fastest growing hydrocarbon market
▪ A major threat (massive overcapacity) has been removed
▪ Low prices triggered huge write-downs which triggered corporate re-organisations
and a faster transition to net zero
▪ Some MNC’s seeking to divest some assets
https://www.nexanteca.com/blog/202010/impact-covid-19-lng-mnc%E2%80%99s-supply-
strategy
▪ Gas’s position as the ideal transition fuel enhanced
▪ Environmental & economic drivers have enhanced LNG as a diesel replacement
▪ Market growing – Vietnam and Philippines set to become LNG importers
▪ Development of downstream LNG markets is bringing in new players, new capital
▪ USA on course to become the largest producer (liquefaction capacity) by 2024
overtaking Australia – but Qatar has plans to recover the crown
▪ Growth all in Asia – becoming even more Asia oriented
Where are we now?
LNG Market Update January 2021
For something completely different:
LNG Market Update January 2021
For any of these blogs go to: https://www.nexanteca.com/blog
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