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Six new records set by LNG sector in 2019
Last year, 2019, was a record-shattering year for the LNG industry, according to a new report by IHS Markit. The market analyst suggests that the numerous records are indicative of a sustained growth trend, with global LNG capacity expected to increase by more than 50% – from 283mn t/y in 2015 to 437mn t/y in 2020.
‘The ongoing pace of new investment is especially noteworthy considering a market context of weak global prices,’ says Michael Stoppard, Chief Strategist, Global Gas at IHS Markit. ‘Not only did LNG grow at an unprecedented rate in 2019, but the industry also laid the foundations for continued strong growth into the middle of the decade.’
Key records set by the LNG industry in 2019 were:
Record levels of new investment. Final investment decisions (FIDs) for liquefaction projects were made at an extraordinary level of 70.4mn t/y – 40% higher than the previous all-time high reached in 2005 (50.4mn t/y). The US, Russia and Mozambique each set individual highs for levels of annual FIDs.
Record levels of FIDs without long-term contracts. Some liquefaction FIDs were made either without long-term contracts or were underpinned by sales to affiliates. Such ‘affiliate marketing’ reached a record 43mn t/y. Affiliate marketing at this scale has not been common in the LNG industry. Historically, most projects have instead secured long-term offtake contracts prior to committing to investment. By choosing to proceed without third-party contracts, projects can be developed more rapidly, notes IHS.
Record liquefaction project start-ups. New liquefaction start-ups amounted to 38.8mn t/y of capacity, narrowly surpassing the previous high set in 2009. Recent start-ups were concentrated in the US, Australia and Russia. The pace of project starts is expected to slow in 2020 to 28.6mn t/y of capacity. The US will continue to dominate in this area as it mostly completes its current wave of projects.
New global supply leader. Australia surpassed Qatar as the top LNG exporter for 2019, reaching 80.2mn tonnes relative to 72.5mn tonnes in 2018. Australia is expected to extend its lead in 2020 and retain its position as top exporter until 2023, when the US is projected to become the largest LNG producer.
Record European imports. Europe set records for imports each single month as well as for the year as whole. Annual net imports totalled 87.2mn tonnes which exceeded the previous record of 65.5mn tonnes set in 2011. Imports are expected to remain strong in 2020 due to additional new liquefaction supply coming to market. New supply in 2020 is expected to outpace Asian demand growth and therefore maintain sales into Europe.
Record Chinese imports. China overtook Japan as the world largest LNG importer in the month of December 2019, with volumes for the month reaching 7.3mn tonnes, compared to Japan’s 6.9mn tonnes. Even though Japan is expected to continue to be the world’s largest LNG importer on a total annual basis through 2022, 2019 marked the second year in a row of declining imports for the country, continuing an overall downward trend since 2015. China entered its fourth year in a row of record LNG imports, increasing its LNG imports 13.4% on a year-over-year basis.