how short-term lng market evolution will influence the market … · 2019-10-17 · short-term...
TRANSCRIPT
How Short-Term LNG Market Evolution
Will Influence the Market Dynamics
Ming Cai
Natural Gas and LNG Consultant
Poten & Partners
Short-term trade accounts for 28~30% of global trade
• Drivers for spot/short-term are: – Demand and supply volatility.
– Uncommitted LNG volumes.
– Uncommitted shipping capacity.
– Uncommitted regasification capacity.
• Poten predicts the spot/short term stays
around 25% to 30% of total trade – Foundation of LNG market will continue to be
long-term transactions, but spot opportunities
will be important.
0
50
100
150
200
250
300
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
MM
t/y
Spot/Short term
Long Term
LNG short-term market has grown from 2%
of the global trade in 2000 to 28% in 2017
Source: Poten & Partners
28-30%
LNG spot market is complicated, involving various
pricing mechanisms in different regions
• Flexible LNG sources have different pricing mechanisms and will
compete for spot sales to higher value regional markets
Major flexible LNG supply in world market
Demand region
Flexible LNG supply
Flexible
supply
Preferred
indexation
LNG
destination
Preferred
indexation
USA HH USA HH
Trinidad /
PeruHH / oil
South
America
HH / NBP /
oil
Europe NBP/oil Europe NBP/oil
Africa NBP/oil Middle East NBP/oil
Qatar /
YemenNBP/oil Asia Oil
Asia Oil South Asia NBP/oil
Source: Poten & Partners
0
5
10
15
20
25
Jan-1
0Jul-
10
Jan-1
1Jul-
11
Jan-1
2Jul-
12
Jan-1
3Jul-
13
Jan-1
4Jul-
14
Jan-1
5Jul-
15
Jan-1
6Jul-
16
Jan-1
7Jul-
17
Jan-1
8Jul-
18
$/M
MB
tu
Max Spot
JKM
Min Spot
Actual spot/short-term LNG trades in Asia Pacific vary
widely around JKM
• JKM is not a deep market but a
proxy for many bi-lateral deals
• Actual spot deals are also
influenced by many other
factors, e.g. shipping distance,
ship size, delivery window,
market environment etc.
JKM vs. range of actual spot prices
Source: Poten & Partners
Constrained Pareto-optimal allocation of available LNG
supply to demand regions
Source: Poten & Partners
Drivers for short-term LNG trade – price & margin
Trading margin
Buyer’s premium/discount
Buyer’s alternative fuel
Seller’s premium/discount
Seller’s netback on delivery in Europe
Discount to hub in Europe
LNG shipping cost
Buyer’s profit share
LNG DAP price
FOB netbacks
Supply by region
Demand by region
Max % of LNG flow
Ranking by trading margin
LNG trade
Short-term LNG trade
Inputs
Calculation
Outputs
Legend:
Increased ST LNG enhances market flexibility in 2022
Imports
Exports
N America /
Caribbean
S America
NW Europe
Med
S Asia
SE Asia
NE Asia
US
Peru
N Africa
W Africa
M East
SE Asia
W Australia E Australia
E Russia
Arctic
Trinidad
E Africa
Source: Poten & Partners
US will become a major ST supplier to NE Asia Short-term/spot LNG supply to Northeast Asia by regions
0
2
4
6
8
10
12
14
16
18
20
2020 2021 2022
MM
t/y Others
SE Asia
US
Africa
Middel EastMiddle East
Source: Poten & Partners
Full and robust scenarios are required to test
sensitivities
Driver Influence Result
Oil price increasesHH-linked LNG more competitive in Asia
More US LNG attracted to Asia1.
US LNG supply produces above nameplate
US LNG forced into Europe, creating
downward pressure on price
If prices falls below marginal cost of supply, it will discourage US
LNG to Europe – potential for US capacity shut-in
2.
Asia LNG demand increases
More LNG required from other regions
3.
Primary shift to cover market likely from Middle East, but
some US supply will be attracted to Asia Pacific
Spot and ST helps buyers manage demand uncertainty
• LNG ST now comprise 25%~30% of total LNG trade giving buyers more options to manage uncertainties in demand
• ST trade will continue to be a major part of the LNG market and become increasingly dynamic with flexible supplies from Qatar and US competing for sales into high-value buyers
• Buyers’ portfolio optimization is crucial in order to mitigate cross commodity price risk
• The mix of spot, ST, flexible and firm volumes within buyers’ total portfolio is critical