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Real LNG growth to come post-2016: Wood Mackenzie

As a result, many LNG players shifted their focus to developing markets and employing new regasification capacity. Despite weakened demand and the impact of the oil price crash, LNG production remained high throughout the year reaching 250 MMt in 2015 – up 4 MMt on 2014 – primarily due to a number of key project start-ups.

In 2016, the initial focus will be on the US, with the start of exports from Sabine Pass, signifying a key milestone however, Wood Mackenzie cautions that with a further 125 MMt of LNG under development, real LNG growth is post 2016.

Key findings from the review were:

  • Global LNG production reached 250 million tonnes in 2015
  • China’s LNG demand declined 2 per cent in 2015 following years of double digit growth
  • Australia’s key CSG LNG projects added 18.5 MMt/a of nameplate capacity
  • New entrants Jordan, Pakistan and Egypt imported 5.8 MMt in 2015
  • Asia spot prices reached a low of US$6.90/MMbtu
  • Atlantic to Pacific LNG trade flows fell by 16 per cent, from 96 MMt/a to 82 MMt/a
  • Weak demand translated into lower shipping rates of US$30,000/d – the lowest since 2010
  • The potential to optimise US LNG flows saw 19 new LNG vessels ordered in 2015
  • Shell’s proposed acquisition of BG would create the largest LNG marketer – supplying 15 per cent of global demand.

Global LNG production remained high throughout 2015, with Wood Mackenzie estimating volumes reached 250 MMt/a.

Giles Farrer, Research Director for Global Gas and LNG supply at Wood Mackenzie said “We saw a 4 MMt increase in LNG volumes globally, compared with 2014. The increase is primarily due to the start-up of key coal seam gas (CSG) projects in Australia – BG’s QC LNG in January and Santos’ GLNG in August 2015. A third project, ConocoPhillips’ APLNG plant, shipped its first cargo at the start of January 2016. The commissioning of these facilities, which have a combined capacity of 26.5 MMt/a, marks the start of the country’s ascent to become the world’s largest supplier of LNG by 2019.

“The fall in Asian demand and the rise in Australian supply, meant some Atlantic LNG volumes were squeezed out of the market and Atlantic to Pacific trade flows fell by 16 per cent – from 96 MMt/a to 82 MMt/a. With the lower oil price driving down Asian LNG prices, the spread between European gas prices and Asian LNG prices narrowed. Consequently companies with Atlantic supply were drawn to European markets offering more attractive returns,” Mr Farrer added.

Wood Mackenzie asserts that the prolonged fall in oil price also impacted company decision making with budgets and capital allocation across the industry under intense scrutiny.

Looking to 2016, the company said that the initial focus will be on the US, with the start of exports from Sabine Pass signifying a key milestone. However, the company warned that the pace of new project ramp up and the threat of a prolonged outage at Yemen presents downside risk to LNG supply availability. Indeed, the reality is that the wave of LNG growth will not hit the market until after 2016.

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