LNGTrade
From Enipedia
- LNG is not a commoditized business or not a developed spot market like oil or LPG
- Baseload sales of LNG are long term: 20-25 years; and make up 90% of LNG trade. 10% is spot/short-term
- Long term contracts are take-or-pay that cover the risk and allow to finance expensive LNG infra CAPEX
- LNG price that supports seller’s upstream development, LNG infrastructure, cost of shipping and return on investments
- Destination restrictions or Diversion Provisions /Profit Sharing arrangements
- Sound contractual basis governed by NY or English law
- Sufficient annual volume
- Assurance of adequate gas reserves
Contents |
[edit] Short Term
Spot and short-term are used interchangeably and refer to LNG contracts of less than one year including cargoes delivered or re-directed under long-term contract provisions.
Sources of spot LNG:
- early volumes coming from new liquefaction capacity
- expiration of LTCs
- buyer over-commitment (oversupply)
- extra plant capacity
- contract and operational flexibility: flexibility of LTC (5% wedge; seasonality
- contract failure
Spot LNG issues:
- regasification terminal access
- sellers demand minimum price
- financial settlement instead of physical spot trade
- profit-sharing on cargo diversions (sharing complicated)
- Asian spot market is a captive market, any capacity is included in the LTCs
Sport LNG drivers:
- increasing spread between spot and LTC prices
- need for flexibility driven by liberalization process
- increasing acceptance of LNG spot risk (especially with rising oil prices)
- downstream investments (new regasification capacity) create need for LNG
- new supply coming online (Australia, Yemen, Angola)
- spot can be used to arbitrage price spreads in different geo-markets
Spot LNG prerequisites and negotiation:
- supplier with uncommitted liquefaction capacity
- potential buyer with available import capacity
- vessel
- Industry uses master agreements, where the majority of terms and conditions are established in advance and individual confirmations are executed as cargoes become available [1]
[edit] Global LNG market
- Lack of physical / liquid and price transparent market in Asia and a partially constrained one in Europe.
- As LNG increases its share in the global gas market and spot trading increases, the market will be able to arbitrage price disparities between regions
- link different price regions into a global natural gas price benchmark
- drive gas-on-gas competition in market where gas pricing has traditionally being linked to oil or other fuels
- where pure trading companies become an established feature of the LNG industry, gas as a global commodity may have arrived
- need of more contractual alignment between upstream and downstream and development of new hybrid contracts
[edit] Trends
- LNG imports to Asia are expected to grow by 40mmtpa in the next 20 years on the accounts of Thailand, Pakistan, Singapore and Malaysia (and to a lesser extent Vietnam, Indonesia and Bangladesh)
- Asian importers are expected to pay international prices
- US could become LNG exporter. Already three LNG export projects: Sabine Pass, Freeport, Cove Point
- Malaysia could become LNG importer
- Japan is set to increase their LNG imports.
[edit] Gas Trade by Transport
| transport | volumeBcm | shareOfTotalConsumptionPct |
|---|---|---|
| LNG | 330.83 | 10.83 |
| Pipeline | 673.04 | 22.03 |
LNG makes up only around 8% of the total gas consumption. Around 70% of gas consumption is local.
The long term contracts make up around 90% of the LNG trade. Spot market around 10%.
Due to small size of the LNG spot market, arguably it cannot drive the convergence of the natural gas prices.
[edit] LNG Trade by Region
[edit] Top LNG Importers
| importer | volumeBcm |
|---|---|
| Japan | 106.95 |
| South Korea | 49.31 |
| United Kingdom | 25.31 |
| Spain | 24.16 |
| India | 17.10 |
| China | 16.62 |
| Taiwan | 16.31 |
| France | 14.57 |
| United States | 10.01 |
| Italy | 8.75 |
| Belgium | 6.57 |
| Turkey | 6.23 |
| Argentina | 4.38 |
| Mexico | 4.05 |
| Chile | 3.86 |
| Canada | 3.30 |
| Kuwait | 3.18 |
| Portugal | 3.01 |
| United Arab Emirates | 1.43 |
| Greece | 1.29 |
[edit] Top LNG Exporters
| exporter | volumeBcm |
|---|---|
| Qatar | 102.60 |
| Malaysia | 33.26 |
| Indonesia | 29.15 |
| Australia | 25.93 |
| Nigeria | 25.89 |
| Trinidad and Tobago | 18.88 |
| Algeria | 17.12 |
| Russia | 14.39 |
| Oman | 10.92 |
| Brunei | 9.39 |
| Yemen | 8.94 |
| Egypt | 8.58 |
| United Arab Emirates | 7.96 |
| Equatorial Guinea | 5.27 |
| Peru | 5.12 |
| Norway | 3.97 |
| United States | 2.02 |
| Spain | 0.74 |
| Belgium | 0.61 |
| Libya | 0.08 |
