LNG: 2015 in review Report

Insight 13 January 2016

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Report summary

In 2015, the weak market environment and the impending LNG supply glut forced companies to adjust strategies and tactics. Buyers were increasingly uncertain of their demand requirements and exercised more caution in contracting. Sellers had thus started to look further afield to emerging markets in Middle East/Africa and new buyers in Asia. At the same time, the interest in Europe grew as both buyers and sellers looked towards a liquid market in anticipation of a wave of new supply. The impact of low oil prices was particularly acute on the LNG sector as the price of contracted LNG fell in line with oil, which capped the price of spot LNG delivered into Asia.

Executive summary
- Supply: Global production hit 250 mmtpa, led by growth in Australia
  - Australia began its ascent to top of the global supply charts
  - Supply outages marred LNG supply growth
  - US FIDs on new supply heavily weighted to H1 2015
  - FID by region Australia LNG exports
  - East African and Russian LNG proposals made slow progress
  - New discoveries will reshape the gas landscape for Egypt
- Demand and Trade: North East Asia LNG demand fell by 4%
  - Lower demand in key Asian markets
  - offset by demand from new emerging buyers
  - The Americas experienced another year of high LNG imports
  - Flows from Atlantic to Pacific fell significantly
  - Companies were optimising within portfolio
- Regas infrastructure: Access to Europe grew in importance
  - FSRUs were delivered to Egypt, Pakistan and Jordan
  - Onshore terminals were completed in Japan, China, Poland and Indonesia
  - Access to Europe is increasingly important for LNG suppliers
  - Emerging markets continued their LNG infrastructure development journey
- Corporate activity: Consolidation among suppliers and fragmentation in markets
  - Consolidation of suppliers
  - Consolidation of buyers
  - Changing corporate behaviour in respond to oversupply and low oil prices
  - Despite mega-mergers, markets were more fragmented
- Shipping: Charter rates continued to plunge
  - Spot/short-term charter rates fell to new lows in 2015
  - but orders for new ships continued to be placed
- Appendix