This article features key points from the report, Asia Pacific Gas & LNG: what to look for in 2020. Fill in the form on this page to get our full analysis, with charts and predictions for the year ahead.
1. Asian LNG spot prices set to fall further in 2020
The five-year supply wave which started with Australian projects in 2015, continues into 2020 as freshly commissioned US projects push more LNG into an already saturated global market. Europe will again be called upon to save day, however unlike 2019 European gas inventory will start the year at record high levels. Barring sustained supply disruption from Russian flows transiting through Ukraine, or an unusually cold winter, we are expecting European inventory to remain elevated compared to previous years. Europe will thus need to rely even more on flexible supply, or increased demand creation from within the power sector, compared with last year. Both indicate an even lower TTF price for 2020 which will in turn suggests lower spot price in Asia as well.
How the global LNG market will respond to such sustained low prices remains a critical uncertainty.
2.Will Chinese LNG demand recover in 2020?
One of the changes with biggest impact on market was slowdown in Chinese growth. China’s gas demand growth has decelerated in 2019 to around 9% from 17% achieved in 2018. The trade war has had a domino effect on China’s domestic economy: the economic slowdown has dragged on overall energy demand and limited the government’s fiscal ability to create gas demand.
In December, the US and China reportedly agreed on a ‘phase one’ trade deal, which will reduce some US tariffs on Chinese goods in exchange for increased Chinese purchases of US agricultural, manufactured and energy products by some US$200 billion over the next two years. Progress of this deal will be key in 2020 to see if this will translate into recovery in the Chinese economy and help gas demand growth.
3. Will Northeast Asia's backlash against coal gather momentum?
China launched large scale coal-to-gas switching 2017-18 to the benefit of LNG demand and with marked improvement in air quality. Elsewhere though, air quality has deteriorated. In Northeast Asia, we've watched concern over fine particle emissions escalate rapidly and in November these concerns drove energy policy change. Could this trend accelerate in 2020? And with low LNG spot prices, could policy also adapt to better incentivise coal-to-gas switching economics?
4. Decision time for Australia regas? And can India live up to expectations?
2020 will see a continued expansion of regas capacity across Asia and hopefully the Final Investment Decisions on numerous other terminals.
2019 saw little progress in regas in Australia, and even some reverse momentum. We started 2019 with five potential projects proposed but we’ll enter 2020 with only three still in the running. These are AGL’s project at Crib Point in Victoria, AIE’s Port Kembla terminal in New South Wales and finally EIPK’s terminal at Newcastle, also in New South Wales. AGL remains locked in environmental permitting procedures and is no longer expecting an FID in calendar year 2020
5. Will new policy announcements shake up interest in Southeast Asia?
2020 will see the release of several policy documents that have potential to shake up gas markets in Southeast Asia. The launch of key master plans in the power and gas markets in Thailand and Vietnam will provide critical strategic signals for market participants in the region.
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