Global LNG and Europe gas balance

Base case: 10-year average weather scenario at current futures prices

LNG supply: Global output to grow 7.6% from last summer; U.S. plants to run above capacity

Summer LNG supply is projected to rise 7.6% year-on-year, to 203 million tons, on the back of strong U.S. exports and plants in the Atlantic Basin recovering from outages. Some of the upstream issues hindering several projects are expected to be resolved by 2H 2022.

U.S. growth represents 36% of this summer’s increase as strong netbacks incentivize suppliers to maximize production. Added output from Cheniere’s Sabine Pass Train 6 and commissioning cargoes from Venture Global’s Calcasieu Pass underpin growth, particularly from July-August.

Atlantic Basin supply growth is driven by the resumption of Hammerfest LNG in Norway after outages last year. Middle East supply growth is due to stable Qatari output above last summer’s lows, and higher Egyptian output boosted by stronger gas production.

In the Pacific Basin, Indonesian and Malaysian output is bolstered by the resolution of gas supply issues. Stable output in Peru provides 1.4 million tons of growth from last summer’s lows, which reflected a three-month outage. Russia’s Sakhalin is not expected to conduct maintenance this year.

The Atlantic storm season in the later summer months of July and August could pose a risk to U.S. LNG loadings. Weather-dependent Egyptian domestic gas demand could also reduce Egyptian LNG growth potential this summer.

Global LNG demand is expected to rise 6% this summer compared to last year, according to BNEF’s base-case scenario. Europe leads the growth in imports, assuming TTF netbacks continue to outcompete JKM throughout the summer. Demand growth in China and emerging Asian markets is much lower than our previous estimates at the start of the year given current futures prices.

Northwest Europe and Italy drive almost all the net imports growth over summer 2022 in BNEF’s base case. Low gas inventory levels at the start of the summer and the risk of Russian pipeline gas disruptions would keep TTF prices above JKM, attracting flexible U.S. and Atlantic Basin LNG supply.

China’s LNG demand sees a marginal increase over summer 2022 from last year, as gas demand growth is hampered by high gas prices and repeated Covid outbreaks. LNG imports could be further squeezed by growth in cheaper domestic production and pipeline imports. Japan’s LNG imports could fall this summer amid higher coal generation, while Korea’s LNG demand is likely to be lower as the Shinhanul 1 nuclear reactor starts up, reducing gas demand for power. Taiwan’s LNG imports could rise marginally as more gas is needed to offset nuclear phase outs.

Thailand is likely to lead imports growth in emerging Asian markets. Falling local gas production is forcing the nation to buy spot LNG despite high prices. Pakistan could see some summer-on-summer growth as it starts a new term contract with Qatar, which will help offset lower spot purchases. Brazil’s imports are set to drop this winter season as hydro generation recovers, and Argentina could take fewer LNG cargoes if spot prices continue to stay high. Kuwait is likely to take more LNG from last summer, supported by the new onshore import terminal at Al-Zour.