Global LNG demand

BloombergNEF

Japan: LNG imports to drop over 2021-25 as gas demand falls in the power sector

Japan’s LNG demand is set to fall over the next five years as gas is increasingly squeezed out of the power mix. LNG imports could reach 58m tons by 2025, 23% lower than in 2020.
The country’s power demand is projected to fall for a number of reasons, on top of an aging population. Higher nuclear generation is anticipated after reactor restarts, see next slide for more analysis. More renewables and the commissioning of 6.5 gigawatts worth of coal power plants will reduce gas demand in power over 2021-25.

Japan plans to enforce a new efficiency target on existing coal plants by 2030. This is less ambitious than a full-fledged phase-out of inefficient plants. As such, it limits the upside for LNG.

City gas demand could increase in 2021 as industry and household activity recovers after the pandemic. A colder winter over 2020-21 already resulted in higher heating demand and depleted LNG storage. BNEF expects 0.1m tons of net storage injections in 2021.

Total contracted LNG supply for Japanese buyers is expected to range between 9m tons to 16m tons above demand over 2021-25.

The degree of oversupply varies widely among LNG buyers and impacts overall import costs. Among the major utilities, Chugoku Electric and Kyushu Electric are the most over-contracted.
To manage the excess contracted supply, Japan’s electric utilities are adopting new strategies, such as becoming portfolio players, increasing overseas and domestic resales, and forging procurement alliances with other buyers.

Source: BloombergNEF, Ministry of Economy, Trade and Industry. Note: Past imports based on Bloomberg’s AHOY JOURNEY , may differ from customs data.

Korea: Demand to fall over 2022-23, but resume growth later on nuclear phase-outs

Korea’s LNG demand is set to grow in 2021 with demand recovery from Covid-19 and a colder-than-normal winter earlier in the year. Demand will then fall over 2022-23 on lower gas demand in power, but rise again in 2024-25 on lower nuclear generation; totaling 44.4m tons by 2025.New nuclear reactors Shinhanul No. 1 and 2 are likely to come online by 2022, raising nuclear generation and reducing gas demand. However, commissioning of the two reactors depends on pending operation permits, which adds potential uncertainty to the start date of these reactors.

Growing coal and nuclear generation will continue to squeeze LNG demand into 2023, but large-scale nuclear decommissioning from 2024 will allow LNG demand to recover by 2025. This outlook is inline with Korea’s latest 2021 Gas supply plan (link).

The Korean government is promoting new growth areas for gas demand, such as gas for hydrogen fuel cells and LNG bunkering. This could boost city gas demand in the medium term on top of the forecast shown above.

Korean importers are developing new regasification terminals to keep up with demand growth (see map), and are expanding existing facilities. Kogas and direct importers are set to add a total of 2.9 million kiloliters (1.3m tons) of LNG storage tanks capacity by 2025.

China: Gas demand growth to stay robust over the next five years

Source: National Development and Reform Commission, PipeChina, BloombergNEF. Note: Please see Appendix for storage net injection assumptions.

Natural gas demand in China is estimated to reach 449 billion cubic meters in 2025, adding 119Bcm from 2020, with a compound annual growth rate (CAGR) of 6.4% over the five-year period.

During 2021-25, industrial sector’s gas consumption may see the fastest growth among all sectors. This is underpinned by expected robust economic growth and continuous government efforts to decarbonize the industry. Gas is likely to further replace coal for industrial heating demand.

City gas demand could grow fast due to expansion of the pipeline network and the ongoing battle against air pollution, which favors coal-to-gas switching. Rising income levels and urbanization is likely to increase gas demand per capita in the coming years.

Gas demand for power will grow over 2021-25 as new gas power projects are commissioned. Coastal provinces which import LNG, like Jiangsu, Guangdong and Zhejiang have planned to increase gas in their power mix.

Transport sector’s gas demand is expected to increase steadily as LNG trucks are likely to gain market share, due to cheaper life-cycle costs compared to diesel ones. However, a shrinking compressed natural gas vehicle fleet may partly offset the growth from LNG trucks.

Chemical sector’s gas demand may be relatively flat, as the government doesn’t intend to approve new projects using gas as a feedstock.

China: LNG imports growth to slow down on higher domestic supply and pipeline imports

LNG imports may surge above 75m tons in 2021, 12% higher than 2020. But growth could slow down over 2021-2023 and accelerate in 2024-25 as LNG increasingly plays a balancing role to meet demand, after considering supply from domestic production and pipeline imports. LNG imports may rise to 87.5m tons by 2025, 30% higher than 2020.

China’s regasification capacity is likely to grow much faster than LNG demand over the next five years. Currently, 24 new/expansion projects are under construction, and could start by 2025 – adding a total of 73.4m tons per year of LNG import capacity. This will lead to a decline in average terminal utilization rate from 79% in 2020 to 55% in 2025.

BNEF expects more LNG contract signing and spot purchases by Chinese gas buyers in the future as 30m tons of LNG demand is currently uncontracted for 2025. More private players are likely to join the gas market in China as PipeChina opens LNG terminal third-party access and more private-owned terminals come online.

Source: BloombergNEF. Note: Terminal capacity is existing and under construction.

India: Rising domestic gas production to lower LNG imports growth potential

India’s gas demand is likely to grow 4% per year on average over 2021-25, reaching 70Bcm in 2025, excluding internal use and losses. City gas demand will see the highest growth with the expansion of gas distribution networks, connecting more households, vehicles and businesses to gas supply. Industry gas demand will rise as more fertilizer plants (Matix, Gorakhpur, Barauni, Sindri and Ramagundam), refineries and other large industrial users are connected to gas supply over 2021-25.

India’s gas production is set to rise in the coming years as Reliance and ONGC raise production from Krishna Godavari Basin over 2021-23. Peak production could be 30 million cubic meters per day from Reliance’s fields (R-cluster, Satellite and MJ) and 15 million cubic meters per day from ONGC’s fields (KG-98/2).

Higher domestic production will reduce growth potential for India’s LNG imports in the coming years. LNG demand could reach 30.8m tons by 2025, growing at 3% per year on average over 2021-25. This is much lower than the 13% per year average growth seen over 2015-20.

A number of LNG import terminals are set to start by 2025. H-energy’s Jaigarh terminal received its floating storage and regasification unit (FSRU) in April 2021 and aims to start operations this year. Adani-Total’s Dhamra terminal, Swan Energy’s Jafarabad FSRU and Atlantic Gulf & Pacific’s Karaikal FSU could start in 2022-23. Petronet LNG could expand Dahej’s capacity again by 2.5m tons a year in the next three to four years.

Source: BloombergNEF, PNGRB India.