LNG industry adapted well to 2011 demand spike, report says
It took a natural disaster to shake up the industry, but LNG in 2011 proved itself for the first time as a fuel flexible enough to supply short-term surges in demand, a new report on the industry says.
"The role of LNG as a flexible and secure energy source as well as the prompt response to provide back-up through additional supplies and cargo diversions to compensate for the sudden loss of nuclear capacity in Japan ... has been a credit to the industry," said the International Group of Liquefied Natural Gas Importers in a 38-page report titled "The LNG Industry in 2011."
The LNG industry has been largely defined by tanker loads sailing fixed routes under long-term contracts between specific liquefaction plants and LNG users.
Although that remained the norm for 2011, a significant short-term market emerged after an earthquake-spawned tsunami in March 2011 crippled the Fukushima nuclear power plant in Japan and prompted that country to idle nuclear-power capacity across the nation. Japan imported much more LNG, oil and coal last year as replacement fuels.
In all, LNG buyers worldwide acquired 240.8 million metric tons of LNG last year, a 9 percent increase. That works out to 32 billion cubic feet of gas per day on average. About one-quarter of that total, 61.2 million metric tons, was imported under spot or short-term (less than four years) contracts, a 50 percent increase.
Besides more spot and short-term sales, more LNG tankers were diverted from their planned destinations – particularly from North America and Europe – and rerouted to more lucrative markets – particularly in Asia. In addition, 44 cargoes were delivered last year to North America and Europe and then immediately re-exported to higher-paying markets; in 2010, this occurred just 19 times, the report said.
On the LNG-making side of the market, Qatar was the big winner.
That Persian Gulf nation is the world's biggest LNG supplier, and has capacity to make 82 million metric tons of LNG – enough to supply 34 percent of global demand last year. (82 million tons is the equivalent of about 10.9 billion cubic feet a day.) Most of that capacity – 52 million metric tons – came on line since 2009. But much of that capacity was idle ... until Japan's nuclear-power crisis. So Qatar was well-positioned to serve the demand spike.
Qatar's exports grew 35 percent last year, to a total of 75.4 million metric tons, the report said. Twenty-seven percent of Qatar's LNG was sold on a spot and short-term basis.
Japan imported 79.1 million metric tons of LNG last year, up 8.2 million metric tons or 12 percent from 2010. Qatar's exports to Japan grew by 4.4 million metric tons last year.
Other highlights from the new report:
- Japan accounted for 42 percent of Asia's additional LNG imports last year. Its share of global LNG consumption grew to 33 percent. Japan received 1,438 LNG shipments last year, an average of almost four per day.
- In all, Asia nations received 63 percent of the world's LNG. Asian consumption grew 15 percent last year. The world No. 2 LNG consumer, South Korea, imported 35.6 million metric tons, up 9 percent. China took 13.1 million metric tons, up 36 percent. India imported 12.3 million metric tons, up 37 percent, as its domestic natural gas production lagged.
- European imports were flat after growing 25 percent a year earlier.
- North American imports sank 25 percent due mainly to growing production of less-expensive shale gas. Much of the LNG contracted for delivery to the United States ended up in Asia or Europe.
- South American demand grew 14 percent. Strong economies in Argentina and Chile boosted the total. Brazil imported much less LNG due to more hydroelectric generation last year.
- The LNG tanker fleet grew by 16 ships to total 359 vessels. That compares with 25 tankers added to the fleet in 2010. Fifty-nine ships were on order, with almost all of them to be delivered in 2013 or later.
- The world had 24 liquefaction plants operating in 18 countries at the end of 2011. Just one LNG site – in Qatar – was commissioned last year. If all the plants operated at full capacity, they could make 278 million metric tons of LNG, compared with global demand of 241 million.
- Five liquefaction plants were under construction last year – three in Australia, one in Angola and one in Papua New Guinea. Their combined capacity will be 46 million metric tons a year.
- In addition, four Australian and one Indonesian liquefaction projects got the go ahead last year to start construction. Their combined capacity will be 27 million metric tons a year. A variety of other LNG projects are under discussion in Australia, Africa, the United States and Canada.
- As for LNG import terminals, 25 countries host 89 LNG regasification plants. Their total capacity was 640 million metric tons a year. As evidence of LNG's growth: In 2001, 11 countries had 40 import terminals.
The Paris-based non-profit trade group's 2011 report itemizes every country's imports and exports, each LNG plant and LNG regasification terminal, and each tanker.