Global Markets: Asia’s soaring gas demand, a new opportunity window for Mozambique LNG

Soaring gas demand from China, India and Southeast Asia is sucking up an LNG supply glut previously expected to last for years, opening opportunity for new production from East Africa to North America that had been deemed part of the overhang, as reported by Reuters news agency.

Trade flows in Eikon show global LNG imports have risen 40% since 2015, to almost 40 billion m3 a month. Growth accelerated in 2017, with imports up by a fifth, largely due to China, but also South Korea and Japan.

Asia’s LNG market has been glutted since 2015, following massive development that began in the early 2000s. But a gasification programme in China last year and strong economic growth across Asia pushed up demand, contributing – along with a cold winter – to a doubling of LNG spot prices from mid-2017.

The market is expected to remain relatively tight for the remainder of 2018, with China’s gas programme continuing and delays at several export projects.

The LNG tanker market is also tight, with few ships ordered in recent years.

This unexpected tightening potentially opens the way for new projects for the first time in several years.

Many projects were delayed or axed when oil and gas prices started tumbling in mid-2014. Now energy companies are returning to health as prices have improved.

In East Africa, US energy company Anadarko Petroleum is getting closer to a final investment decision (FiD) as it lines up potential buyers for its Mozambique gas field.

Tokyo Gas is the latest to near an offtake agreement, according to three sources with direct knowledge of the matter, who asked not to be named as they could not talk about ongoing contractual negotiations.;

Anadarko’s Mozambique concession holds an estimated 75 trillion ft3 (2.1 trillion m3) of gas, its website says, four times 2017’s globally imported LNG volumes.

One risk to new projects, though, are emerging price disputes between buyers and sellers, with importers demanding cheaper and more flexible terms.

North Asia has been anchoring demand for the past decade – Japan, China and South Korea being the top three LNG importers – with China accounting for most of the growth.

South and Southeast Asia are now providing new demand.

India is starting a gas development programme that could match China‘s, planning to add 11 LNG import terminals to an existing four.

Pakistan started importing LNG in 2015 and has ambitious expansion plans. Bangladesh and Myanmar also plan to develop import terminals.

Thailand expects its LNG imports to climb nearly sevenfold, to 35 million tpy by 2036, and Indonesia, the world’s fifth-biggest LNG exporter, is expected to become a net importer as domestic production stalls.

By 2030, Thailand and Indonesia together could import nearly 70 million tpy of LNG, comparable to all the gas China imported in 2017.

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