Fluid dynamics is the study of non-solid matter: that which is mutable, volatile and mercurial! The analogies with the complex world of gas and seaborne LNG trade are obvious. But just as fluid dynamics is a framework for analysing the maelstrom of physical reality, so too can the gas trade be viewed through various helpful frameworks, for example that of the changing global energy mix.
A Gaseous State (Of Affairs)
Natural gas is utilised in developed and developing countries in a range of contexts such as residential heating, industry (for example glass, cement, fertilisers) and, increasingly, in power generation. Gas is seen as a less polluting ‘bridging fuel’ to a lower carbon future, hence in part the consensus view that – even as total world energy demand continues to grow – the share accounted for by gas will continue to rise in coming years and decades, building on recent historical trends.
Indeed, global gas demand, which has grown at a fairly firm CAGR of 2.4% since the start of the millennium, is projected to reach 370bn cfd in 2018, accounting for around 25% of total primary energy consumption globally, up from 23% in 2000. At the same time, while pipelines remain important, LNG has become increasingly favoured as a way to move ‘stranded’ gas to markets. Seaborne LNG trade grew at a robust CAGR of 6.4% in 2000-17, and is projected to breeze past the 300 mtpa mark in 2018, with global LNG imports projected to equate to 12% of gas consumption, up from 6% in 2000. Against this backdrop, the LNG carrier fleet has grown from 90 units at start 2000 to 516 (with 114 on order) at start March 2018.
A Fluid Situation
Although LNG can be a relatively supply-driven sector (see SIW 1,265 and 1,285), demand and regasification trends are still important. As the graph suggests, global nameplate regas capacity exceeds 800 mtpa (though with the ongoing shale gas revolution, many US terminals are to be reconfigured for exports). South Korea and Japan account for c.40% of capacity, reflecting their long-standing reliance on LNG (especially in Japan after Fukushima). NW Europe and the Mediterranean together account for 20%, with up to 63 mtpa of capacity planned too. However, the main sources of regas growth look to be developing economies east of Suez.
A Solid Outlook?
Roughly 115 mtpa of regas infrastructure is under construction, of which the ISC, SE Asia, China and the Middle East account for 75%. The emergence of FSRUs (see inset) seems to be a key enabler of LNG import growth, providing a relatively cheaper and more flexible (via seasonal redeployment) ragas solution than standard onshore terminals. Some 22% of existing LNG import capacity in these areas uses FSRUs, versus 40% of under construction and 60% of potential capacity. Various African and Latin American countries are also looking at FSRUs to import LNG for the first time, potentially further aiding shifts in the global energy mix.
So changing energy dynamics driven by economic and environmental factors look encouraging for the LNG sector. But seaborne LNG trade is also clearly a significant factor enabling the shift in the energy mix. Once again, shipping and energy trends go hand in hand. Have a nice day.