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F O R M O R E I N F O R M A T I O N :
© 2017
Update: Developments in Global LNG Trade
Tamir Druz, Managing Director
Tel. +972 50 7471210
tamir.druz@capraenergy.com
Sam Bulmer, Director
Tel. +44 7732 809571
sam.bulmer@capraenergy.com
© 2017 2
5 Big Developments to Watch in LNG
The LNG Industry is Fundamentally Transitioning
1) The year 2017 marks the 2nd year of LNG’s biggest ever “growth spurt.”
2) At the same time, the LNG demand base is getting much bigger and
much broader.
3) In spite of the unprecedented supply growth, stable LNG prices and
slopes indicate more balanced fundamentals than many expected.
4) Also, as LNG supply and demand hubs have proliferated, customers are
sourcing cargos closer to home.
5) Last but not least, 2017 also marks the “breakout year” for the Platts
JKMTM index and ICE’s JKM LNG futures contract.
© 2017 3
Expected LNG Project Capacity Additions (2016 – 2020)
Source: Capra Energy
 About 140 mtpa of new LNG
production capacity can be
expected to have come on-
stream from 2016 thru 2020;
· Almost half of it (68 mtpa) is
coming from the US;
· About a third (46 mtpa) will be
coming from new Australian
capacity.
 All of these are projects that
have achieved positive FIDs
and are either under
construction or advanced
development.
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
2016 2017 2018 2019 2020
CumulativeTotalCapacityAdditions(mtpa)
CapacityAdditions(mtpa)
US Australia Malaysia Russia Indonesia Cumulative Total
• Gorgon T1-T2 (10.4)
• APLNG T2 (4.5)
• Gladstone T2 (3.9)
• Sabine Pass T1-T2 (9.0)
• Sabine Pass T3-T4 (9.0)
• Cove Point (5.3)
• Gorgon T3 (5.2)
• Wheatstone (9.3)
• Ichthys (8.7)
• PreludeFLNG (3.8)
• Cameron T1-T2 (9.0)
• Freeport T1 (4.4)
• Cameron T3 (4.5)
• Corpus Christi T1-T2 (9.0)
• Freeport T2-T3 (8.8)
• Sabine Pass T5 (4.5)
• PFLNG 1 SATU - (1.2)
• Malaysia LNG T9 (3.6)
• Yamal LNG T1 (5.5)
• Yamal LNG T2 (5.5)
• Yamal LNG T3 (5.5)
• Yamal LNG T2 (5.5)
• Corpus Christi T3 (4.5)
• Yamal LNG T3 (5.5)
• Tangguh T3 (3.9)
Development #1 - LNG’s “Growth Spurt”
At Least 140 mtpa of New Capacity Coming On-Stream
© 2017 4
Source: Capra Energy
 LNG imports into China and
India, the newest entrants into
the ‘Big 5’, have exceeded
many analysts’ expectations.
· China recently assumed the #2
spot among import markets,
and we expect that to continue.
· If Power of Siberia does not
come online as planned, then
we expect China to overtake
Japan by the end of this decade.
 South Korea and Taiwan have
also been showing an
increased appetite for LNG in
2017, and the former may
pose a much larger bullish risk
than almost anyone expects.
Development #2 – Robust LNG Demand Growth
LNG Demand Growth Has Been Keeping Pace
Monthly Imports for 5 Biggest LNG Markets (millions of tonnes)
Japan
South Korea China
India
Taiwan
Total
© 2017 5
Source: Capra Energy
 Spot prices and slopes appear to have
found a floor since the period of sharp
declines from 2014 to 2015.
· The $5/mmbtu level has served as a soft
floor since 2016;
· Strong rebounds have been seen in
response to LNG plant outages, weather,
higher competing fuel prices, etc.
 Also, LNG forward price curves may
indicate market expectations for
tightening fundamentals
· Seasonality has intensified, with winter
premiums exceeding the levels seen in
recent years.
· Also, longer-term structural contango has
continued to strengthen.
Development #3 – LNG Price Stabilization
LNG Forward Curves in Contango, with Strong Winter Premiums
LNG Forward Market Price Curves (20 Years)
0.000
5.000
10.000
15.000
20.000
25.000
Price($/mmbtu)
NE Asia
All Japanese
nuclear capacity
taken offline
following
Fukushima.
Mild East Asian summer,oil
price collapse + winters + new
supply (PNG,QCLNG,Chinese
PNG)
Multiple LNG
plant outages
& oil price
rise.
NE Asia (DES) LNG Spot Prices (Aug ‘09 – Sept ’17)
© 2017 6
Source: Kpler (Flows Navigator)
 As LNG importers are presented
with more supplier choices and
contract flexibility, they are
transitioning to more proximate
supply sources.
· Australia has gained substantial NE
Asian market share from Qatar and
other Persian Gulf suppliers – South
Asian & Mideast buyers have made
up for these losses.
· The US is rapidly becoming supplier
of choice for Latin America
 This dynamic should intensify as
existing long-term contracts expire,
and as destination clauses begin to
disappear.
Development #4 – Regionalization
LNG Customers Increasingly Favoring Regional Suppliers
Persian Gulf Exports to Northeast Asia (Jan 2013 – Sept 2017)
© 2017 7
Source: ICE
 ICE reached an important
milestone of 10,000 lots of open
interest in its JKM LNG futures
contract earlier this month.
 A number of trends converged in
2017 to make it the year that the
market was ready to embrace LNG
futures trading.
· A surge in overall LNG trade and
especially spot and short-term deals;
· Greater interest in protecting LNG
margins and managing LNG price
risk as competition has intensified
and spreads have narrowed;
· Increased volatility of price slopes
(vs. Brent) have made it an
increasingly unreliable proxy.
Development #5 – JKM Index & ICE Futures
Platts JKM Index & ICE LNG Futures Break Out
ICE JKM LNG Futures Contract Open Interest (Apr 2016 – Sept 2017)
0
2,000
4,000
6,000
8,000
10,000
12,000
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
© 2017 8
www.capraenergy.com
Our Upcoming Event in Houston
8

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2017.09 tealeaves iv - tamir druz slides

  • 1. F O R M O R E I N F O R M A T I O N : © 2017 Update: Developments in Global LNG Trade Tamir Druz, Managing Director Tel. +972 50 7471210 tamir.druz@capraenergy.com Sam Bulmer, Director Tel. +44 7732 809571 sam.bulmer@capraenergy.com
  • 2. © 2017 2 5 Big Developments to Watch in LNG The LNG Industry is Fundamentally Transitioning 1) The year 2017 marks the 2nd year of LNG’s biggest ever “growth spurt.” 2) At the same time, the LNG demand base is getting much bigger and much broader. 3) In spite of the unprecedented supply growth, stable LNG prices and slopes indicate more balanced fundamentals than many expected. 4) Also, as LNG supply and demand hubs have proliferated, customers are sourcing cargos closer to home. 5) Last but not least, 2017 also marks the “breakout year” for the Platts JKMTM index and ICE’s JKM LNG futures contract.
  • 3. © 2017 3 Expected LNG Project Capacity Additions (2016 – 2020) Source: Capra Energy  About 140 mtpa of new LNG production capacity can be expected to have come on- stream from 2016 thru 2020; · Almost half of it (68 mtpa) is coming from the US; · About a third (46 mtpa) will be coming from new Australian capacity.  All of these are projects that have achieved positive FIDs and are either under construction or advanced development. 0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 2016 2017 2018 2019 2020 CumulativeTotalCapacityAdditions(mtpa) CapacityAdditions(mtpa) US Australia Malaysia Russia Indonesia Cumulative Total • Gorgon T1-T2 (10.4) • APLNG T2 (4.5) • Gladstone T2 (3.9) • Sabine Pass T1-T2 (9.0) • Sabine Pass T3-T4 (9.0) • Cove Point (5.3) • Gorgon T3 (5.2) • Wheatstone (9.3) • Ichthys (8.7) • PreludeFLNG (3.8) • Cameron T1-T2 (9.0) • Freeport T1 (4.4) • Cameron T3 (4.5) • Corpus Christi T1-T2 (9.0) • Freeport T2-T3 (8.8) • Sabine Pass T5 (4.5) • PFLNG 1 SATU - (1.2) • Malaysia LNG T9 (3.6) • Yamal LNG T1 (5.5) • Yamal LNG T2 (5.5) • Yamal LNG T3 (5.5) • Yamal LNG T2 (5.5) • Corpus Christi T3 (4.5) • Yamal LNG T3 (5.5) • Tangguh T3 (3.9) Development #1 - LNG’s “Growth Spurt” At Least 140 mtpa of New Capacity Coming On-Stream
  • 4. © 2017 4 Source: Capra Energy  LNG imports into China and India, the newest entrants into the ‘Big 5’, have exceeded many analysts’ expectations. · China recently assumed the #2 spot among import markets, and we expect that to continue. · If Power of Siberia does not come online as planned, then we expect China to overtake Japan by the end of this decade.  South Korea and Taiwan have also been showing an increased appetite for LNG in 2017, and the former may pose a much larger bullish risk than almost anyone expects. Development #2 – Robust LNG Demand Growth LNG Demand Growth Has Been Keeping Pace Monthly Imports for 5 Biggest LNG Markets (millions of tonnes) Japan South Korea China India Taiwan Total
  • 5. © 2017 5 Source: Capra Energy  Spot prices and slopes appear to have found a floor since the period of sharp declines from 2014 to 2015. · The $5/mmbtu level has served as a soft floor since 2016; · Strong rebounds have been seen in response to LNG plant outages, weather, higher competing fuel prices, etc.  Also, LNG forward price curves may indicate market expectations for tightening fundamentals · Seasonality has intensified, with winter premiums exceeding the levels seen in recent years. · Also, longer-term structural contango has continued to strengthen. Development #3 – LNG Price Stabilization LNG Forward Curves in Contango, with Strong Winter Premiums LNG Forward Market Price Curves (20 Years) 0.000 5.000 10.000 15.000 20.000 25.000 Price($/mmbtu) NE Asia All Japanese nuclear capacity taken offline following Fukushima. Mild East Asian summer,oil price collapse + winters + new supply (PNG,QCLNG,Chinese PNG) Multiple LNG plant outages & oil price rise. NE Asia (DES) LNG Spot Prices (Aug ‘09 – Sept ’17)
  • 6. © 2017 6 Source: Kpler (Flows Navigator)  As LNG importers are presented with more supplier choices and contract flexibility, they are transitioning to more proximate supply sources. · Australia has gained substantial NE Asian market share from Qatar and other Persian Gulf suppliers – South Asian & Mideast buyers have made up for these losses. · The US is rapidly becoming supplier of choice for Latin America  This dynamic should intensify as existing long-term contracts expire, and as destination clauses begin to disappear. Development #4 – Regionalization LNG Customers Increasingly Favoring Regional Suppliers Persian Gulf Exports to Northeast Asia (Jan 2013 – Sept 2017)
  • 7. © 2017 7 Source: ICE  ICE reached an important milestone of 10,000 lots of open interest in its JKM LNG futures contract earlier this month.  A number of trends converged in 2017 to make it the year that the market was ready to embrace LNG futures trading. · A surge in overall LNG trade and especially spot and short-term deals; · Greater interest in protecting LNG margins and managing LNG price risk as competition has intensified and spreads have narrowed; · Increased volatility of price slopes (vs. Brent) have made it an increasingly unreliable proxy. Development #5 – JKM Index & ICE Futures Platts JKM Index & ICE LNG Futures Break Out ICE JKM LNG Futures Contract Open Interest (Apr 2016 – Sept 2017) 0 2,000 4,000 6,000 8,000 10,000 12,000 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17
  • 8. © 2017 8 www.capraenergy.com Our Upcoming Event in Houston 8