PIRA Energy Group believes that the competition is on in Korea and China for incremental winter LNG cargoes. In the U.S., producer survey reveals results broadly in line with recent surveys. Supply red flags keep Europe guessing.
Specifically, PIRA’s analysis of natural gas market fundamentals has revealed the following:
China and Korea Gear Up for Winter
In the key Asian growth markets of Korea and China, the competition is on for incremental winter LNG cargoes, with the former showing growth related to fuel substitution (lower nuclear capacity) and seasonal use, while the latter will come from new import infrastructure opening up new markets. Demand indicators from October show no decrease in the pace of incremental buying by Korea, even without the colder than normal weather factor. The activation of these two ports will increase Chinese import capacity by some 10-mmcm/d and aside from weather in Northern China (a similar seasonal demand profile to Korea), two entirely new markets will be opened without the corresponding addition of dedicated new supplies which can only mean more buyers for the same level of volumes.
Producer Survey Reveals Results Broadly In Line With Recent Surveys
The more things change, the more they seem to stay the same. PIRA’s 3Q13 Producer Survey reveals results broadly in line with recent surveys. Namely, a subset of companies active in the nation’s most prolific shale play — the Marcellus — remain responsible for pushing U.S. production to record highs, while most others tread water.
Supply Red Flags Keep Europe Guessing
After record gas injections in October 2013, PIRA had been somewhat less concerned about a supply squeeze this winter, but the early hoisting of several new red flags on supply has us concerned. Russia showed back in October that its production capacity was in good shape going into winter; what it cannot guarantee is that domestic demand will cooperate (by being low) or that we are not headed into another Ukrainian transit fiasco. While Russian gas production has dipped below normal in November, at around 1.85-bcm/d, Gazprom officials are deeply concerned about access to Russian gas for Western Europe via Ukraine.
LNG World News Staff, November 21, 2013