The US will become the world's top exporter and China the top importer of liquefied natural gas (LNG) in 2022, says NYSE-listed market research and analysis company IHS Markit in its 'LNG Trade in 2021: Runaway Recovery' report.
The report finds that the US, which was the third-largest LNG exporter behind Australia and Qatar in 2021, is poised to claim the top spot in 2022.
The US was the largest source of LNG supply growth in 2021, adding 25-million tons amid a continued buildup of liquefaction capacity, as well as the ramping up of output from plants turned down the previous year. Average utilisation for US plants climbed from 43% in the third quarter of 2020 to 98% in the third quarter of 2021.
China has already become the top global importer of LNG. Imports reached 81-million tons in 2021, an increase of 12.3-million tons, or 18%, year-on-year, overtaking Japan, where imports were flat year-on-year at 75-million tons. This marks the first time since the early 1970s that Japan has not been the world’s largest LNG importer.
“A new map of LNG is taking shape as 2021 became the year of rapid recovery, making the oversupply and price lows of 2020 seem like a distant memory. It is a tale of two markets, with China fuelling the demand surge as the world’s top importer and the US poised to become the world’s leading exporter, providing the supply push,” says IHS Markit global gas chief strategist Michael Stoppard.
Further, the report shows that long-term contract signings rebounded to an all-time high after a pause in 2020, with more than 65-million tons a year of firm, long-term contracts signed in 2021, surpassing the previous record of 61-million tons a year in 2013.
"Among sellers, signings were roughly evenly split between the US, Russia, Qatar and portfolio suppliers, although many of the latter are likely to source volumes from US projects. In a notable signpost of potential investment trends in 2022, US projects were by far the largest source of pre-final investment decision contracts, as most contracts signed in Qatar and Russia were for capacity that is either already existing or under construction.
"Among buyers, mainland China was by far the largest specified end-market, with Chinese buyers signing around 25-million tons a year of firm long-term deals," IHS Markit said.
Further, amid strong global demand, European LNG imports fell. As one of the most flexible regional import markets in the world, European LNG deliveries are reflective of global market balances. Given strong demand in Asia and South America, less LNG supply was available to Europe and European LNG deliveries fell by 9%, or seven-million tons, in 2021 to 77.2-million tons.
However, this is well above the region’s average import level of 30-million to 40-million tons during previous years of LNG market tightness from 2012 to 2018, as imports were kept relatively high by cold weather and low storage levels.
Additionally, spot LNG prices have soared past previous records, with spot LNG prices in Asia having spiked to nearly $30 per million British thermal units (MBTU) for a few weeks in January 2021 during extreme cold weather and transportation challenges before settling back to normal ranges in the first half of the year.
Further, by August, Asian and European spot LNG prices climbed well above their oil price equivalent and remained above it for the rest of the year. Prices ended December 2021 at $40/MBTU, or more than double the previous peaks achieved in the several years following Japan’s 2011 nuclear crisis, the report shows.
Meanwhile, IHS Markit highlights that Brazilian imports hit an all-time high amidst drought, as persistent dry weather in Brazil resulted in weak hydropower generation, forcing the market to rely more heavily on LNG imports. Brazil more than tripled its 2020 imports by receiving 7.5-million tons in 2021, surpassing the previous record of 5.8-million tons set in 2014.
The report also shows that, outside of the US, utilisation rates suffered. Throughout the year, plants across the Atlantic and Pacific basins faced unexpected outages and gas feedstock shortfalls from maturing production, dragging down average global utilisation below the previous five-year average, excluding the price-responsive shut-ins in the US in 2020.
Utilisation was particularly weak during the summer in the northern hemisphere, with non-US global utilisation averaging 11% lower than the five-year average.
Total loaded LNG supply in 2021 reached 396.3-million tons, up 5.5%, or 20.5-million tons, relative to 2020.
The largest LNG supplier in 2021 was Australia at 83-million tons, a 1%, or 600 000 t, increase, followed by Qatar at 81.3-million tons, with a 2%, or 1.6-million-ton, increase.
The US provided the largest supply growth with 25.3-million tons of additional LNG, a 52% increase, to reach 73.6-million tons, IHS Markit's research shows.