LNG News Weekly Date 29th MAY 2020

HAMMERFEST LNG TO REMAIN OFFLINE UNTIL MID-JUNE

The Hammerfest LNG export plant in Norway's far north will remain offline for scheduled maintenance until June 18, according
to data published on the website of its operator Equinor. The plant was shut down for maintenance on May 15, and had been
due to return to operations in two weeks, but its restart was delayed. Hammerfest LNG was launched in 2007 and produces
up to 4.3mn mt/yr of LNG (5.85bn m3 pre-liquefaction). It liquefies gas from the Snohvit field in the Barents Sea, receiving
it via a 160-km pipeline. The closure of the terminal has led to a drop in output by 18mn m3/d, according to Equinor. source :
www.naturalgasworld.com

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MARCH LNG BEATS TURKEY'S PIPELINE IMPORTS
Turkey imported more LNG than pipeline gas in March, the first month this has happened, as it took advantage of historically
low spot prices. At 2.06bn m3 equivalent, it was more than twice last March's 950mn m³, the state energy regulator Emra
reported May 28. LNG accounted for 52.5% of the total, which was down 8.2% on March 2019 at 3.9bn m³. Qatar and US
supplied 38% and 18% of the total LNG with the US more than tripling its volume year on year as more capacity has come on
line. More than half the pipeline gas came from Azerbaijan; 557mn m3 came from Iran (down a third, year on year); and only
389mn m3 came from Russia, historically its biggest supplier and this March down 72% yr/yr.The pipeline carrying Iranian gas
to Turkey exploded in Turkey on the morning of March 31, cutting off supplies, and has not been repaired yet despite offers
of help from Tehran. For Q1, Turkey’s LNG imports were 6.71bn m3 equivalent, about 34.7% more than the same period of
2019, while pipeline gas imports fell 6.4% yr/yr to 8.47bn m3. source : www.naturalgasworld.com

First newbuild LNG carrier for Nakilat-Maran JV

Managed by Nakilat, Global Energy is the first of four LNG carrier newbuilds for Global Shipping Co Ltd, a joint venture owned
60% by Nakilat and 40% by Maran Ventures Inc. All four newbuild LNG carriers will join Global Shipping by the end of 2021,
bringing Nakilat’s fleet to 74 vessels – about 12% of global LNG fleet in carrying capacity. Nakilat chief executive Abdullah Al
Sulaiti said, “We are committed to growing our fleet in a sustainable manner to meet the rising demand for clean energy
transport globally. Adding this technologically advanced newbuild to our fleet not only gives us a competitive edge, but also
allows us to provide additional capacity and flexibility to our customers, which is important in a dynamic marketplace.” Added
Mr Al Sulaiti, “The steady expansion of our fleet through the acquisition of these four newbuilds and the second phase fleet
transition that has already commenced, comes as part of our efforts to maximise returns for our shareholders and strengthen
our position as the leading transporter of clean energy.” Maran Ventures chairman John Angelicoussis said “Nakilat has been
a strategic partner for many years and we are pleased to be taking delivery of this first LNG vessel under our new Global
Shipping joint venture. We are confident these high specification vessels built by DSME and now managed technically and
commercially by Nakilat, will provide charterers with a first-class LNG shipping service.” Mr Al-Sulaiti added “We have seen a
shift in terms of management and vessel technology in the industry, which we have taken into consideration. Constructed in
South Korea, the four modern vessels each have a cargo carrying capacity of 173,400 m3, equipped with some of the most
advanced technology in the market today, with two of them equipped with ME-GI and the other two with X-DF propulsion
technologies. These vessels also feature modern structural design and employ other advanced technologies.” The Angelicoussis
Group is a privately held group of shipping companies with a fleet of over 150 vessels in operation and under construction.
Maran Ventures is the LNG shipowning arm of the Angelicoussis Group that employs Maran Gas Maritime to operate its fleet
of 33 LNG carriers and supervise the construction of an additional 12 LNG carriers, including one floating storage and
regasification unit, at DSME. source : www.rivieramm.com

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Cameron LNG implements ‘non-contact’ LNG loading
procedure
Loading a ship with LNG cargo traditionally requires person-to-person contact in both confined and non-confined areas of the
LNG cargo ship for 24 hours or more, involving on average 14 people from both the ship and shore tasked with executing
commercial documents. Under Cameron LNG’s newly implemented procedure, only four Cameron LNG personnel need to go
on board the ship and work with only two ship crew for less than four hours – fewer than one-third the number of people and
only 15% of the contact time. Enhanced equipment disinfecting, health screening and required use of personal protection
equipment further reduces the potential for transmission of Covid-19, increasing the safety of both Cameron LNG employees
and LNG ship’s crew, explained Sempra Energy. Digitalisation is also figured into the new procedures. Sempra LNG said the
team at Cameron LNG is working to further improve this new process by incorporating additional technology like loanable
mobile high-speed internet hotspots for LNG ships and cloud-based tools that could further streamline the document process.
In May, Cameron LNG’s third train began producing LNG, with commercial operations set to begin in Q3 2020. This would
complete the first phase of development at the 12-mta Cameron LNG. Cameron LNG is jointly owned by affiliates of Sempra
LNG (50.2% interest), Total, Mitsui & Co, and Japan LNG Investment, a company jointly owned by Mitsubishi Corporation and
Nippon Yusen Kabushiki Kaisha. source : www.rivieramm.com

GasLog takes delivery of JERA-chartered LNG carrier

The vessel immediately commenced a 12-year charter with LNG Marine Transport Ltd, the principal LNG shipping entity of
Japanese firm JERA. GasLog’s CEO Paul Wogan said “I am very pleased to announce the delivery of the GasLog Wales and
commencement of her 12-year charter to JERA, one of the world’s largest LNG buyers. The vessel is the second of seven
vessels we will be taking delivery of through the third quarter of 2021, representing approximately US$145 million of incremental
EBITDA per annum once fully delivered. I want to thank our crew, site team and shore staff as well as our partners at Samsung
for their hard work and dedication in delivering the GasLog Wales safely and on budget, despite the many challenges presented
by the Covid-19 pandemic.” GasLog Wales, an 180,000 m3 cargo capacity newbuild LNG carrier is equipped with dual fuel
medium speed propulsion (X-DF engines) and Mark III Flex Plus containment system. GasLog has taken delivery of vessels
GasLog Warsaw in 2019 and most recently GasLog Windsor in April 2020. The company also held its annual AGM on 14
May 2020 and announced the election of six directors: Peter G Livanos, Bruce L Blythe, Donald J Kintzer, Julian R Metherell,
Anthony S Papadimitriou and Paul Wogan. Shareholders also approved the appointment of Deloitte LLP as GasLog’s
independent auditors for the fiscal year ending December 31, 2020. source : www.rivieramm.com

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NAKILAT ASSUMES CONTROL OF AL KHARAITIYAT LNGC
Qatari shipowner Nakilat has assumed full ship management and operations of Q-Flex LNG carrier Al Kharaitiyat from Shell
Trading and Shipping Company as part of the second phase of its planned fleet management transition programme, it said on
May 27. With a cargo-carrying capacity of 216,300m3, Al Kharaitiyat is wholly-owned by Nakilat and chartered by Qatargas.
The vessel was built in South Korea by Hyundai Heavy Industries, delivered in June 2009 and has been in service ever since.
Al Kharaitiyat is the second vessel that will come under the management of Nakilat this year as part of this second phase
transition, bringing the total number of vessels managed by the company to 20, comprising of 16 LNG and 4 LPG carriers.
source : www.naturalgasworld.com

SIEMENS WINS DEAL AT GOLDEN PASS LNG

Siemens Gas and Power is set to supply three cryogenic boil-off gas (BOG) compressor trains for the Golden Pass LNG
export terminal in Sabine Pass, Texas, the German engineering firm said in a statement on May 27. The company received a
contract for the equipment from CCZ, a joint venture between Japan's Chiyoda International and the US' McDermott International
and Zachry Group. They are serving as contractors at the three-train 5.2mn mt/yr terminal project, which is operated by Qatar
Petroleum (QP) and ExxonMobil. Siemens will engineer, manufacture, test, install and commission the three single-shaft
centrifugal BOG compression packages. Each will be driven by a 6.8-MW electric motor. It will provide these electric motors
and electric variable speed drives under a frame agreement, it said, as well as steam turbine generator sets. "With 90% global
market share and a fleet that has accumulated more than 4.2mn hours of service, Siemens Gas and Power is a worldwide
leader in cryogenic boil-off gas compression,” Matthew Russell, vice president for LNG at Siemens' energy oil and gas division,
commented. "We believe our expertise in the design and manufacturing of BOG compressors, along with our strong presence
in the LNG market, played an integral role in securing the Golden Pass compression contract." Exxon and QP took a final
investment decision on the $10bn Golden Pass project in February 2019 and first gas is expected in 2025. source :
www.naturalgasworld.com

RUSSIAN NOVATEK TO PROMOTE MURMANSK INVESTMENT

Russian independent gas producer and LNG exporter Novatek signed May 27 a long-term co-operation agreement to promote
social and economic development in the region of Murmansk, it said. Murmansk, a major port on Russia's Arctic coast west
of the Yamal Peninsula, is to be home to an LNG research and construction base. CEO Leonid Mikhelson and Murmansk
governor Andrey Chibis agreed to work together in creating a "favourable investment climate and attracting investments to the
Murmansk region." It covers healthcare and education, social and medical infrastructure, and sports, culture and arts activities.
Novatek is building an LNG transhipment terminal in Murmansk to enable the more economic use of its winterised tankers that
ship LNG to Europe from the Yamal and – eventually – Gydan peninsulas. Novatek is also building an LNG construction
centre. “This represents not only an investment in the future of the Russian gas industry and the creation of new technologies,

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but also the development and economic vitality in the Murmansk region. We pay special attention to sustainable development
in the regions where we operate by creating new jobs, improving local infrastructure and implementing social programs aimed
at increasing the living standards of the people,” Mikhelson said. source : www.naturalgasworld.com

POLAND BOOKS NEW CAPACITY AT LNG TERMINAL

Polish state-owned natural gas import monopoly PGNiG will be able to import 8.3bn m³/yr at the country's state-owned LNG
terminal in Swinoujscie, it said in a May 22 statement newly published in English. The terminal's capacity is being expanded
with effect from 2024 and the contract lasts for 17 years. However the operator's website gives capacity as only 7.5bn m³/yr,
at that date, up from 5bn m³/yr today. The Polish government said that the terminal "is one of the pillars of Poland’s natural
gas security, and its extension is a step towards strengthening the country’s energy independence. PGNiG’s rising prominence
on the LNG market demonstrates the fast growth of companies supervised by the ministry of state assets." No other companies
have been named in connection with the terminal's use. PGNiG said it was "satisfied with the regasification capacity we have
been allocated. It will enable us to effectively implement PGNiG’s plans to diversify gas imports and expand its trading activities
on the gas market in central and eastern Europe." Polskie LNG, the operator of the terminal, said that in an open season
procedure that started in February, PGNiG had been allocated an annual LNG regasification capacity of 6.2bn m³ in 2022–
2023 and 8.3bn m³ from 2024 onwards. The two have yet to sign the contract. At present, PGNiG has 5bn m³/yr of
regasification capacity booked at the terminal, which is all of the plant; but it said "its needs are constantly growing. PGNiG
receives a growing number of spot cargoes, also increasing gas volumes imported from the US under long-term contracts. To
note, PGNiG will receive some 1.95bn m³ of LNG after regasification annually in Swinoujscie under a contract with a US
company Cheniere starting from 2023." Qatar and Norway are among PGNiG's other foreign suppliers as it reduces imports
from Russia. Last year, LNG accounted for 23% of PGNIG’s total gas imports, compared with just 8.4% in 2016. The share of
imports from countries east of Poland fell from 89% in 2016 to 60% in 2019, it said. Its contract with Gazprom, against which
it won a major price arbitration dispute, expires next year.
source : www.naturalgasworld.com

KUNLUN'S JIANGSU TERMINAL RECEIVES 1ST SPB VESSEL

Kunlun Energy-operated Jiangsu LNG terminal recently received its first self-supporting prismatic type B (SPB) vessel, Vitality,
that unloaded 65,000 metric tons of LNG, Kunlun’s parent company, CNPC, said on May 26 in a statement. Type B tanks
limit sloshing problems, an improvement over membrane LNG carrier tanks which may break due to the sloshing impact,
therefore destroying the ship's hull. Earlier this year, CNPC said that the third phase expansion of the Jiangsu terminal was
underway. Two new 200,000-m3 storage tanks will be built, along with related infrastructure. At present, the terminal has a
handling capacity of 6.5mn mt/year. Once the third phase is complete, the terminal will have three 160,000 m3 and three

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200,000 m3 LNG storage tanks. The total tank capacity will increase from the current 680,000 m3 to 1.08mn m3. Kunlun
operates three LNG import terminals – Jiangsu, Tangshan and Dalian. The Jiangsu terminal is located in the Jiangsu province,
the Tangshan terminal in the Hebei province and Dalian terminal in the Liaoning province. source : www.naturalgasworld.com

INDIA'S APRIL LNG IMPORTS SEE A SHARP DROP

After rising by a whopping 68% yr/yr in February and 20% yr/yr in March, India’s LNG imports in April witnessed a steep
yr/yr decline owing to the lockdown imposed by the Indian government late-March to control the spread of Covid-19. The
lockdown has impacted gas demand and major LNG importers had to issue force majeure notices. India’s LNG imports last
month were 1.95bn m3 (about 1.4mn metric tons), down 29.4% compared with the corresponding month of the previous year,
according to the data published by the Indian oil and gas ministry's Petroleum Planning and Analysis Cell on May 27. A decline
in Indian LNG demand is bad news for the already oversupplied global LNG market. India, the fourth-largest LNG importer in
the world, had been a bright spot as it soaked up large volumes of the commodity. The country's cumulative LNG imports
during the 12 months to March 31 (fiscal 2019-2020) were 33.68bn m3 (about 25mn mt), up 17.2% compared with the previous
year. The 2019-2020 imports were the highest for any financial year on record. Although there have been some relaxations
in recent weeks, and economic activities have picked up, India remains under lockdown till May 31. source :
www.naturalgasworld.com

MITSUI OSK LINES TO SUPPLY FLNG FOR GERMANY

Japanese shipowner Mitsui OSK Lines (MOL) and German LNG Terminal Wilhelmshaven (LTW) have signed a contract for a
263,000 m³ floating storage and regasification unit (FSRU), LTW owner Uniper said May 26. The vessel will be built by
Korea's Daewoo Shipbuilding Marine Engineering Co in Goeje and chartered by LTW for 20 years. It has been planned and
custom designed by the two contracting parties in accordance with the local and environmental requirements for the German
market and the Wilhelmshaven site. Uniper expects to hold a competitive tender this summer to check the binding interest
expressed by potential customers in the capacity. "Once the approval process for the project is completed, the final investment
decision will be made subject to economic viability," Uniper said. The regasified LNG will be pumped under the sea to the
deepwater port facilities and from there into the nearby high-pressure network, removing the need for regasification facilities
on land. "This optimised planning will minimise the environmental impact both on land and on the seabed by a non-disruptive
crossing of the natural habitat identified in the environmental studies," Uniper said. Uniper COO David Bryson said the
agreement was "an important milestone for both parties on the journey to establishing an LNG terminal in Wilhelmshaven" and
would "build on the successful and trusting collaboration with MOL on previous major projects in the LNG ship market." MOL
executive officer Hiroyuki Nakano said the "unique tailored" FSRU design would meet all customer requirements for an
economical regasification service in accordance with German environmental regulations. Our mission from this special moment

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is to execute the project and deliver the unit on time." Wilhelmshaven is Germany's only deep-sea port and has the optimal
infrastructure for offloading LNG tankers of all sizes. LNG ships are often hundreds of meters long, but they can land and turn
here without difficulty, giving it a "significant economic advantage over other ports." Its proximity to the German long-distance
gas pipe network and to important gas storage facilities makes integrating the system into the gas infrastructure comparatively
simple and cost-effective. There is at least one other LNG terminal planned for the German coast: one at Brunsbuettel, which
is to be owned by German Oiltanking and two Dutch companies Gasunie and Vopak; and possibly a smaller one for bunkering,
to be owned by Belgian transmission system operator Fluxys and Russian Novatek. soruce : www.naturalworld.com

Qatar ready to discuss India’s demand to cut long-term LNG

prices
Qatar has agreed to discuss India’s demand to renegotiate the long-term LNG contract, reversing the stand it took just four
months ago, as crumbling spot prices and collapsing demand during the pandemic has put global suppliers under tremendous
pressure. “Qatar was earlier cold to the idea but has now agreed to discuss. A meeting is being arranged and should happen
over the next week or two,” said a person familiar with the matter. Executives at Petronet LNGNSE 6.02 %, which imports
Qatari gas are likely to meet via videoconference with Qatar gas executives soon to discuss how prices can be cut for the 8.5
million tonne a year of supply deal that expires in 2028. Petronet LNG is also planning to approach ExxonMobil to cut prices
on its 20-year-contract for 2.5 million tonnes a year of LNG from its Australian project, said the person. The decision to
discuss Indian demand is a climbdown for Qatar, whose energy minister had rejected at January-end Indian petroleum and
natural gas minister’s suggestion to reopen the contract. India had then demanded delinking LNG price from crude oil rates,
as the spot rate in the gas market had sharply fallen to around $4 per mmBtu while oil prices were around $60 a barrel,
keeping long-term gas prices high at around $8-9 per mmBtu. Since then oil prices have fallen to $35 per barrel, going below
$20 per barrel for some days in between. But LNG prices too have crumbled, falling to a record low of $1.3 per mmBtu last
week. The Indian side would like Qatar to cut LNG prices either by delinking it from crude and linking it to some gas market
benchmarks or lowering the Brent-linked slope that determines the price. Qatari LNG is priced at a slope of 12.7% of the three-
month average Brent prices. The recent fall in crude oil prices has lowered Qatari LNG rates to about $5 per mmBtu, which
is much lower than the rates three months ago but appears expensive compared to that in the spot market. Some of the recent
global LNG supply contracts have been signed at a slope of around 10.5% and the Indian side is hopeful that Qatar could
extend similar terms to the old buyers. “It’s a buyer’s market. Globally, suppliers are today far more worried about placing their
volumes than about prices,” said an industry executive, who did not wish to be identified. Petronet had renegotiated long-
contract with Qatar in 2015 under which Qatar had agreed to price gas at a three-month average of Brent crude instead of
the 60-month average used until then. In return, Petronet agreed to buy an additional one million tonne per annum of LNG
from Qatar. But this time, India may not be in a position to offer to buy more as domestic demand for gas is not so strong,
said industry executives. source : www.economictimes.indiatimes.com

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CHINA'S LNG IMPORTS IN APRIL UP 13%
China’s LNG imports in April totalled 5.1mn metric tons, up 12.9% yr/yr, customs department data published May 23 showed.
Although imports have witnessed a recovery in the last couple of months, the growth rates are significantly lower due to the
Covid-19 pandemic's impact on demand. Chinese LNG imports surged over 35% yr/yr in April 2019. China's LNG imports
during the first four months of the year were up 4.6% yr/yr to 20.30mn mt. Meanwhile, China’s pipeline gas imports in April
were 2.63mn mt, down 15.5% yr/yr, the data showed. Pipeline gas imports in the first four months were 12.03mn mt, down
3.2% yr/yr. source : Natural gas world

Minerva locks in newbuilding charters

Greek shipowner Minerva Marine has locked in employment for two of five LNG newbuildings it has on order at two shipyards,
brokers said. The Andreas Martinos--controlled company is understood to have secured business for the first of its five vessels
to an energy major charterer for a three-year period. Some brokers named the charterer as Shell, while others said the vessel
was fixed to BP. The initial deal on a 173,400-cbm LNG newbuilding at DSME is said to have been concluded some time
ago, possibly late last year. But details have only recently started to emerge.Those following the ME-GI ship, currently listed
as the Minerva Psara, said it will be delivered in November, although it is shown on databases as due for handover in January
2021.Brokers said Minerva has also fixed a second ship more recently but to a different energy major charterer. While rates
have fallen for LNG carriers in recent weeks, brokers pegged them at levels in the mid to high-$50,000 per day range for
period charters of this length on ex-yard newbuildings. The Greek owner made its break into LNG shipping in March 2018,
joining the crush at yards for gas tonnage and ordering two vessels at DSME priced at just shy of $183m each. The company
then shifted over to Samsung Heavy Industries in early December where Minerva contracted a single 174,000-cbm vessel
with X-DF propulsion. It was priced at around $185m for delivery in January 2021. A second vessel was added at SHI before
the year closed and in May 2019 the company firmed up a third vessel at the yard, giving it a total of five, apparently
speculatively-contracted LNG newbuildings. The SHI ships are being built with GTT’s Mark III Flex Plus containment system,
which offers a 0.07% cargo boil-off rate. Earlier this month Trade-Winds reported that around one-third of on-order LNG
newbuildings remain unchartered. Of 132 large LNG carriers and floating storage and regasification units on order, 45 appeared
to have no firm charters, which amounts to about 34%. Some 30 LNG carriers are due for delivery this year. source : www.tradewinds.com

STATE OF THE GLOBAL LNG INDUSTRY

The global LNG industry grew larger and more flexible during 2019, but also increasingly oversupplied and low-priced. It
entered 2020 facing a crisis, with added demand challenges, exacerbated by the Covid-19 pandemic. The combination of
these factors is accelerating reshaping of the industry. Record numbers of final investment decisions for gas liquefaction projects
were taken in 2019, mostly in the US, Mozambique and Russia, totalling 70.8mn mt/yr. This record volume of sanctioned
liquefaction projects was underpinned by the expectation of ever-growing LNG demand globally. But in view of the pandemic

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and the changes this is bringing, this expectation will now need to be revised. Many of these sanctioned projects were in the
US, totaling 30.1mn mt/yr, thanks to the availability of abundant shale gas. Africa also added 20.9mn mt/yr of sanctioned
liquefaction capacity in 2019. Also included was Arctic LNG 2 in Russia, with Novatek developing liquefaction facilities in the
Arctic region, where projects are able to leverage abundant, cheap, gas resources, and geographic flexibility in exporting to
both Europe and Asia. By December 2019, 123.3mn mt/yr of liquefaction capacity was under construction or sanctioned for
development (Figure 1), with about 40% in the US. Excessive supply of shale gas is doing to the LNG industry what shale oil
has done to the oil industry – uncontrolled supply with optimistic forecasts of demand, especially Chinese demand.

According to IGU’s latest report, with 24.35mn mt/yr new liquefaction capacity additions expected in 2020, that global
liquefaction capacity will reach 454.8mn mt/yr by end of the year. This is well in excess of demand, expected to remain
around 2019 levels, ie about 355mn mt/yr. But that was before the impact of the Covid-19 pandemic. Projects at pre-FID
stage have reached 907.4mn mt/yr, with the great majority coming from the US and Canada: it needs to be borne in mind
that many projects were chasing the same customers, so even in the rosiest scenario there is a lot of double counting.
Africa, with 93.3mn mt/yr pre-FID liquefaction capacity proposals, could emerge as a key LNG production region if these
projects materialise. But with the current weak global LNG demand climate and persistently weak global prices, many of these
are not expected to progress.

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There are more than a dozen liquefaction plants scheduled for FID in 2020 and if buyers remain hesitant to sign long-term
agreements, most of these may be deferred and some will be cancelled. With most majors announcing significant spending
cuts this year and next, investment decisions will be delayed.
For example, ExxonMobil has already announced it would not go ahead with FID on its Rovuma LNG plan in Mozambique this
year. And NextDecade announced May 19 it would defer sanctioning its 27mn mt/yr Rio Grande project in Texas until next
year. Even more drastic, Shell has withdrawn from the Lake Charles II LNG project in the US. But some projects, especially
those that are low-cost, are still progressing. Shell announced early May that all conditions have been met for FID on a new
liquefaction unit at Nigeria LNG. Along with its partners, it will also be an offtaker, and the extra 8mn mt/yr of output will
replace declining equity output elsewhere. In addition, Qatar LNG has reconfirmed its plans to expand its liquefaction capacity
– through the Qatar North Field LNG Expansion project – by 30mn mt/yr by 2025, with another 19mn mt/yr to be added by
2027. This is the world’s most cost-competitive source of LNG. New LNG export projects, and developers, need to brace
themselves for a continued glut as further production is added, outpacing global demand, contributing to prolongation of
depressed prices. This may be followed by a period of recovery, but while it is relatively easy to see what is coming on the
supply side, given the long lead times for liquefaction projects, predicting demand is much more difficult. New liquefaction
capacity added in 2019, 42.5mn mt/yr, is expected to prolong excess supply in the global LNG market beyond 2020. And
then there is also the 123.3mn mt/yr of liquefaction capacity under construction or sanctioned for development, in December
2019, still to come. Should all these projects, and some of those at pre-FID stage, eventually materialise – even if construction
is delayed by a year or two – it would extend the expected period of oversupply far into this decade. And even more so, if
the impact of the pandemic on the global economy results in a prolonged weakening of gas demand.
LNG and gas pricing
Global gas prices were at record lows in 2019 (Figure 2), only to be beaten by even lower prices in 2020 (Figure 3). Prices
in 2019 were impacted by increasing natural gas production, the commissioning of new LNG export infrastructure and limited
demand response from Asian markets.

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With LNG demand in Asia flat throughout the summer of 2019, more and more volumes headed to Europe. And even though
prices increased, winter prices in northwest Europe remained at their lowest level in ten years.

So far, 2020 is proving to be even more challenging for natural gas and LNG producers, as – with the added impact of the
Covid-19 pandemic on the global economy – prices have become even lower (Figure 3). Prices in Asia, Europe and the US
have converged to below $2/mn Btu. The current market environment lowers the expectation of seeing a significant recovery
in prices back to 2019 levels any time soon.
Challenges
Challenges that will influence or affect the LNG industry in the years ahead include:
• Russian pipeline gas versus LNG in Europe;
• New barriers to the development of LNG projects such as carbon and methane emissions and
environmental, social, and governance (ESG) criteria playing an increasing role in new project
sanctions and investment;
• Improved, reliable, verifiable and credible methods to measure and reduce such emissions;
• The role of gas/LNG in a future “renewable el ectricity world”;
• LNG demand in China – a faltering economy, LNG price levels, regional demand dynamics, and
security of supply concerns;
• Broader use of LNG portfolio approaches, relying more on short -term and spot markets to allow for
arbitrage and hedging as energy prices change;
• Further commoditisation
These all pose potential challenges, but also opportunities, to the future of gas and LNG markets, requiring solutions.
For most of its history, LNG trade has been driven more by supply than demand. Producers output as much as they can and
the market somehow balances, as any ‘surplus’ cargoes find a home in a market of last resort. 2020 may be the year when

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this assumption ceases to apply. As a result of reduced industrial and commercial activity, LNG buyers have been scaling
down orders, and in some cases refusing cargoes by invoking force majeure. Buyers in Asia and Europe – where storage is
almost full – have cancelled about 20 to 25 US LNG cargoes for June loading. Prices are now at levels that threaten the
economics of not just new projects, but also existing LNG production, with some liquefaction plants having to shut-in production
– especially in the US. Goldman Sachs is forecasting up to 30mn m³/d of US shut-ins this year.
Prices are now so low (Figure 3) that US LNG exporters are trading at less than half breakeven levels, weakening their position
even further. Chesapeake Energy, the once-pioneering shale gas producer, said early May that “it is no longer able to access
financing and is considering a bankruptcy court restructuring of its over $9bn debt if oil prices don’t recover from their sharp
fall caused by the Covid-19 pandemic.”
But so far the impact of the pandemic has not been felt as strongly by the gas industry as oil. Demand in 2020 may remain
more or less flat, but it still is very difficult to forecast. However, the International Energy Agency (IEA) estimates a 5% drop
in global gas demand in 2020. With new LNG production expected to come online this year, the biggest problem is increasing
oversupply: it may take years before this problem fully dissipates. This is reflected by gas prices in 2021 and 2022
being revised downwards by lower economic growth and LNG oversupply forecasts. With oil prices staying low, oil-indexed
LNG prices will also stay low. And with new, and already sanctioned, liquefaction projects continuing to come into the market
until 2027 – including Qatar LNG – the pressure on prices is expected to continue. But once the threat from the pandemic is
over and the global economy starts picking up, near-term LNG demand will improve from its lows during the first half of 2020
and gas prices are expected to see some improvement (Figure 4), but stay below 2019 levels. Such signs are already
beginning to emerge, starting with China as it returns to work.

The LNG industry was already oversupplied before it entered the pandemic crisis. This will not change. It will continue on
shaky ground for longer. Weak Asian demand and increasingly saturated European gas markets – and storages – mean that
the LNG oversupply problem and low prices will persist for some time to come. As Cedigaz points out, “If oil prices recover

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(Sale and Purchase) (Gas projects)
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from the current lows, thus resulting in a significant and prolonged disconnection between oil-indexed prices under long term
contracts and spot gas prices, then buyers may be pressured to look at renegotiating the long-term oil indexed contracts and
even move away from oil-linkage in new contracts.” This is already happening. There is an additional challenge. The role of
gas as an energy transition fuel is increasingly under question as, approaching COP26, pressure to reach Paris Agreement
targets mounts and Europe carries on with its Green Deal, with an expectation that demand may peak in the 2030s. However,
provided it remains cheap, and the industry takes the opportunity to restructure and reshape itself, with demand picking up
natural gas will still have a key role in providing reliable and cleaner energy well into the future. Source : WWW.NaturalGasWorld.com

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per the citation given in the report/newsletter herein. Under no circumstances will CYGNUS ENERGY, its owners, employees, gents or affiliates be held liable by any person or entity or institution or company for decisions made or actions taken by any
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consequences arising therefrom. Figures are based on latest available information, which is subject to subsequent revision and correction. The views expressed are those of CYGNUS ENERGY and do not necessarily reflect the views of any other
associated company. NEWS AND SOURCE: LNGWORLDNEWS, LNG INDUSTRY, THE HINDU BUSINESS, ARGUS MEDIA, PETROWATCH, REUTERS, IGU LNG REPORT 2018, TRADEWINDS, MONEYCONTROL

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