Liquefied natural gas shipped to northwestern Europe’s regasification terminals in the United Kingdom, Belgium, and the Netherlands more than doubled in the first quarter of 2015, compared with the same period in 2014.
The U.S. EIA said in its weekly gas update that this increase came about as reduced demand and decreasing spot prices in Asian markets made more LNG available to spot markets in the Atlantic Basin. LNG shipments to the U.K. and Belgium averaged 2.0 Bcf/d in January and February 2015, a 122% increase over the same period last year, when LNG shipments averaged 0.9 Bcf/d.
In Asian markets, mild weather, high LNG stocks, and weak demand for natural gas in the power sector contributed to lower demand for spot LNG cargos in the region for the first three months of 2015. In the three largest Asian markets—Japan, South Korea, and China—LNG imports declined by 6% (1.3 Bcf/d) in the first quarter of 2015 compared with the first quarter of 2014. South Korea experienced the largest decline (1.36 Bcf/d) year-on-year in the first quarter of 2015 when high storage inventories and weak power sector demand reduced the need for spot LNG. Chinese LNG imports decreased 0.25 Bcf/d in the first three months of 2015 from a year earlier. In contrast, Japan increased its LNG imports by 0.31 Bcf/d, EIA said.
While northwest European imports of LNG doubled in the first quarter of 2015 compared with the same period in 2014, sendout from regasification terminals increased even more. Total LNG regasification sendout in northwest Europe averaged 1.7 Bcf/d in the first three months of 2015, significantly higher than the average sendout of 0.5 Bcf/d in the same period last year, according to data by National Grid, Fluxys, and GTS. Last year’s winter in Europe was one of the warmest on record, with low natural gas demand and high storage stocks. However, even with the increased sendout this year, it was considerably lower than the 7.1 Bcf/d combined regasification capacity of the three countries, implying a 24% utilization rate.
Despite a colder winter in 2014-15 and relatively low storage levels at the end of the heating season, both in the U.K. and the Continent, spot prices at the U.K.’s benchmark National Balancing Point remained low in the first quarter of 2015, averaging $7.28 per million Btu, 27% lower than in the same period of last year, and their lowest level since 2010. While the NBP price briefly spiked in February to $7.75/MMBtu, following the announcement of a continued cap on production from the Groningen field in the Netherlands, it declined again in March and remained around $7/MMBtu in April. The price decline was driven in part by gas-on-gas competition with the pipeline imports to Continental Europe, where prices for pipeline gas with contractual linkages to oil have been decreasing, given the decline in oil prices.
With spot LNG prices in Asian markets declining below NBP prices, it was more advantageous for sellers to send spot cargos to northwest Europe, as transportation differentials for Middle Eastern and Atlantic Basin supplies favor European markets over Asian markets. Japan spot prices in March, at $7.60/MMBtu, were the lowest since the summer of 2009, and converged with NBP prices for the first time since 2010. This is primarily a result of lower Asian demand, additional Pacific Basin LNG supply, and, with declining crude oil prices, decreasing oil-linked contract LNG prices, the pricing mechanism for most Japanese LNG imports.
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Image: EIA