The ripples in the global LNG markets induced by geopolitical conflict seemed to have died down and greater import and export capacity coupled with continued growth in the share of renewable energy will result in a relatively stable yet uncertain LNG market in 2024. Key trends to look out for include the following:
Global LNG demand amounted to ~402 million tons in 2022 and is expected to have grown by ~8 to 12 million tons in 2023, to reach ~409 to 412 million tons.
Global LNG demand will see similar 2% to 3% growth as 2023 in 2024. While the LNG demand growth in 2022 was mainly driven by Europe substituting Russian pipeline gas with LNG imports, a milder winter in Europe and the economic slowdown in China in 2023 resulted in slower growth for LNG in 2023.
Natural gas and LNG demand in Europe fell by ~7% this year down to ~302 Bcm in 2023 from ~326 Bcm.
Russian gas imports fell ~18% year-on-year in 2023 and some of it was offset by an ~8% year-on-year growth in LNG imports, reaching ~141 Billion cubic meters (Bcm) (101 million tons) in 2023. Not only did industrial gas demand fall in Europe in 2023 but power generation also fell in Europe. At the same time, however, there was a growing contribution from renewables. Collectively, spark spreads fell and were negative suggesting weaker gas demand for power generation in 2024 as well.
Europe enacted policies mandating natural gas storage operators to maximize members’ storage during the refill season post Ukraine’s invasion by Russia – to 90% before every winter period – resulting in high storage levels.
Gas storage levels by mid-November were the highest the region has seen at over 95% or ~103 Bcm (~74 million tons LNG) with storage being almost full by December. A milder winter may result in lower gas demand and higher storage levels in 2024 beginning January compared to over 50% in 2021 and over 80% in 2022, impacting the LNG outlook for 2024.
China emerged as the top LNG importer in 2023, surpassing Japan, and is increasingly re-selling to other Asian buyers, cashing in on high LNG prices, a trend that may continue through 2024.
After a 19% slump in demand to ~64 million tons in 2022, its LNG imports rose by 11% to ~71 million tons in 2023, yet below 2021 imports of ~79 million tons. However, by September 2023, China had already surpassed its annual LNG exports to 617,000 tons, compared to 576,000 tons in 2022 and only 26,000 tons in 2021. South Korea, followed by Thailand, Bangladesh, Japan, and Kuwait are some of the importers of Chinese LNG re-exports. China’s newer contracts with U.S. LNG exporters are being written in a way that will limit destination flexibility but allow it to re-export from its shores reflecting its interest in expanding its LNG trading footprint.
Higher natural gas storage levels and muted demand created pressure on LNG prices through 2023 and expectation of a well-supplied market will continue to drive prices down.
East Asia and TTF natural gas futures averaged at ~$23/MMBtu and ~$25/MMBtu, respectively, during the 2022-2023 winter season and are expected to average lower at ~$20/MMBtu and ~$18/MMBtu, respectively, during the 2023-2024 winter season.
Qatar and Australia are not expected to significantly add to their LNG export capacity in 2024.
The North Field expansion in Qatar is not slated to start production until 2026 and new LNG trains are being constructed. Australia’ LNG exports are expected to fall from 82 million tons in 2023 to 79 million tons in 2024 mainly driven by declining production and muted demand from Asia. Darwin LNG production was suspended as its feedgas source, Bayu-Undan field is depleted and its replacement, Santos’s Barossa gas and condensate project was still only 60% complete by July 2023 before being suspended lacking necessary environmental approvals. Australia’s LNG export outlook remains uncertain.
The U.S. is the top exporter of LNG globally, exporting ~91 million tons in 2023, a jump of ~13% compared to 2022.
The two main drivers included Freeport LNG returning to full service in early 2022 adding 6 million tons per annum (mtpa) capacity and Venture Global’s Calcasieu Pass facility reaching full capacity that added another 3 mtpa. In addition to existing contracts and demand from Europe and China in the spot market, U.S. LNG demand in 2024 will come from Cheniere’s deal with Korea Southern Power (KOPSO) to supply 0.4 mtpa from 2027 through 2046, with small quantities starting in 2024.
U.S. LNG exports will continue to grow further through 2024 and may exceed 100 mtpa driven by Plaquemines Parish LNG Phase 1 (10 mtpa) in Louisiana in the later months of 2024.
However, the delay of Golden Pass LNG Trains 1 and 2 (6.5 mtpa) in Texas will create a significant dent in the export outlook and result in uncertainty in the market. Cheniere’s 10 mtpa expansion of Corpus Christi LNG terminal in Texas, U.S. and Shell’s 14 mtpa LNG export terminal in Kitimat, British Columbia, Canada may start-up earlier than planned by late 2024 and support LNG supply growth.
U.S. Henry Hub gas prices averaged $2.53/MMBtu in 2023, a drop of 61%, compared to $6.45/MMBtu in 2022.
Henry Hub prices are expected to average $2.79/MMBtu in 2024, an increase of 10% compared to 2023. For the winter season of 2023-2024, gas prices are expected to be higher reaching $3/MMBtu from January through March.
The U.S gas production growth is estimated to have grown by 3% (5 billion cubic feet per day or Bcfd) in 2023 and will grow by 2% (1.8 Bcfd) in 2024, mainly driven by the improved well productivity in the Permian region and higher crude oil prices.
The Permian is expected to grow by 11% (2.2 Bcfd) in 2023 and by 6% (1.4 Bcfd) in 2024 mostly as associated gas production from oil wells. Permian pipeline takeaway capacity will be sufficient through mid-2024, when 2.5 Bcfd Matterhorn Express Pipeline is expected to come online. Appalachian gas producers on the other hand will likely keep the production flat averaging ~25 Bcfd during 2024 as they did in 2022 and 2023, with low possibility of new pipeline capacity being built.
Panuswee Dwivedi
