Ord Minnett has analysed LNG production and exports in the Asia-Pacific region. Overall, we viewed the December 2016 data as positive and make the following key observations:
Production from the Australian-based assets was reasonable. We estimate production in December from Australian LNG projects totalled 4.2 million tonnes (Mt), down 7% from November 2016. This was mostly due to Train 1 at Gorgon being taken offline to allow Chevron to assess and address performance concerns. We estimate production at PNG LNG was up 10% to 0.69Mt.
LNG spot pricing has been strong, driven by solid demand growth trends and slow ramp-up from producers introducing new supply. Spot LNG prices in December 2016 exceeded implied oil-linked LNG contract prices for the first time ever since the 2014 introduction of the Singapore Exchange’s LNG Index Group (SLInG) spot price index for Asian LNG. Increased demand from a colder-than-usual European winter, in addition to supply-side constraints, has seen prices rise 27% for the month.
Australian producers appear to be displacing Middle Eastern supply into the traditional Japanese and Korean markets. In total, Japan and China are taking 86% of Australia’s production. Of the 64 cargoes of LNG which sailed from Australia in December, 50% (by volume) went to Japan and 36% went to China. All cargoes went to buyers in Asia for the month, with Korea, Malaysia, Singapore, Taiwan and India each taking shipments.
Based on ship movements, we estimate LNG production for the December-quarter of 2016 as follows: North West Shelf produced at an annualised rate of 17.1Mt, Pluto at 5.9Mt, Asia Pacific LNG at 7.2Mt, Gladstone LNG at 5.5Mt and Papua New Guinea LNG at 7.8Mt.
For the full report, please contact your Ord Minnett Adviser.