news optimism waning for steady lng demand recovery, poten

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WEDNESDAY, JUNE 24, 2020 - VOL. 1, NO. 176

NEWSOptimism Waning for Steady LNG Demand Recovery, Poten Says

The chances for a sustained recovery in global natural gas de-mand are being threatened by economies that have been slow to start back up as countries inch out of lockdown and face a resurgence of Covid-19 cases in some parts of the world, according to shipbroker Poten & Partners.

Industrial demand remains weak in key markets, particularly those in Asia where some of the world’s leading liquefied natural gas (LNG) importers are located, while early demand recovery has been more “unpredictable and volatile” elsewhere, said Jason Feer, global head of business intelligence, during a webinar on Wednesday.

LNG demand in South Korea, Japan and Latin America has been particularly hard hit, he noted. While the World Health Organization on Sunday reported the highest daily infection increase yet, with the largest spikes in North and South America, South Korea and Japan have better managed the outbreak. But Feer said the global economic slowdown has hurt baseload importers in Asia.

Meanwhile, Chinese demand has rebounded sharply in recent months as lockdown measures largely eased there and pent-up consumer demand drove gains, but those appear to be falling off, Poten said. In India, where some of the most stringent lockdown measures have been imposed, gas demand increased on strong spot buying for fertilizers, but it’s unclear if such patterns would continue.

“It’s something to watch out for, is that something that can be sustained,” Feer said of India, “or are we just sort of meeting initial pent-up demand when economies open up?”

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Demand weakness is perhaps more noticeable than it was a few months ago. Floating LNG storage levels are approaching record highs, as the number of laden vessels worldwide hovers near 30. Feer said the volume of LNG currently floating represents about 58% of the typical demand in June. He added that the highest Poten has ever recorded was roughly 61% of monthly demand, saying that the current elevated inventories are a bearish signal for winter.

LNG producers in the United States and across the world are responding to the oversupply and low prices. U.S. cargo cancella-tions are expected to continue through September, Feer said, with

...cont' pg. 4

Shell CEO Sees Covid-19 as Opportunity for ‘Green Recovery,’ as Net-Zero Emissions Goals Advance 7

Daily Rundown• LNG demand recovery is once again being

threatened by a resurgence of Covid-19 • Qatar has moved aggressively to retain its market

share during the outbreak• Shell expects the pandemic to accelerate the energy

transition as it eyes net-zero emissions by 2050

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WEDNESDAY, JUNE 24, 2020

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...cont' pg. 6

See NGI’s LNG Glossary Here

. . . from NEWS - Optimism Waning for Steady LNG Demand Recovery , pg. 1

more than 40 likely in August in addition to 33 this month and 25 expected to be cancelled in July.

Australia is also reducing output as its long-term contracts al-low and on the spot market, he added, while Indonesia, Malaysia and Nigeria are cutting back their volumes too.

“The odd man out is Qatar,” Feer said. The world’s largest LNG producer is using floating storage regularly in the Asia Pacific, Atlantic Basin and Middle East regions and has been aggressive in the global spot market to retain its market share.

The country also appears more inclined to sell cheap natural gas these days.

“Traditionally, Qatar has resisted selling very, very cheaply,” Feer said. “They have really dropped that objection.”

Qatar has very low production costs and is able to sell gas at lower prices. As U.S. cargoes have been canceled, the country has

also stepped in with spot volumes to serve offtakers that have elected not to lift LNG in North America.

While the supply and demand balance in Europe has improved somewhat in recent weeks, the outlook is still cloudy there as well.

Leading gas benchmarks on the continent hit record lows and were trading around $1.00/MMBtu last month. But that opened the arbitrage window to Asia and supply was diverted there. Europe has also accounted for more than 50% of U.S. export cargoes this year, and as American cancellations have mounted, less LNG imports have arrived in Europe.

European gas prices have made a comeback since then, while the overall reduction in LNG imports has helped to slow the pace of injections into gas storage sites. “This is giving the market some ad-ditional relief that we won’t hit capacity of storage before the end of injection season,” said Poten analyst Oleg Vukmanovic.

European storage is currently filled to 78% of capacity, but the supply and demand balance now has the continent on track to



fill storage by the end of September, or closer to the winter heating season. It was previously on track to fill by August, Vukmanovic said.

“That’s a positive for prices, and it reduces the risk of a collapse” in the Dutch TitleTransfer Facility into negative territory.

Poten expects LNG demand to decline by 5-6 million tons (Mt) this year and growth to return to a level of roughly 376 Mt in 2021, up by about 9-10 Mt year/year. Similar growth levels are expected in 2022, driven primarily by markets in Asia. n



...cont' pg. 9

ENVIRONMENTShell CEO Sees Covid-19 as Opportunity For ‘Green Recovery,’ as Net-Zero Emissions Goals Advance

Royal Dutch Shell plc is not backing off its ambition to become a net-zero emissions energy operator by 2050, and in fact, management expects Covid-19 to accelerate the energy transition.

In a recorded video for the global workforce, CEO Ben van Beurden said Tuesday there was an “opportunity of a green recovery” as the world slowly emerges from the pandemic.

“This is a key moment for us all,” he said, “for governments, for businesses and individuals, to pull together to make sure that as the world emerges from this unprecedented crisis, we all make the right choices for a better world.”

Society “must remain focused on the longer-term challenge of climate change because it hasn’t gone away. It still needs urgent action.”

Shell’s ambition to become a net-zero emissions energy business by 2050, introduced in April, remains “so crucial,” the CEO said.

“Our current business plans will not get us to where we need to be, and we will have to change those plans over time,” he told the workforce. “It won’t be easy, and of course, there will be obstacles to overcome. But like many others, I believe that society now has a unique opportunity to accelerate toward a cleaner energy future.”

BP plc CEO Bernard Looney made similar remarks earlier this month. The London-based supermajor in February also has set a net-zero emissions goal by 2050.

The “combined health and economic shock” from Covid-19 “is bound to reshape the global economic, political and social en-vironment in which we all live and work,” Looney said. “It has the potential to accelerate emerging trends and create opportunities to shift the world onto a more sustainable path.”

In the face of the pandemic, as consumers change their lifestyles, “it feels like we are at a pivotal moment,” the BP chief



...cont' pg. 8



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NGI’s LNG Insight

Wednesday, June 24, 2020

Volume 1, No. 176

said. “Net zero can be achieved by 2050. The zero-carbon energies and technologies exist today; the challenge is to use them at pace and scale, and I remain optimistic that we can make this happen.”

Shell has for some time been undergoing a restructuring to bet-ter adapt to the changing needs of its customers by “looking hard at what we do and where we invest,” said van Beurden.

Shell in February joined Dutch natural gas company Gasunie to undertake a feasibility study regarding a massive green hydrogen plant in the northern Netherlands. The plant, to be fueled by a wind farm off the coast of Groningen, could be designed to produce 800,000 metric tons of hydrogen by 2040.

Another Shell-backed investment in Norway would capture carbon dioxide and store it under the sea, van Beurden noted.

“With Covid-19, many people have experienced a sudden change, and the impact of the virus has been severe,” he said. “But this is also a moment of opportunity for people to re-evaluate what is important in their lives and emerge more united in tackling the urgent challenge of climate change.”

In related news, Wells Fargo on Wednesday said it has structured renewable energy agreements with Shell Energy North America (US) LP and Shell subsidiary MP2 Energy LLC to secure 150,000 megawatt hours a year. The energy, said the financial firm, would provide 100% of the consumption of about 1,200 Wells Fargo properties in California and the Mid-Atlantic states, and meet 100% of the company’s eligible load in California, Delaware, Maryland, New Jersey, Illinois, Ohio, Pennsylvania and the District of Columbia.

The Shell Energy contract is for seven years, while the MP2 contract is for 6.7 years. n

news optimism waning for steady lng demand recovery, poten

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