European LNG sendout at new multi-year high in November

Sendout averaged 2.55 TWh/d, up from 1.39 TWh/d a year earlier and the highest since 2.82 TWh/d in May 2011.

Following October's sendout of 2.09 TWh/d, regasification in the first two months of the gas year was the highest since 2010-11, when it was 2.34 TWh/d and averaged 2.45 TWh/d over the whole year.

LNG was being driven towards Europe on the back of weak US demand in 2010-11, with economic activity low following the global financial crisis. Growing shale gas production was also displacing the need for US LNG imports. And Qatar had expanded output from its Ras Laffan plant by around the end of 2010 to 77mn t/yr from around 30mn t/yr before 2009. And it ran the plant above this nameplate capacity in the 2010-11 gas year.

LNG was subsequently drawn away from Europe in the years following the March 2011 Fukushima disaster as Japan kept most of its nuclear generation capacity off line. Gas-fired generation compensating for lower nuclear output led to the country becoming the largest global gas importer.

The recent drive towards Europe

A similar slackening in global demand growth and a boost to global supply has driven LNG towards Europe in recent months, as it did in 2010-11.

Higher available nuclear capacity in South Korea and Japan this winter compared with the last couple of years has eroded demand for gas-fired generation. And the onset of an El Nino event, promising milder weather, has also made it less likely that aggregate heating demand will be high in the region this winter. Mild weather may also crimp demand growth in China, which has continued its coal-to-gas boiler conversion programme, albeit at a lower rate than a year earlier.

The combined effect of milder weather and higher nuclear output, on top of early stocking of winter LNG supply, may result in northeast Asia taking less LNG this winter than a year earlier.

Softer spot demand has weighed on northeast Asian LNG delivered prices, compared with European hubs encouraging more Atlantic-loaded cargoes to go to Europe.

This is while the expansion in global liquefaction capacity has been quicker in the past couple of years than at the start of the decade when Qatar boosted its output. Global liquefaction capacity is set to increase by 41mn t/yr this year after around 40mn t/yr was added last year and around 45mn t/yr is scheduled to be added next year.

A substantial share — around 24mn t/yr — of this year's expansion in liquefaction capacity is in the Atlantic basin or at Russia's Yamal LNG facility on its Arctic coastline. The proximity of these facilities to European hubs favours delivery to Europe unless premium markets elsewhere are high enough to offset the additional cost of shipping. And a knock-on effect of the rapid expansion in global liquefaction has been to push spot freight rates to record highs increasing the necessary premium.

New supply to Europe

The growth in Europe's take in recent months has in large measure been driven by LNG imports from non-traditional suppliers.

Russia's Yamal facility exported 13 cargoes in November, having started up in December last year. Most of these were delivered to European terminals, rather than shipped along the Northern Sea Route or transshipped in northwest Europe for onward delivery further east.

Europe also took substantially more US LNG supply than in the past couple of years. US liquefaction was higher than a year earlier in October-November following the start-up of the 5.75mn t/yr Cove Point facility, which exported its first cargo in March.

This additional supply pushed some European regasification terminals to record sendout.

Portuguese sendout hit a new record of 151 GWh/d, just above the previous high of 150 GWh/d reached in August 2017. And the Netherlands' Gate sendout also reached a new record of 272 GWh/d, up from the previous high of 197 GWh/d in October and minimum boil-off of just 5 GWh/d last November. The terminal's sendout dropped to 31.5 GWh/d on 1-2 December, but sendout rose again to 273 GWh/d on 3-6 December.

Gate sendout climbing close to capacity has prompted the terminal's operator to test market interest in an expansion of its regasification capacity.

Aggregate UK sendout climbed to a three-year high of 473 GWh/d after 12 cargoes were delivered in November. And sendout stepped up to 754 GWh/d on 1-6 December, with nine deliveries scheduled for 1-16 December.

Sendout from Belgium's Zeebrugge terminal dropped from October, although it remained higher than a year earlier.

And a rise in French sendout to 560 GWh/d, the highest since November 2010, from 405 GWh/d in October almost completely offset the lower Zeebrugge regasification. French sendout is nominated to slow this month from November, but still be around double the three-year December average.