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Refinery demand, not OPEC, is the key to keeping oil prices above $50 a barrel, analyst say

U.S. West Texas Intermediate (WTI) crude futures ended Friday’s session 11 cents higher at $50.66 per barrel, the highest settle since May 24. The contract was up about 1.5 percent on the week, marking the third straight weekly gain.

International benchmark Brent crude futures rose 38 cents to $56.81 a barrel at by 2:18 p.m. ET (1818 GMT). The contract earlier hit $56.87, the highest intraday level since March 1.

Oil prices were little changed after Baker Hughes reported that oil rigs operating in U.S. fields fell by 5 to a total of 744.

Oil prices have gained more than 15 percent in the last three months, suggesting output cuts of 1.8 million barrels per day by OPEC and other producers have helped clear the global crude glut. Rising global demand has also brought more balance to the market.

Analysts say they are more focused on the demand outlook, which has grown stronger.Sustained high demand at refineries is the key to keeping an oil price rally going, they say. Although Demand for refined petroleum products like diesel has been “remarkable,” but Kilduff believes persistently high U.S oil production will continue to exert downward pressure on crude prices. He is also wary of the prevailing narrative around demand strength.

U.S. crude oil refinery inputs averaged about 15.2 million barrels per day during the week ending September 15, 2017, 1.1 million barrels per day more than the previous week’s average. Refineries operated at 83.2% of their operable capacity last week. Gasoline production decreased last week, averaging 9.8 million barrels per day. Distillate fuel production increased last week, averaging over 4.5 million barrels per day.

Others:

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The Trump administration is trying to lay the groundwork to open up the Arctic National Wildlife Refuge (ANWR) for oil and gas drilling, according to a report last week from the Washington Post.

Even when oil prices have been at low levels,  companies like ConocoPhillips still drilled in the National Petroleum Reserve-Alaska and  a spokesperson for Conoco told the post they would consider ANWR to see if it will render profit. If the Trump administration has its way, the industry would like to get the chance to verify the prognosis.

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Oil Trades Near $50 as Demand Seen Dropping Amid Refinery Work

Reposted from Bloomberg

https://www.bloomberg.com/news/articles/2017-09-17/oil-holds-advance-near-50-as-u-s-drillers-idle-more-crude-rigs

By Jessica Summers

Oil hovered below $50 a barrel as oil demand is seen decreasing with refiners set to begin seasonal maintenance.

Oil-prices

Futures slipped as much as 1.4 percent in New York after a 5.1 percent gain last week. Crude demand typically takes a hit when refineries shut down key units involved in processing oil into fuels. As futures hit the $50-a-barrel level, producers accelerate the use of hedges to lock in future profits. Meanwhile, for the third time this month, a hurricane is heading toward the Caribbean.

“We are moving into the autumn period and that typically is a weaker period seasonally for oil demand,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said by telephone. At the same time, “we have WTI flirting with $50 and $50 is pretty much the magic number which oil producers come in and hedge. The price of WTI is up against a wall, a producer hedge wall, and it’s going to be difficult to overcome that.”

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While oil has gained strength this month and peeked above $50 during three sessions, prices have failed to close above that crucial threshold even as members of the Organization of Petroleum Exporting Countries worked to curb a worldwide supply glut. The global cushion of spare production capacity will shrink without further investment in exploration and output, according to the International Energy Agency.

West Texas Intermediate for October delivery declined 38 cents to $49.51 a barrel at 12:06 p.m. on the New York Mercantile Exchange. Total volume traded was about 18 percent below the 100-day average.

Why the Permian Basin Is OPEC’s New Headache: QuickTake Q&A

Reposted from Bloomberg

https://www.bloomberg.com/news/articles/2017-05-22/why-the-permian-basin-is-opec-s-new-headache-quicktake-q-a

May 21, 2017, 11:00 PM CDT

A dry expanse straddling the Texas-New Mexico border has become such a bounty of energy that it’s now a threat to OPEC. Surging output from the Permian Basin, which has been described as a layer cake of oil and natural gas, is projected to help push U.S. crude production to a record next year, making it harder for members and partners of the Organization of Petroleum Exporting Countries to move prices higher and lower by controlling the supply to the world. As technology improves, and geologists learn more about what’s underground, estimates of Permian reserves steadily increase.

1. What’s so special about Permian?

The basin — a geological term for a low-lying area that collects sediment — may contain more recoverable oil than any field except Saudi Arabia’s Ghawar. Running 250 miles wide and 300 miles long across West Texas and southeastern New Mexico, it’s a bonanza for drillers, not only because it has layers of oil-rich stone, but also because each seam is 10 or 15 times thicker than those in other shale formations such as Bakken(in North Dakota, Montana and Canada) or Eagle Ford (in southern Texas). Adam Sieminski, an analyst at the Center for Strategic and International Studies in Washington and former head of the Energy Information Administration, compares it to a layer cake: Once a seam is exhausted, there’s another ready for exploitation.

2. How much oil is there?

One part of Permian, known as the Wolfcamp formation, was found to hold 20 billion barrels of oil trapped in four layers of shale beneath the desert in West Texas. That’s almost three times larger than Bakken. It’s important to remember that Wolfcamp is “just a sliver of the basin,” says Ed Morse, Citigroup Inc.’s head of commodities research.

3. What about natural gas?

While Permian is mainly an oil play, the rise in crude production has swollen the supply of natural gas as a byproduct of the drilling. The basin is estimated to produce almost 8.5 billion cubic feet of gas a day, enough to heat 150,000 U.S. homes for an entire winter.

4. Was Permian a recent discovery?

Far from it — crude has been pumped from the basin for almost a century. But its layers of oil-soaked shale were largely untapped until the last decade, when intensive drilling techniques perfected in other U.S. shale plays were adopted. Hydraulic fracturing, or fracking — consisting of forcing water mixed with sand and chemicals into a well to create fissures in shale rock so oil or gas can escape — was first used commercially in 1949. Horizontal drilling came in the early 1980s and provided access to shallow layers of shale. These methods weren’t used together, at least on a large scale, until the 2000s.

5. Who’s leading the Permian charge?

Short answer: Just about everyone. Occidental Petroleum Corp. and Pioneer Natural Resources Co. led the way and are now being joined by major oil companies including Exxon Mobil Corp. and ConcocoPhillips. American drillers plan to lift their 2017 outlays by 32 percent to $84 billion, compared with just 3 percent for international projects, according to analysts at Barclays Plc. Much of the increase in spending is flowing into the Permian, where producers have been reaping double-digit returns, even with oil commanding less than half what it did in 2014.

6. How high will output go?

Permian oil production is projected to rise to a record 2.49 million barrels a day in June, which would account for more than a quarter of the U.S. total. Permian output exceeded that of 8 of the 13 members of OPEC in April. Citigroup estimates that Permian could be producing 5 million barrels a day by 2020, more than either Iran or Iraq. The basin’s output will surge to an 8 to 10 million barrel-a-day range over the next decade, potentially surpassing all OPEC members, Scott Sheffield, Pioneer’s chairman, said in March. Vicki Hollub, chief executive officer of Occidental, sees output eventually growing to 4 to 5 million barrels a day.

7. How has this affected OPEC?

OPEC and 11 other oil exporters agreed late in 2016 to implement output cuts during the first half of this year, an effort to prop up global oil prices. Rising U.S. output, both from shale and offshore drilling, has undermined those efforts.

8. Is the U.S. shale industry the new swing producer?

Some analysts say yes — that its decisions on increasing or decreasing output are what balance the global market. Saudi Arabia had that role from the 1980s until 2014, when it led OPEC into adopting a pump-at-will strategy, which flooded the world with oil and was supposed to put the high-cost U.S. shale industry out of business. Not all industry watchers agree that shale is now king. That’s because state-owned Saudi Arabian Oil Co., or Aramco, can ignore economics when making output decisions, something private companies can’t do.

The Reference Shelf

— With assistance by Joe Carroll, David Wethe, and Stephen Cunningham

China emerges as global climate leader in wake of Trump’s triumph

Reposted from The Guardian

In one of the more entertaining moments of COP22, the global climate conference held in Marrakech last week, the Chinese vice-foreign minister Liu Zhenmin, gave the absent US president-elect a short lesson in the history of climate diplomacy. Climate change, he explained, was not a Chinese hoax. In fact, long before the issue had been discussed behind the high vermillion walls of Zhongnanhai, China’s contemporary Forbidden City, it had been put on the global agenda by the Intergovernmental Panel on Climate Change in the 1980s, supported by Ronald Reagan and George Bush (senior).

Mounting international concern led eventually to the Kyoto Protocol, the first global agreement to try to limit climate change, signed by President Bill Clinton subsequently rejected by the US Congress. When President Obama’s administration formally entered the successor Paris Agreement in September this year, the president knew better than to try to seek endorsement from a hostile Congress. Yet the US has been present throughout, as the world grappled with how to distribute the burden of global action to ward off climate catastrophe, although its leadership has been, at best, intermittent. It has tended to resemble a temperamental adolescent, periodically playing the game, but intermittently flouncing off the field, its ball firmly under its arm.

This time, rather than seeing the announced US departure from the climate stage under a Trump administration as an excuse for others to slacken their efforts, Chinese officials made clear that this latest act of US self-harm would not deter China from pursuing its own interests, and that those interests lie firmly in a vision of a low-carbon future. As Liu Zhenmin said in Marrakech, any change in US policy “won’t affect China’s commitment to support climate negotiations and also the implementation of the Paris Agreement”.

It is a view that is widely shared in China’s circles of experts and policymakers. While this latest turn in the US administration’s climate policy might be disappointing for the global effort, China’s policy at this point has a standalone logic and an internal coherence that makes a change of direction highly unlikely. China plans to be the supplier of low-carbon goods to a carbon-constrained world: It already boasts the world’s biggest installed capacity of wind and solar power, and its climate policies are built in to its current five-year economic plan.

The departure of the US, far from crippling that effort, could further stimulate it: When the news of Donald Trump’s electoral college victory set cell phones beeping at a private climate change discussion in Beijing, one of China’s leading climate policy experts observed that China should now expect to assume climate leadership.

As recently as 2009, in the wake of the failed Copenhagen climate conference, such a response from China to the election of a man who held Trump’s views would have been unimaginable. At the time, the US and China were locked into a toxic opposition created by the structure of the 1997 Kyoto Protocol, the international agreement that made climate action obligatory for rich countries, but only advisory for emerging economies, even those as large as China. The world’s two biggest emitters of greenhouse gases seemed bound into a negative relationship in which the climate policy of one was conditioned by the willingness of the other to do as much, if not more. Since neither was willing, this dysfunctional pairing acted as dispiriting drag on global efforts.

But between Copenhagen and Paris, China’s global climate policy underwent a sea change, driven by domestic factors and assisted by the end of the Kyoto Protocol. When the Kyoto Protocol was negotiated in 1997, China had 21% of the world’s population, but was responsible for only 14% of global CO2 emissions. By 2009, China was producing 26% of the world’s emissions and had begun publicly to articulate a climate policy. Its first public goal was to reduce its carbon intensity by 40% to 45% by 2020, and as the 2015 Paris conference approached, China, then by far the world’s biggest emitter, announced that its emissions would peak by 2030 or earlier. It is a target most experts judge to be well within China’s reach; some believe that the peak could come in the early 2020s.

The architecture of the Paris Agreement, ratified and brought into force in record time, played a significant role in the breakthrough. It does not impose mandatory action on its signatories; nor does it distinguish between the obligations of the rich and the less rich countries. Each nation, instead, is invited to volunteer its offer on reducing emissions, on the understanding that all will be encouraged to increase their efforts over time, in order to fulfill the common ambition of keeping the global average temperature rise below 2C above pre-industrial levels. This would, in practice, demand that net zero emissions be in effect by mid-century. Meeting that goal will demand much greater efforts than are currently on the table.

The news announced in Marrakech that the world had already experienced1.2 degrees of warming only underlined the urgency of the effort to put the architecture of the Paris Agreement’s implementation in place. Ironically, the US and Mexico were among the first to present long-term carbon reduction plans, with the US offering to reduce emissions by 2050 by 80% from the 2005 level, and Mexico proposing a reduction of 50% by 2050 on a 2000 baseline. By way of comparison, Germany has plans to reduce its emissions by up to 95% by 2050.

How has China, the country that had been seen as the bad boy of climate policy, transformed itself into a potential global climate leader? And why, if Trump is correct in his assertion that efforts to mitigate climate change would cripple the US economy, do China’s leaders see it instead as the key to the next phase of China’s growth?

For China, multiple factors came together between Copenhagen and Paris: China’s growth was slowing and its leaders understood, from the examples of South Korea and Japan, that their economy needed to be more efficient in its use of energy and resources, and that it needed to upgrade its capacity to produce advanced, higher value technologies, preferably with China owning the patents, if it was to avoid stagnation.

By the time the 13th Five Year Plan was published in 2015, it was clear that China’s leadership had identified low-carbon technologies as the technologies of the future, and, since these were new technological frontiers, there was an opportunity for China to establish its dominance as an innovator as well as a manufacturer and exporter. For China, the opportunities that tackling climate offered began to be seen as the engine of the next phase of prosperity. Last year, China invested $102.9bn in renewable energy and installed half of the world’s new wind power. It is still highly dependent on coal, but its coal consumption has peaked and begun to decline, to be replaced over time by renewables, hydro, and nuclear power.

China, like any other country, has vested interests that resist its energy transformation: the giant traditional energy companies defend their interests in China as elsewhere. But the environmental effects of three decades of high-carbon growth — the choking smog that blights China’s major cities, the water crisis and soil pollution, the mounting health and social impacts that threatened the standing of the Communist Party — also created a political space for action.

Xi Jinping’s administration adopted “ecological civilisation” as its slogan and floated a raft of policies that included the restoration of decimated forests, efforts to reverse desertification, the promotion of electric mobility and eco-friendly urbanisation, as well as important investments in new technologies. Given the state of the air that China’s citizens were breathing, there was unlikely to be any popular opposition to a government that wanted to clean up. On top of that, China’s leadership had a clear understanding of the potential impacts of climate change on China, affecting its food security, exacerbating the threat of extreme weather events, ratcheting up its water crisis, and threatening to drown its most prosperous cities as sea levels rise.

China’s role at the Paris conference in December 2015 was constructive. A US-China pledge to cooperate on climate change in 2013 had held firm, despite many other tensions in the US-China relationship. A climate-literate US president and a Chinese leadership that saw the low-carbon economy as its next major opportunity together created a positive synergy that stimulated an extensive program of cooperation, despite the hostility of the US Congress.

Nevertheless, like the rest of the world, China’s leadership will be watching and waiting to see how much of Trump’s extreme rhetoric on climate survives the encounter with reality: He has threatened to “destroy” the Paris agreement and abolish the Environmental Protection Agency, Obama’s key regulatory instrument. A more likely approach is strangulation: The head of Trump’s EPA transition team is a prominent climate denier, Myron Ebell.

The US cannot leave the Paris Agreement quickly: The agreement came into force on 4 November, and it would take nearly four years for the US to withdraw. But the US could simply withdraw from the United Nations Framework on Climate Change, the overarching international climate agreement, within a year.

Trump’s ascension to the presidency signals an end to American leadership on international climate policy. With the withdrawal of US support, efforts to implement the Paris agreement and avoid the most devastating consequences of global warming have suffered a huge blow.

It could also cut off funding, refusing to contribute to funds that are intended to support poor and vulnerable countries to mitigate and adapt.

All of this would weaken the global effort, but it would not destroy it. China is poised to assume the role of steady, reliable climate ally, in sharp contrast to Trump’s US. Assuming leadership on climate has many attractions for China. As well as the economic opportunity, it is one of the few issues on which China could make a claim for the moral high ground.

In terms of industrial strategy, the case seems clear: China still has relatively deep pockets and can finance the dissemination of technologies — from solar panels to nuclear power plants — across the developing world, consolidating trade and diplomatic links at a time when clean energy, according to the International Energy Agency, is projected to grow exponentially, creating millions of jobs and stimulating trillions of dollars in annual investment. That is where China sees its future.

China’s Ambitious New Clean Energy Targets

Re-posted from The Diplomat

http://thediplomat.com/2017/01/chinas-ambitious-new-clean-energy-targets/

China’s 13th Five Year Plan on Energy Development (Energy 13FYP) might be one of the most anticipated energy blueprints in the world for its far-reaching implications for the carbon trajectory of the planet’s largest emitter.

On January 5, 2017, the National Energy Administration finally unveiled the plan to reporters, with a set of 2020 targets covering everything from total energy consumption to installed wind energy capacity. Before we delve into details of the plan, one thing is worth noting: with the Energy 13FYP, China might have once again raised ambitions for its low-carbon future, highlighting the urgency that this smog-ridden country attaches to moving away from fossil fuels.

What’s With All the FYPs?

Enjoying this article? Click here to subscribe for full access. Just $5 a month.In March, China unveiled its 13th Five Year Plan for Economic and Social Development (2016-2020), which contains a set of climate and energy related targets, including an energy consumption cap and a 15 percent goal for the share of non-fossil-based energy in the country’s primary energy mix. So what’s the connection between this plan and the Energy 13FYP?

If we consider this the “Master Plan” for all aspects of China’s development in the next five year period (2016-2020), then the Energy 13FYP is the breakdown of that Master Plan for the energy sector, with more detailed targets to better guide policymaking, government spending and project planning in the sector.

What’s in the Energy 13FYP?

The table below illustrates the numerous 2020 targets already announced by the Chinese government in its Strategic Energy Action Plan (2014-2020) and its national 13th Five-Year Plan. They are cross-referenced with actual levels at the end of 2015. Comparing these to the latest targets is a way of gauging changes to the scale of ambition.

From this comparison, it appears that most of the Energy 13FYP targets are not entirely “new.” Many are in line with the existing thinking of previous announcements, in particular the Strategic Energy Action Plan (2014-2020), which, at the time of its publication was already considered ambitious in curbing coal consumption and CO2 emissions beyond international expectations.

However, this time around, policymakers seem even more determined to squeeze out coal’s share in the country’s energy mix, lowering its 2020 percentage in primary energy consumption from 62 percent to 58percent.

The country is also aiming higher for renewables: installed capacity of wind energy and solar energy should reach “more than 210GW” and “more than 110GW,” respectively, by 2020; higher than what was declared at the end of 2014.

With a quick look back at the progress of China’s energy targets since the 2009 Copenhagen climate summit, it is clear that:

  • China has repeatedly strengthened its decarbonization and low-carbon energy targets.
  • China exceeded most of its 2015 low-carbon energy and decarbonization targets and has made its 2020 energy and emissions targets more ambitious over time.
  • It plans to reduce “emissions intensity” (the volume of emissions produced relative to economic activity) by more than other major economies.

Set against the background of other major emitters, particularly the United States’ potential backtracking from its climate commitments, China’s continued strengthening of its own targets looks even more remarkable.

Challenges

But ambitious targets do not necessarily translate into results. To achieve these goals in less than five years, China would have to overcome chronic problems in its energy sector. Media reports about the Energy 13FYP reveal deep-rooted concerns that have troubled Chinese policymakers.

China’s power sector is faced with a severe overcapacity problem. Slowing demand for electricity due to the economic downturn and the slashing of energy intensive industries has caused widespread under-utilization of existing power generation capacities, which are seeing their lowest utilization hours since 1978.

Yet the country is still seeing a fast build-up of coal-fired power capacity as a result of inertia (many projects were approved in the heyday of the economic boom), and perverse incentives (dropping coal prices and a government fixed electricity tariff is increasing the profit margin for coal power).

The situation has prompted regulators to consider putting a two-year “freeze period” in the Energy 13FYP for the approval of any new coal-fired power projects. At the press conference to launch the Energy 13FYP, government vowed to keep coal power capacity below 1,100 GW by 2020, setting an upper limit for new coal capacity.

The other side of the overcapacity coin is curtailment of renewable energy, particularly wind and solar energy in western parts of the country.

A combination of transmission bottlenecks and market set-up has prevented large chunks of renewable electricity from reaching the grid. In 2015, 15 percent of China’s wind energy was wasted, a record high. Based on the Energy 13FYP, the problem seems to have pressed policymakers to put more emphasis on reining in curtailment, as opposed to further expansion of installed capacity. It has also prompted them to plan more new renewable electricity capacity in China’s eastern regions, where electricity demand is concentrated, reducing the need to transmit renewable energy across the country.

Ma Tianjie is chinadialogue managing editor in Beijing. Before joining China Dialogue, he was Greenpeace’s Program Director for Mainland China.

This post was originally published by chinadialogue and appears with kind permission.

Oil surges into the close to settle above $50, posts best monthly gain since April 2016

Reposted from https://www.cnbc.com/2017/07/31/oil-rises-above-50-for-first-time-in-2-months–then-retreats.html

U.S. crude closed above $50 a barrel for the first time in more than two months.
WTI crude initially turned lower after touching the $50 milestone, but surged into the close of Monday’s trading session.
Traders have been raising their bullish bets on oil in recent weeks.
Tom DiChristopher | @tdichristopher
Monday, 31 Jul 2017 | 3:33 PM ET
CNBC.com
The West Phoenix oil platform, operated by Seadrill Norge AS, right, stands with other unused platforms in the Port of Cromarty Firth in Cromarty, U.K. Commodities tomorrow: Crude closes over $50
Monday, 31 Jul 2017 | 3:59 PM ET | 01:17
U.S. crude oil surged into the close of trading to settle above the key psychological level of $50 a barrel.

U.S. West Texas Intermediate crude ended Monday’s session up 46 cents at $50.17, its first close above $50 a barrel since May 24. That pushed WTI’s monthly gain to about 9 percent, making July the best month for the commodity since April 2016.

The milestone came after WTI posted its best weekly performance of the year, surging 8.6 percent last week, boosted by a big drop in U.S. crude stockpiles and Saudi Arabia’s vow to cut oil exports in August.

U.S. WTI crude intraday

Prices first rose above $50 in overnight trade against the backdrop of U.S. threats to slap sanctions on Venezuela’s energy sector after embattled President Nicolas Maduro proceeded with a vote to replace the nation’s legislative body. The sanctions are seen as heaping pressure on Venezuelan state energy company PDVSA and potentially reducing the country’s oil output even further than it has already fallen throughout a prolonged economic crisis.

OPEC also announced over the weekend that some members of the cartel, including top oil exporters Saudi Arabia and Russia, will meet next week to discuss ways to improve compliance with a deal to limit output among roughly two dozen crude-producing nations.

U.S. shale producers have begun reducing capital spending plans, a positive signal for observers concerned about surging American output weighing on oil prices.

U.S. WTI crude year to date

Some analysts believe oil prices will struggle to rise much above $50 a barrel though, citing a number of technical resistance levels and developments in the physical market.

Still, hedge funds and money managers have begun raising their bets that oil prices will rise in recent weeks. The volume of bullish bets on U.S. crude mostly fell from the end of February through the end of June.

Shell: Global LNG demand to rise 4-5%/year to 2030

HOUSTON, Feb. 20

02/20/2017
    

Global demand for natural gas is expected to increase 2%/year between 2015 and 2030, with LNG demand expected to rise at twice that rate at 4-5%/year, according to Royal Dutch Shell PLC’s first LNG Outlook.

Shell inherited the outlook following its acquisition of BG Group PLC.

The report, which draws on a broad range of independent industry data and internal analysis, projects the size of the global LNG market to rise 50% between 2014 and 2020, mainly attributable to LNG facilities already under construction or recently completed.

In 2016, global LNG demand reached 265 million tonnes, including an increase in net LNG imports of 17 million tonnes from a year earlier.

Shell notes many expected a strong increase in new LNG supplies would outpace demand growth during 2016. However, demand growth kept pace with supply as greater-than-expected demand in Asia and the Middle East absorbed the increase in supply from Australia.

China and India, which are set to continue driving a rise in demand, were two of the fastest-growing buyers in 2016, increasing their imports by a combined 11.9 million tonnes of LNG. This boosted China’s LNG imports in 2016 to 27 million tonnes and India’s to 20 million tonnes.

LNG demand has been bolstered by the addition of six new importing countries since 2015—Colombia, Egypt, Jamaica, Jordan, Pakistan, and Poland—bringing to 35 the number of LNG importers, up from about 10 at the start of the century. Egypt, Jordan, and Pakistan were among the fastest-growing LNG importers in the world in 2016. Due to local shortages in gas supplies, they imported a total of 13.9 million tonnes of LNG.

The bulk of the increase in LNG exports in 2016 came from Australia, where exports rose 15 million tonnes from a year earlier to a total of 44.3 million tonnes. The US also contributed the growth, with 2.9 million tonnes of LNG delivered from the Sabine Pass terminal in Louisiana.

Shell’s outlook forecasts LNG prices to continue to be determined by multiple factors, including oil prices, global LNG supply and demand dynamics, and the costs of new LNG facilities. In addition, the growth of LNG trade has evolved into helping meet demand when US gas markets face supply shortages.

LNG trade also is changing to meet the needs of buyers, including shorter-term and lower-volume contracts with greater degrees of flexibility, Shell says. Some emerging LNG buyers have more challenging credit ratings than traditional buyers.

While the industry has been flexible in developing new demand, there has been a decrease in final investment decisions for new supply. Shell believes industry will have to make further investments to meet growing demand, most of which is set to come from Asia, after 2020.

A Chinese government target has been set for gas to make up 15% of the country’s energy mix by 2030, up from 5% in 2015. An additional 100 million tonnes/year of LNG demand from China would be equal to an increase of more than 20% in total global LNG demand in 2030.

Meanwhile, Southeast Asia is projected to become a net importer of LNG by 2035, a major transformation for a region that includes Malaysia and Indonesia, currently among the major LNG exporters in the world.

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