Strategic pillars of price transparency in global LNG
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Differences in logistical costs and pricing mechanisms have resulted in a significant spread between LNG bunker price assessments in Singapore and Rotterdam, with the latter port benefiting from more advanced infrastructure and more competitive gas-on-gas pricing. Bright Prospects for LNG Bunkering LNG bunkering demand from non-LNG tankers is forecast to reach nearly 15 million mt/year by 2030 – bigger than the UK's import market – driven by the 2020 implementation of the International Maritime Organization's 0.5% sulfur cap for maritime fuels and the expansion of LNG bunkering infrastructure. Growing global supplies and lower prices have also increased the viability of LNG as bunker fuel. Source: S&P Global Platts 0 3 6 9 12 15 2030 2029 2028 2027 2026 2025 2024 2023 2022 2021 2020 More LNG bunker trade to emerge in Asia once ports in Singapore and Malaysia open for business LNG tankers non-LNG vessels 0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 Singapore $390 /mt * Rotterdam $220 /mt * *December 2019 average prices Around 50 commercial non-LNG vessels of over 10,000 deadweight mt, including tankers, containerships and bulk carriers, were expected to have consumed around 650,000 mt of LNG as bunker fuel in 2019, versus 11-12 million mt/year consumed by LNG tankers. LNG Global Price Assessments’ – learn more spglobal.com/platts/en/products-services/lng 50,000 0 100,000 150,000 200,000 2019 2018 2020 2017 2016 2015 2014 2013 2012 2011 $190,000 per day LNG freight rates hit all-time high 500 vessels Global LNG fleet reached in 2018 Australia's ACCC includes Platts LNG shipping route cost in its netback price series Platts launches Pacific and Atlantic ballast rate assessments Platts launches Pacific and Atlantic shipping day rate assessments 2010 LNG Asia Pacific Carrier Day Rate LNG Atlantic Carrier Day Rate Asia Pacific Mideast Atlantic Basin Transparency key to mitigate LNG freight volatility LNG freight transparency is helping the shipping industry better accommodate the increasingly flexible nature of LNG and allow market participants to capture optionality and arbitrage opportunities, the cornerstones of commoditization. mmt/year mmt/year Rise in JKM derivatives and Platts Asia MOC activity More than 1,900 bids, offers and trades had been submitted during the Platts Asia LNG MOC process by the end of 2019. Also, the percentage of submissions that fully adhere to standardized terms regarding vessel nomination, delivery window and discharge port has steadily increased, reducing the need for normalization and boosting price formation efficiency. Meanwhile, the JKM derivatives market has seen exponential growth over the past years, a trend that seems set to continue given the expansion of the physical spot market, the rise of LNG indexation in term contracts and the participation of financial entities in LNG derivatives. 0 50 100 150 200 250 Sept Aug July Jun May April Mar Feb Jan Dec Nov Oct Dec Nov Oct Sept Aug Jul Jun 2019 2018 Bids, Offers, and Trades ICE+CME Cleared Volume (lots) 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 LNG prices in an evolving market $/day Number of bids, offers, trades JKM derivatives lots (1 lot: 10,000 MMBtu) The commoditization of LNG over the past decade has resulted in enhanced spot price transparency in the industry’s key trading hubs, greater supply security and a more interconnected market where cargoes are free to cut a path to the best netback, helping mitigate market inefficiencies and regional pricing disparities. 2019 VOLUMES TO/FROM AND SHARE OF GLOBAL TRADE Americas Europe Africa Middle East APAC LNG Terminal DES WEST INDIA terminals 1.4mmt 0.4% 16.5mmt 4.6% 7.3mmt 2.0% 2.5mmt 0.7% 0.6mmt 0.2% DES JKM terminals 124mmt 34.7% 41.7mmt 11.6% 5mmt 1.4% 12mmt 3.2% 2mmt 0.6% GCM terminals 1.24mmt 0.3% 10.7mmt 3.0% 6.2mmt 1.7% 11.1mmt 3.1% NWE 4.8mmt 1.3% 10.6mmt 3.0% 5.9mmt 1.7% 8.8mmt 2.5% 10.07mmt 2.8% 4.4mmt 1.2% 7.5mmt 2.1% 3.4mmt 0.9% MED The growing robustness of Platts JKM ® has enabled the more established markets of East Asia to operate with greater confidence and efficiency. Other emerging LNG hubs, comprising West India, Northwest Europe, Mediterranean and US Gulf Coast, are also becoming increasingly central to global market development, price transparency and risk management. Europe includes Yamal LNG US GULF COAST FOB Gulf Coast Marker 30.1mmt NORTHWEST EUROPE DES Northwest Europe Marker 37.5 mmt MEDITERRANEAN DES Mediterranean Marker 26.4 mmt WEST INDIA DES West India 28.7 mmt NORTHEAST ASIA DES JKM Marker 187.8mmt 2015 2014 2013 2012 2011 2019 2018 201 7 2016 20 10 20 09 2020 0 5 10 15 20 25 DES JKM FOB Gulf Coast DES Middle East DES Northwest Europe DES Mediterranean DES West India $/MMBtu DES JKM Platts launches JKM Swaps; first lots cleared on ICE DES JKM China’s NDRC sets new third-party terminal access guidelines DES West India Petronet-RasGas contract revision sets precedent FOB Gulf Coast First cargo from the US Gulf; Expanded Panama Canal opens DES JKM Japan begins downstream market liberalization DES JKM Trafigura, Vitol trade first Platts Asia MOC cargo DES JKM Vitol, Tellurian sign 15-year JKM-linked US offtake MOU FOB Gulf Coast 2018 marks return to investment growth, strengthens in 2019 FOB Gulf Coast ICE launches FOB US Gulf Coast Marker (GCM) LNG futures contract DES JKM Japan rules against destination restrictions DES JKM Fukushima disaster triggers demand spike, energy policy shift DES JKM PEGAS becomes third exchange to list JKM after ICE and CME DES JKM Total & Tellurian sign 15-year JKM-linked US offtake DES Europe Over 70% of Europe’s gas supply linked to hub prices DES West India Platts launches Indian DES assessment LNG bunkering Platts launches Singapore and Rotterdam LNG bunkering assessments Middle East Platts launches Middle East Marker daily import value delivered DES Mediterranean Platts launches Southern Europe assessment DES Europe Platts launches European DES assessments FOB Gulf Coast Platts launches FOB US Gulf Coast LNG assessment DES JKM Platts launches JKM, first daily LNG spot price assessment Freight rates Platts launches Pacific and Atlantic shipping day rate assessments Trade and Infrastructure 30.1 95.0 37.5 35.2 26.4 25.4 28.7 46.2 187.9 216.6 5 7 7 7 9 9 7 12 65 84 43.5 91.9 68.5 73.6 63.6 63.6 42.5 81.9 433.8 488.3 10.8 18.4 7.4 7.2 6.9 6.2 4.6 8.0 47.2 47.8 Terminals Total Volume (mmt) Global Capacity Share (%) Terminals Capacity (mmt/yr) 2019 2025 2019 2025 2019 2025 2019 2025 2019 2025 US GULF COAST NORTHWEST EUROPE MEDITERRANEAN WEST INDIA NORTHEAST ASIA As the trend towards LNG commoditization gathers pace, fueled by significant additions of elastic supply and demand, the need for enhanced pricing transparency becomes ever more important to enable stakeholders to share new risks and gain the confidence they need to trade and make investment decisions. Strategic pillars of price transparency in global LNG LNG’s strategic pricing hubs
Transcript of Strategic pillars of price transparency in global LNG
Differences in logistical costs and pricing mechanisms have resulted in a significant spread between LNG bunker price assessments in Singapore and Rotterdam, with the latter port benefiting from more advanced infrastructure and more competitive gas-on-gas pricing.
Bright Prospects for LNG BunkeringLNG bunkering demand from non-LNG tankers is forecast to reach nearly 15 million mt/year by 2030 – bigger than the UK's import market – driven by the 2020 implementation of the International Maritime Organization's 0.5% sulfur cap for maritime fuels and the expansion of LNG bunkering infrastructure. Growing global supplies and lower prices have also increased the viability of LNG as bunker fuel.
Source: S&P Global Platts
0
3
6
9
12
15
20302029202820272026202520242023202220212020
More LNG bunker trade to emerge in Asia once ports in Singapore and Malaysiaopen for business
LNGtankers
non-LNGvessels
0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000
Singapore$390/mt*
Rotterdam$220/mt*
*December 2019 average prices
Around 50 commercial non-LNG vessels of over 10,000 deadweight mt, including tankers, containerships and bulk carriers, were expected to have consumed around 650,000 mt of LNG as bunker fuel in 2019, versus 11-12 million mt/year consumed by LNG tankers.
LNG Global Price Assessments’ – learn more spglobal.com/platts/en/products-services/lng
50,000
0
100,000
150,000
200,000
20192018 20202017201620152014201320122011
$190,000per day
LNG freight rateshit all-time high
500vessels
Global LNG fleet reachedin 2018
Australia's ACCC includesPlatts LNG shipping route
cost in its netbackprice seriesPlatts launches Pacific and
Atlantic ballast rateassessments
Platts launches Pacific andAtlantic shipping day
rate assessments
2010
LNG Asia Pacific Carrier Day Rate LNG Atlantic Carrier Day Rate
Asia PacificMideastAtlantic Basin
Transparency key to mitigate LNG freight volatilityLNG freight transparency is helping the shipping industry better accommodate the increasingly flexible nature of LNG and allow market participants to capture optionality and arbitrage opportunities, the cornerstones of commoditization.
mmt/year
mmt/year
Rise in JKM derivatives and Platts Asia MOC activityMore than 1,900 bids, offers and trades had been submitted during the Platts Asia LNG MOC process by the end of 2019. Also, the percentage of submissions that fully adhere to standardized terms regarding vessel nomination, delivery window and discharge port has steadily increased, reducing the need for normalization and boosting price formation efficiency.
Meanwhile, the JKM derivatives market has seen exponential growth over the past years, a trend that seems set to continue given the expansion of the physical spot market, the rise of LNG indexation in term contracts and the participation of financial entities in LNG derivatives.
0
50
100
150
200
250
SeptAugJulyJunMayAprilMarFebJanDecNovOct DecNovOctSeptAugJulJun20192018
Bids, Offers, and Trades ICE+CME Cleared Volume (lots)
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
LNG prices in an evolving market
$/day
Number of bids, offers, trades
JKM derivatives lots(1 lot: 10,000 MMBtu)
The commoditization of LNG over the past decade has resulted in enhanced spot price transparency in the industry’s key trading hubs, greater supply security and a more interconnected market where cargoes are free to cut a path to the best netback, helping mitigate market inefficiencies and regional pricing disparities.
2019 VOLUMES TO/FROM AND SHARE OF GLOBAL TRADE
Americas Europe Africa MiddleEast
APAC LNGTerminal
DESWEST INDIA
terminals
1.4mmt0.4%
16.5mmt4.6%
7.3mmt2.0%
2.5mmt0.7%
0.6mmt0.2%
DES JKMterminals
124mmt34.7%41.7mmt
11.6%
5mmt1.4%
12mmt3.2%
2mmt0.6%
GCMterminals
1.24mmt0.3%
10.7mmt3.0%
6.2mmt1.7%
11.1mmt3.1%
NWE
4.8mmt1.3%
10.6mmt3.0%
5.9mmt1.7%
8.8mmt2.5%
10.07mmt2.8%
4.4mmt1.2%7.5mmt
2.1%
3.4mmt0.9%
MED
The growing robustness of Platts JKM® has enabled the more established markets of East Asia to operate with greater confidence and efficiency. Other emerging LNG hubs, comprising West India, Northwest Europe, Mediterranean and US Gulf Coast, are also becoming increasingly central to global market development, price transparency and risk management.
Europe includes Yamal LNG
US GULF COASTFOB Gulf Coast Marker
30.1mmt
NORTHWEST EUROPEDES Northwest Europe Marker
37.5mmt
MEDITERRANEANDES Mediterranean Marker
26.4mmt
WEST INDIADES West India
28.7mmt
NORTHEAST ASIADES JKM Marker
187.8mmt
20152014201320122011 201920182017201620 1020 09 2020
0
5
10
15
20
25DES JKM
FOB Gulf Coast
DES Middle East
DES Northwest Europe
DES Mediterranean
DES West India
$/MMBtu
DES JKMPlatts launches
JKM Swaps; first lots cleared
on ICE DES JKMChina’s NDRC sets
new third-partyterminal access
guidelines
DESWest India
Petronet-RasGas contract revisionsets precedent
FOBGulf Coast
First cargo fromthe US Gulf;
Expanded PanamaCanal opens
DES JKMJapan beginsdownstream
marketliberalization
DES JKMTrafigura, Vitol
trade firstPlatts AsiaMOC cargoDES JKM
Vitol, Telluriansign 15-year
JKM-linked USofftake MOU
FOBGulf Coast
2018 marks returnto investment
growth,strengthens
in 2019
FOBGulf Coast
ICE launches FOBUS Gulf CoastMarker (GCM)LNG futures
contract
DES JKMJapan rules
againstdestinationrestrictions
DES JKMFukushima
disaster triggersdemand spike,energy policy
shift
DES JKMPEGAS becomesthird exchange
to list JKM afterICE and CME
DES JKMTotal & Tellurian
sign 15-yearJKM-linkedUS offtake
DES EuropeOver 70% ofEurope’s gassupply linkedto hub prices
DESWest India
Platts launchesIndian DES
assessment
LNG bunkering
Platts launches Singapore and
Rotterdam LNG bunkering
assessments
Middle EastPlatts launches
Middle EastMarker dailyimport value
delivered
DESMediterraneanPlatts launches
Southern Europeassessment
DESEurope
Platts launchesEuropean DESassessments
FOBGulf Coast
Platts launchesFOB US GulfCoast LNG
assessment
DES JKMPlatts launchesJKM, first dailyLNG spot price
assessment
Freight rates
Platts launches Pacific and Atlantic
shipping day rate assessments
Trade and Infrastructure
30.1 95.0 37.5 35.2 26.4 25.4 28.7 46.2 187.9 216.6
5 7 7 7 9 9 7 12 65 8443.5 91.9 68.5 73.6 63.6 63.6 42.5 81.9 433.8 488.3
10.8 18.4 7.4 7.2 6.9 6.2 4.6 8.0 47.2 47.8
Terminals
TotalVolume(mmt)
GlobalCapacity
Share(%)
TerminalsCapacity
(mmt/yr)
2019 2025 2019 2025 2019 2025 2019 2025 2019 2025
US GULF COAST NORTHWESTEUROPE
MEDITERRANEAN WEST INDIA NORTHEAST ASIA
As the trend towards LNG commoditization gathers pace, fueled by significant additions of elastic supply and demand, the need for enhanced pricing transparency becomes ever more important to enable stakeholders to share new risks and gain the confidence they need to trade and make investment decisions.
Strategic pillars of pricetransparency in global LNG
LNG’s strategic pricing hubs
