ExxonMobil stopped short of taking an expected final investment decision (FID) this week on its 15.2 million tonnes per annum Rovuma LNG project in Mozambique, with the anticipated green light now pushed into 2020.

But this appears to be just a hiccup in a year that has already seen a whopping 63.1 mtpa of new liquefaction capacity sanctioned for projects in the US, Mozambique and Russia, with potentially more to come this year.

This is almost three times the volume given the go-ahead in 2018.

Independent consultant Andy Flower calculates that, excluding LNG production currently offline in Egypt and Yemen, there is 426.7 mtpa of liquefaction capacity in operation.

On top of this, Flower said there is a further 217 mtpa of capacity that developers plan to take an FID on before the end of 2020, over half of which — 114 mtpa — is in the US.

But as the sanction bandwagon rolls on, buoyed by longer-term demand forecasts, in the more immediate time frame the talk is of an oversupplied LNG market.

Speaking in London this week, shipbroker and consultant Poten & Partners gave another bearish forecast of the global picture for LNG supply.

Oleg Vukmanovic, Poten's head of business intelligence for Europe, Africa and the Atlantic, said storage in Europe, which is traditionally seen as the sink for LNG cargoes, is currently about 97% full and forecasts for a relatively mild winter will not help soak up the overhang.

Vukmanovic said the situation is being exacerbated by Russia continuing to pump pipeline gas into Europe for fear of losing market share to LNG. On top of this, Chinese LNG demand has slowed and while South East Asian demand is growing, along with other pockets such as Turkey, he said this is coming from a low baseline.

“While there is [demand] growth in other parts of the world, the brunt of clearing this surplus is falling back to Europe,” he said.

Booked solid

Vukmanovic said slot availability at European terminals is very tight, forcing vessels to wait for up to a fortnight offshore before discharging. Up to four vessels are idling off Gate LNG in Rotterdam and Spanish LNG buyer Enagas is having to divert or cancel deliveries into Spain.

Vukmanovic said November berths are “booked solid”, with the only possible options being one of the "use it or lose it” slots at French, Dutch and UK terminals, if they become available.

Floating storage is not a strategy for clearing the LNG overhang and only magnifies the problem, the analyst said, as it pushes the issue into another month.

But the LNG cargoes keep coming, particularly from the US, where new projects have finally started up, and they are likely to continue to do so.

Vukmanovic said Cheniere requires 60 days' notice to cancel a cargo.

Kristen Holmquist, Poten's forecasting manager, said the economics are not there to warrant cargo cancellations, adding that the forward curve prices are underestimating some of the dynamics that are going to occur in the market and, as a result, there is little trust in the futures pricing.

She said there is so much prompt LNG available that nobody is really buying ahead.

The gloomy supply picture contrasts with a buoyant LNG shipping market, where rates are rising for all vessel types and prompt tonnage is in short supply across all basins

The gloomy supply picture contrasts with a buoyant LNG shipping market, where rates are rising for all vessel types and prompt tonnage is in short supply across all basins.

Shipping analysts said this supply situation is likely to mean charterers will be less keen to seek cover for more than the months throughout the winter.

One veteran market player and former shipowner listening to Poten’s presentation said, set against this backdrop, owners might do well to take a slightly lower rate to secure longer coverage for their vessels.

Holmquist forecast the LNG surplus will continue into 2020 at about 20.6 million tonnes, slightly below this year, and on into the first half of 2021 before the market becomes more balanced.

By 2029, she said 70% of global LNG could be available for sale under more flexible contract terms, assuming long-term contracts are not renewed.

Even if 50% of the expiring volumes are renewed long term, Poten said more than half of global LNG will be available on other terms.

So where will all that new LNG go? Holmquist said that from 2021 to 2029, Poten sees demand growth from India but with the biggest potential from buyers in South East Asia.

“This is where we see the future in the LNG market,” she said.

New liquefaction sanctioned in January to September 2019
ProjectLead developerCapacity (mtpa)FID taken
Golden Pass, USExxonMobil15.6February
Sabine Pass train 6, USCheniere Energy4.8May
Mozambique LNGAnadarko/Total12.9June
Calcasieu Pass, USVenture Global10August
Arctic LNG 2, RussiaNovatek19.8September