FACTBOX: One year on, Russia-Ukraine war remains disruptive for Asian LNG markets

Since the Russia-Ukraine conflict began a year ago, Europe's shift to LNG has disrupted global LNG markets and drained cargoes from Asia. Asia has responded by pulling back from spot LNG, demand destruction and switching to alternatives like coal, nuclear and renewables. Many of these trends are likely to continue into 2023, but an escalation of the conflict could worsen the situation.

The war has also prompted strategic reassessment of energy policy in Asian countries with a heavy reliance on LNG and the energy strategy of national oil companies. It has rekindled the Asian market for long-term contracts, especially for producers like the US and Qatar, and made a case for revival in upstream investment. It has also reinforced the need for a long-term energy transition plan.

Trade flows

Some of the biggest changes in global LNG trade flows in 2022 were the diversion of US LNG to Europe from Asia, China losing its position as the largest LNG importer to Japan and the Qatar reinforcing its market share in China and India.

-Buyers

• Asia's overall 2022 LNG imports fell around 20.32 million mt/year as it lost volumes to Europe, S&P Global Commodity Insights data showed.
• China drifted from its position as top global LNG importer in 2022, with imports falling 19.5% on year to 63.4 million mt, customs data showed.
• Australia remained the largest LNG supplier to China but lost a lot of ground to Qatar, falling from supplying around 40% to 35% of China's total imports. Australia and Qatar accounted for over 50% of China's LNG supply in 2022, S&P Global data showed.
• Japan regained its position as top global LNG importer in 2022 despite imports falling 3.1% on year to about 72 million mt, Ministry of Finance data showed.
• Australia remained Japan's single largest LNG supplier in 2022, increasing its market share to 43% from 36% in 2021, MOF data showed. Malaysia was the second and Russia third, with both ramping up volumes on year. Qatar and US lost significant market share, with Qatar slipping from being Japan's third largest supplier in 2021 to seventh in 2022.
• South Korea was the third-largest global LNG importer, importing 46.35 million mt in 2022, up around 1.6% on year, S&P Global data showed.
• Australia strengthened its position as South Korea's largest supplier in 2022, followed by Qatar and the US. Malaysian imports also saw an uptick.
• India's LNG imports fell 9.12% on year to 29.29 Bcm (around 21.38 million mt) in 2022, according to PPAC data, with imports from the US and Australia falling sharply.

-Suppliers

• The two biggest global suppliers of LNG in 2022 remained Qatar and Australia, followed by the US and Russia, which saw its LNG exports rise by nearly 10% in 2022 despite punitive restrictions by the West.
• The US is expected to become the world's biggest LNG exporter in 2023 at 91.2 million mt/year, assuming the resumption of operations at Freeport LNG in early 2023.
• Among the steepest declines in US LNG flows in 2022 were those to China by over 60%, and to Japan, South Korea and India.
• Qatar posted a near 3% increase in LNG exports in 2022, with robust imports to both Asia and Europe despite global disruptions.
• The major year-on-year change was a reshuffle in Qatar's main customers. In 2021 its four largest buyers by volume were South Korea, India, China and Japan, and in 2022 they were China, India and South Korea, with Japan falling significantly and being replaced by European buyers and supplies to South Korea falling 17.5% on year, S&P Global data showed. China's offtake of Qatari LNG rose 65% on year in 2022, while India's rose 13%.
• Australia's 'loaded' LNG exports were stable on year at 83.9 million mt in 2022, S&P Global seaborne data showed.
• Qatar exported over 70% of its LNG to Asia, while almost all Australian LNG landed in Asia, with Japan, China, South Korea and Taiwan its largest markets. The main change in 2022 was Japan emerging as the largest market for Australian LNG, with China relegated to second. Australia exported 22.7 million mt of LNG to China and 30.6 million mt to Japan in 2022, S&P Global data showed.

Infrastructure

• Pipeline natural gas imports to China via Russia's Power of Siberia pipeline rose 7.8% on year to 45.8 million mt in 2022, according to Platts calculations based on official data.
• Market participants expect stalled upstream investments by national oil companies in India, China and Southeast Asia in gas projects to move ahead.
• Demand-side investments in regasification are set to grapple with long-term gas supply issues for countries planning to become new LNG importers -- Philippines, Vietnam, Sri Lanka -- or those expanding current capacity like India and China.
• The number of LNG carriers being used as floating storage globally last year hit a record high as market players held onto LNG cargoes and vessels. Around 31 LNG carriers were used for the purpose at the start of October, according to S&P Global. In the winter of 2020-21 there were almost no LNG carriers in floating storage as demand had collapsed due to COVID-19 and maximum floating storage in the winter of 2021-22 was only in the mid-teens, S&P Global data showed.
• South Korea and Japan are among those increasingly relying on nuclear power to meet demand. S&P Global forecasts demand for gas in Japan's power sector could decline around 17 million cu m/day on year for the six summer months starting April.

Prices

• The Platt JKM DES spot price hit a record high $84.762/MMBtu March 7, 2022, S&P Global data showed, reflecting the Russia-Ukraine war impact.
• The Platts JKM averaged $33.98/MMBtu in 2022, surging from $18.60/MMBtu in 2021. The Platts West-India Marker averaged $31.85/MMBtu in 2022 compared with $17.37/MMBtu in 2021.

• On Feb. 17, the Platts JKM slid below the $15/MMBtu mark -- the lowest since August 2021. It was assessed at $14.513/MMBtu Feb. 22.
• JKM prices are forecast to average $14.9/MMBtu in summer 2023 and $20.10/MMBtu in calendar 2023, according to S&P Global.
• High European storage levels and ongoing underlying weakness in demand points to a lower call on LNG in Europe over summer 2023, allowing for modest LNG demand growth elsewhere.