LNG imports in China and India soared in 2016 as a global supply glut kept prices low and bolstered Asian demand, according to an annual report from the International Group of Liquefied Natural Gas Importers.
China's LNG imports climbed roughly 37% in 2016, due mostly to an increase in gas-fired power generation and heightened demand from the industrial sector, the report found. India's imports followed closely behind, with a more than 30% increase as the country took advantage of low LNG spot prices.
U.S. LNG export terminal developers have looked at China and India as growing sources for demand. In the 12 months since Cheniere Energy Inc.'s Sabine Pass began exporting LNG in February 2016, each of the two countries received more than 20 million tonnes per annum of U.S. LNG, according to the U.S. Department of Energy.
Emerging importers also drove global LNG demand growth, the report said. Egypt, Pakistan and Jordan imported a combined 13.5 mtpa in 2016, up from 5.5 mtpa the year before.
More mature markets, however, saw demand fall. Japanese imports dropped 1.7 mtpa as the country works to restart its nuclear fleet following the 2011 meltdown of the Fukushima Dai-ichi plant. Europe, which was expected to be a major destination for U.S. LNG exports, also had sluggish demand. The United Kingdom received 2.6 mtpa less than the year before, a 26% drop, as it relied instead on pipeline gas. Belgium imports fell by 58%, and the Netherlands saw a 42% decline.
With the LNG market expected to be oversupplied until the mid-2020s, buyers are increasingly looking for flexible contract terms, International Group of Liquefied Natural Gas Importers President Jean-Marie Dauger said.
"In a well-supplied market and given the significant quantities under long-term contracts which are due to expire in the medium-term — particularly in Japan — the share of spot and short-term volumes (which remained stable at around 28% of total trade) could increase further in the coming years," he wrote in an editorial at the beginning of the report.
Despite stagnant growth in LNG traded on a spot or short-term basis, the share of "pure" spot trades, which the LNG importers group defines as cargoes delivered within three months of the transaction date, ticked upward in 2016 to 18% of total volumes, from 15% the year before. The increase was driven mostly by China, India and Egypt.