Barcelona — Both the European gas market and the LNG market in Asia look "tight" for the duration of the upcoming winter, with prices likely to remain elevated until at least March 2019, Shell's head of integrated gas Maarten Wetselaar said.
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Speaking on the sidelines of the Gastech conference in Barcelona, Wetselaar said LNG is currently priced at near oil parity for the winter, which, he said, was high.
"The winter looks bullish for gas," Wetselaar said, adding that the markets in Asia and Europe looked tight "all the way out to March and April."
"Gas prices in Europe are relatively high, with storage levels not quite recovered from the tough winter, so with a tight LNG market in Asia, Europe might well see high prices as well," he said.
Europe has struggled to attract LNG cargoes given a recovery in price for Asian deliveries over the past few years, especially in the winter.
S&P Global Platts assessed the Asian benchmark JKM spot LNG price for November delivery at $12.07/MMBtu on Monday, while the JKM swap assessment for January and February was assessed much higher at $13.25/MMBtu.
The Dutch TTF day-ahead price, meanwhile, is currently trading at Eur27.60/MWh, according to Platts assessments, the equivalent of $9.45/MMBtu, while the Q1 2019 price was assessed at Eur28.18/MWh.
Shell last year famously went against popular opinion that the LNG market was oversupplied, saying there was no glut.
High LNG prices triggered by surging demand and some upstream issues meant the market eventually sided with Shell, agreeing that the market was not in a state of oversupply.
"There wasn't a glut," Wetselaar said, adding that the market would in fact become tighter again from late 2021.
"What happens in between -- summer 2019 to summer 2021 -- is a bit 'unknowable'," he said.
He said that quite a lot of supply was coming on stream in that two-year period and demand in China in particular continued to ramp up.
"I don't exclude that we'll never have a soft market, but in that period we could have one," he said.
Andree Stracke, chief commercial officer at Germany's RWE Supply and Trading, added that the LNG market was buoyant at present for suppliers.
"Every cargo produced is finding a home," he said.
Stracke added that the LNG market was also benefiting from a significant increase in trading liquidity, with greater liquidity around the JKM benchmark and greater numbers of market participants.
The CEO of Qatar Petroleum, Saad Sherida al-Kaabi, also said Monday during the Gastech conference that the LNG market was changing quickly, conceding that the view of an LNG glut from now until 2025 was no longer so widely held.
"The market is changing very quickly and we need to make sure we know how to manage projects," al-Kaabi said. "We need to make sure there is ample supply."
Qatar is set to expand its LNG production capacity from 77 million mt/year to at least 100 million mt/year through the construction of three more trains.
Wetselaar said Shell -- which already has a stake in Qatargas 4 -- would be interested in taking part in the Qatar LNG expansion.
"We are in talks with Qatar Petroleum on that," he said.
According to Steve Hill, Shell's executive vice president for gas marketing and trading, the LNG industry has shifted away from trying to bring mega-trains online quickly to a focus on being the "low-cost" producer.
This comes against the background of the burgeoning cheap US LNG supply industry, Qatar's new LNG expansion and the emergence of Novatek as a low-cost LNG producer in Russia.
Novatek CEO Leonid Mikhelson told reporters late Monday on the sidelines of Gastech that his company could be profitable even when LNG prices were at their lowest.
"We can be very competitive on both capital expenditure and operating expenditure," Mikhelson said, adding that Novatek could produce feedgas at one third the price of Henry Hub.
--Stuart Elliott, firstname.lastname@example.org
--Edited by James Leech, email@example.com