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1 23/03/2021
The developments of global LNG sector in 2020

2020 was an extraordinary and challenging year due to the outbreak of covid-19 pandemic and its implications on the economic activity in the vast majority of regions around the world. To contain spreading of the pandemic, many countries have adopted restrict measures including social distancing, closure of their borders, suspension of air flights and even restricting people movement within the same country.  Other restrict measures included banning public events and shutting in most retail and manufacturing activities or operating them at the minimum levels to meet the essential requirements.

According to the most recently published version of OAPEC quarterly report of the developments of the global LNG sector, the global scene of LNG industry and trade gas in 2020 has been affected by several consequences caused by the pandemic. Nevertheless, OAPEC has believed that there are potential opportunities could evolve to help stabilize the global market and assure the continuing flow of investment capital.

For Arab LNG exporters, the total LNG exports have been slightly affected by covid-19 pandemic, totaling 105.7 million tons in 2020 against 108.5 million tons in 2019 or a decline rate of -2.6%, while reserved a global market share of 29.65%.

This limited impact can be attributed to the main feature of LNG contracting agreements that based on long term agreements between state-owned Arab countries and their clients in the European and Asia markets. It is worth mentioning that Arab countries is still the major long term-reliable supplier of LNG to many markets.

Globally, the total LNG trade reached 360.3 million tons in 2020, slightly higher than that of 2019 at an annual growth rate of 2%. Once again, the natural gas, and in particular LNG, emphasizes its significance as a reliable and affordable energy source able to meet the global energy demand.

Prior to covid-19 outbreak, the global market was set to be oversupplied, due to rapidly growing LNG supplies outpacing global demand. However, the production reduction taken by some LNG producers due to maintenance activities and other reasons and the balancing role of the European market effectively achieved the required supply-demand balance over 2020.

From investment perspective, the pandemic has led to the delay of FIDs taking on many LNG projects, leaving 2020 as the worst year in the past five years with only one project has been sanctioned in Mexico totaling 2.5 MTPA. A further 20 planned projects were delayed for FID taking in 2021 and beyond.

The volatility of spot LNG prices was the main dynamic change caused by covid-19 outbreak. Spot LNG prices have reached historic highs at the end of 2020, leaving the market condition similar to that following Fukushima disaster in Japan when prices reached over $20/MMBTU. Thus, long term oil-indexed contracts provide guaranteed stability to the market which will achieve mutual benefits for sellers and buyers.

Looking ahead, the global LNG market is forecasted to be more stabilized in 2021 with confidence of stable LNG supplies from major exporters.  Furthermore, some of delayed LNG projects are forecasted to reach FID taking in 2021. As a consequence, the demand on LNG is forecasted to continue to grow.