Both trends indicate an even lower TTF price for 2020, which in turn suggests lower spot price in Asia. Not to forget, Sims noted, the “ever present is the risk to LNG supplies from Qatar should US-Iran tensions escalate to a point of causing disruption to shipping through the Strait of Hormuz.”
On the demand side, low LNG spot prices across Asia have brought forward a range of new buyers. In South Korea, for example, new power and industrial consumers are also looking to self-procure, joining the likes of POSCO, SK E&S, GS Energy and others who already independently import and bypass KOGAS' stronghold on the market.
In Malaysia, Shell imported a spot LNG cargo into Malaysia, breaking PETRONAS’ monopoly for the first time. Now, Malaysia’s power generation company TNB, TNBF, is understood to be looking for additional cargoes in 2020. Incumbents, like Petronas or Kogas, have a supply portfolio of long-term supply contracts with relatively high prices.
“Being able to self-purchase LNG from the spot market will provide additional margin for these end users,” analysts stressed. After a few spot cargoes under their belts, these new buyers and LNG suppliers might well gain confidence to take on mid-term deals.
Asia’s backlash against coal could provide upside
Clean air policies, adopted by governments in South Korea and Taiwan, have reduced coal-burn in the power sector which is starting to have a positive effect on gas demand.
“If this winter’s curtailments [and restrictions on coal power dispatch] have a positive impact and blackouts are avoided, then seasonal coal curtailments are likely to feature regularly in Northeast Asia; to the benefit of LNG,” said principal analyst Lucy Cullen.
She cautioned, however, that the nature of energy markets in Northeast Asia does not favour significant coal-to-gas switching. Emissions concerns and sustained low natural gas and LNG prices may provide the necessary impetus for wider-scale switching in 2020.