Tokyo and Seoul, December 8, 2023 – Over the course of August 2022 to July 2023, both Japan and South Korea experienced unprecedented levels of liquefied natural gas (LNG) stored in above-ground storage tanks, according to data released by Japan’s Ministry of Economy, Trade, and Industry and South Korea’s Energy Economics Institute, respectively.
For more than two decades, Japan and South Korea have consistently ranked among the top three global importers of LNG. Despite their status as key importers, both nations lack international pipeline interconnections, relying entirely on LNG imports. With no underground storage facilities, LNG is stored in above-ground storage tanks co-located with regasification terminals.
Japan holds the world’s largest LNG storage capacity in above-ground storage tanks, distributed across over 30 regasification facilities, totaling 20.1 million liquid cubic meters (MMcm) or 425.1 billion cubic feet (Bcf) of gaseous natural gas in 2022, as reported by the International Group of Liquefied Natural Gas Importers (GIIGNL). Meanwhile, South Korea possesses the second-largest LNG storage capacity, with 14.1 liquid MMcm (298 Bcf of gaseous natural gas) housed in above-ground storage tanks at seven regasification terminals.
Mild winter weather in East Asia during the 2022‒23 winter season contributed to lower-than-average LNG imports and consumption. This climate anomaly led to a substantial accumulation of LNG in storage tanks in both Japan and South Korea from January through July 2023. Although storage levels declined in August and September due to increased consumption in the natural gas-fired electric generation sector, the monthly onsite LNG storage volumes for both countries remained at record highs.
LNG inventories in regasification facilities play a crucial role in meeting seasonal fluctuations in natural gas demand, particularly during winter when the need for space heating peaks. In Japan, LNG storage volumes fluctuated between 29% and 69% of available capacity from January 2010 through August 2023. South Korea experienced similar variability, with storage volumes ranging from 17% to 90% over the same period.
The volume of LNG stored in above-ground storage tanks is essential as an emergency stockpile in the event of halts in LNG imports from global sources. Japan’s LNG stockpile can sustain an average of approximately 19 days based on monthly inventory and consumption data from 2011–2023, while South Korea’s LNG stockpile can provide an average of 30 days of supplies. The absence of underground natural gas storage capacity and international pipeline connections underscores the dependency of Japan and South Korea on real-time LNG shipments.
Price Movements
Henry Hub Spot and Futures Prices
The Henry Hub spot price experienced a modest increase of 3 cents, rising from $2.70 per million British thermal units (MMBtu) last Wednesday to $2.73/MMBtu yesterday.
In contrast, the January 2024 NYMEX contract saw a decrease of 23.5 cents, dropping from $2.804/MMBtu last Wednesday to $2.569/MMBtu yesterday. The 12-month strip, averaging January 2024 through December 2024 futures contracts, declined by 23.8 cents to $2.746/MMBtu.
Regional Spot Prices
Natural gas spot prices witnessed a general decline across most locations during the report week (Wednesday, November 29 to Wednesday, December 6). Notable changes included a decrease of $2.34/MMBtu at the Opal hub and an increase of $6.30/MMBtu at the Algonquin Citygate.
The Algonquin Citygate, serving Boston-area consumers, experienced a significant rise from $3.50/MMBtu last Wednesday to $9.80/MMBtu yesterday. This increase was attributed to lower temperatures towards the end of the report week, leading to higher demand for natural gas for space heating.
Midwest and West Price Trends
In the Midwest, the Chicago Citygate price decreased by 18 cents from $2.55/MMBtu last Wednesday to $2.37/MMBtu yesterday. This decrease followed a 15% (3.0 Bcf/d) reduction in natural gas consumption, primarily in the residential and commercial sectors.
Prices in the West also declined, with notable decreases at PG&E Citygate in Northern California, SoCal Citygate in Southern California, the Opal hub in Southwest Wyoming, and Northwest Sumas on the Canada-Washington border.
Waha Hub in West Texas
Natural gas spot prices at the Waha hub in West Texas, near Permian Basin production activities, fell $1.32 during the report week, reaching $0.64/MMBtu yesterday. This price decline was influenced by lower natural gas deliveries and higher supply receipts, leading to a high linepack condition.
International Futures Prices
International natural gas futures prices showed a decrease during the report week. Weekly average front-month futures prices for LNG cargoes in East Asia dropped 47 cents to a weekly average of $16.10/MMBtu. TTF in the Netherlands also saw a decrease, with natural gas futures falling $1.06 to a weekly average of $12.91/MMBtu. Comparatively, last year’s prices were significantly higher, standing at $32.98/MMBtu in East Asia and $42.95/MMBtu at TTF.
Natural Gas Plant Liquids (NGPL) Prices
The natural gas plant liquids composite price at Mont Belvieu, Texas, increased by 19 cents/MMBtu, averaging $6.92/MMBtu for the week ending December 6.
Ethane prices fell by 4%, while natural gas prices at the Houston Ship Channel decreased by 7%. Propane prices rose by 9%, and the propane discount relative to crude oil decreased by 17%.
Supply and Demand Overview
Supply
The average total supply of natural gas decreased by 0.5% (0.6 Bcf/d) compared to the previous report week.
Dry natural gas production decreased by 0.2% (0.2 Bcf/d) to a weekly average of 105.0 Bcf/d.
Average net imports from Canada decreased by 5.9% (0.4 Bcf/d) from the previous week.
Demand
Total U.S. consumption of natural gas fell by 9.4% (9.3 Bcf/d) compared to the previous report week, driven by warmer temperatures across most of the Lower 48 states reducing the demand for space heating.
Natural gas consumed for power generation declined by 2.4% (0.8 Bcf/d) week over week.
Industrial sector consumption decreased by 2.8% (0.7 Bcf/d).
Residential and commercial sector consumption declined significantly by 19.2% (7.8 Bcf/d).
Natural gas exports to Mexico increased by 5.6% (0.3 Bcf/d).
Natural gas deliveries to U.S. LNG export facilities (LNG pipeline receipts) averaged 14.1 Bcf/d, or 0.2 Bcf/d lower than the previous week.
LNG Overview
Pipeline Receipts
Average natural gas deliveries to U.S. LNG export terminals decreased by 1.6% (0.2 Bcf/d) week over week, averaging 14.1 Bcf/d.
Natural gas deliveries to terminals in South Louisiana decreased by 1.3% (0.1 Bcf/d) to 8.6 Bcf/d.
Terminals in South Texas experienced a 4.2% (0.2 Bcf/d) decrease in natural gas deliveries.
Terminals outside the Gulf Coast observed a 6.8% (0.1 Bcf/d) increase in natural gas deliveries.
Vessels Departing U.S. Ports
Twenty-nine LNG vessels, with a combined LNG-carrying capacity of 105 Bcf, departed the United States between November 30 and December 6, according to shipping data provided by Bloomberg Finance, L.P.
Rig Count and Storage
Rig Count
According to Baker Hughes, the natural gas rig count decreased by 1 rig to 116 rigs for the week ending Tuesday, November 28.
The Marcellus added one rig, while two rigs were removed from unidentified producing regions.
The number of oil-directed rigs increased by 5 rigs to 505 rigs.
The Permian and Cana Woodford each added three rigs, while one rig was removed from unidentified producing regions.
The total rig count, including 4 miscellaneous rigs, increased by 3, reaching 625 rigs, which is 159 rigs fewer than the same time last year.
Storage
Net withdrawals from storage totaled 117 Bcf for the week ending December 1, exceeding the five-year (2018–2022) average net withdrawals of 48 Bcf and last year’s net withdrawals of 30 Bcf during the same week.
Working natural gas stocks totaled 3,719 Bcf, representing a 7% surplus compared to the five-year average and a 7% increase over last year’s levels at this time.
According to The Desk survey of natural gas analysts, estimates of the weekly net change to working natural gas stocks ranged from net withdrawals of 96 Bcf to 127 Bcf, with a median estimate of 106 Bcf.
In conclusion, Japan and South Korea’s peak LNG storage levels highlight the ongoing significance of these nations in the global LNG market, with their storage facilities playing a critical role in managing seasonal demand fluctuations. Meanwhile, natural gas prices experienced varied movements across regions, influenced by factors such as temperature changes, demand patterns, and supply dynamics. The rig count and storage data further provide insights into the current state of the natural gas industry, indicating trends in production, consumption, and storage levels.