Kicking off the year 2020, what feels like many moons ago, I recall excitement and trepidation amongst us. This was the start of a new decade, a year in which the first palindromic date for 900 years would occur (02/02/2020), Britain would depart the EU, an iconic US election would take place, essentially the list of events scheduled for the year’s 366 days was lengthy.
Following 2019’s record-breaking year for the LNG industry, there was equally high hopes for 2020. Would it be a repeat or even bettering of 2019’s sanctioned 70 million tpy of new LNG capacity? Unfortunately not. In fact, the projects to achieve Final Investment Decisions (FID) in 2020 can be counted rather quickly, at a grand total of one. This successful project is ECA Liquefaction’s (a Sempra LNG and IEnova joint venture) ECA LNG Phase 1 project in Baja California, Mexico. With first LNG production from this project expected in late 2024, and CAPEX estimated at approximately US$2 billion, the FID snuck in just before the doors close on 2020.
Whether the projects that were planned for 2020 FIDs are successful in 2021 is, like many things, up in the air; numerous launch dates for projects have already been postponed. Whilst the IEA understands there to be confidence that global gas demand should recover in 2021 due to support from fast-growing markets in Asia, Africa, and the Middle East, there are still markets where recovery will be slower, and the strength of the LNG industry in 2019 may not be matched until 2022 and possibly beyond.
In this issue’s global summary of the LNG industry in 2020, Norton Rose Fulbright considers the future, and how actions taken earlier this year in Europe to try and balance the market by importing and storing LNG will have ramifications in 2021 if these storage volumes remain high, as it is likely that cancellations of LNG export cargoes from the US will continue. The LNG industry has experienced a rollercoaster of change during the course of 2020: global gas demand fell 4% y/y in 1H20, natural gas spot prices plunged during 2Q20 but showed strong improvement in 3Q20, and there was nearly a record for the first time in over a decade that zero new liquefaction projects were confirmed in a year (fortunately this was not the case). The report starting on p. 8 entitled ‘The wild ride from 2020 to 2021’ is a thorough overview of the industry that looks at the whirlwind of the LNG industry over the year, as well as the onslaught of COVID-19 impacts – though I assure you that the issue isn’t all doom and gloom.
To sum up the year in general seems rather difficult, but taking a look at the globally most googled searches provides entertainment and information, with the global pandemic an underlying theme. High in the ranks, at number 2, is “what to watch”, number 5 is “how to screenshot on a Mac”, 28 is “how to solve a Rubik’s cube” and 33 “how to make hand sanitiser”. Covering the ‘new normal’ of working from home, limited available social activities, panic buying and essential PPE, every corner of the globe has struggled and persevered through the pandemic (other than the six unique South Pacific island nations that have reportedly avoided all contact with COVID-19).
The ‘word of the year’, as categorised by Collins Dictionary, for 2020 was ‘lockdown’, and looking ahead, let’s hope for 2021 the focus is strongly on recovery, and an optimistic outlook on the unknown.
As the weirdest 12 months wraps up, the LNG Industry team would like to thank you all for your support throughout the year, and we look forward to continuing to provide you with current and informative market news and developments as we move into 2021. Wishing you all a healthy and prosperous holiday season.