News

Become a member

Middle East LNG Imports to Grow Over Coming Years – S&P Global Platts

March 22, 2017 | Pipeline

The Middle East, traditionally knows for its large-scale exports, has become one of the fastest growing demand centres for LNG with imports expected to grow by about 50 per cent over the next two years before stabilising as regional production ramps up by 2022, S&P Global Platts said in a new report.

Over the past three years, LNG imports into the region, (which includes Jordan, Egypt and Pakistan due to its proximity of its import terminals to the mouth of the Arab Gulf) has grown by 380 per cent, at a time when deliveries to traditional demand centers have been relatively stagnant or in decline, the report said.

The region imported 5.9 Bcm (4.3 million mt) of LNG in 2014, surging to 28.6 Bcm (20.9 million mt) for 2016, S&P said.

The push for LNG imports is due to domestic demand growth outpacing available pipeline supplies. Despite the Middle East accounting for a large portion of global gas reserves, 80 per cent of their share is concentrated in Iran and Qatar. Growing domestic demand in in some countries in the region has reached a point where production can no longer keep pace with demand.

UAE and Kuwait’s gas consumption has surpassed production by 12.1 Bcm and 3.6 Bcm respectively in 2014, according to the lasts BP Statistical Review of World Energy.

Meanwhile, Egypt, which went from exporting 16.2 Bcm of 61.3 Bcm it produced in 2010, to consuming almost all of the 48.8 Bcm it produced domestically in 2014.

Over the last two years, countries in the region have been increasingly been using LNG to bridge the gap between domestic gas supplies and latent demand, turning the region into a growing import destination.

This transition has been facilitated by a steep decline in LNG prices over the past three years, driven by a fall in the value of oil-linked contracts, additional liquefaction capacity being brought online and milder weather in key demand regions, S&P Global Platts said.

In addition to lower LNG prices, the availability of Floating Storage and Regasification Units (FSRUs) has played a key role in the region’s transformation into a LNG demand centre.

At the start of 2015, Egypt, Jordan and Pakistan all managed to install and commission FSRUs within three months of each other. Egypt subsequently secured a second FSRU in the same year, along with the United Arab Emirates, which now has two FSRUs in operation.

These FSRUs together give the region a theoretical maximum import capacity of almost 50 Bcm (36.5 million mt) per year with over 36 Bcm (26.28 million mt) of that capacity online since 2015.

Since the arrival of the additional FSRUs in 2015, imports into the region have grown dramatically, moving from 5.9 Bcm (4.3 million mt) in 2014 to 28.6 Bcm (20.9 million mt) in 2016, an increase of 385 per cent.

The lion’s share of the increase has been due to demand from the new market entrants in the region, namely Egypt, Jordan and Pakistan, which accounted for 67 per cent total regional LNG imports in 2016. However, deliveries to traditional importers Kuwait and UAE, have been increasingly steadily as well, growing by almost 60 per cent from 5.9 Bcm (4.3 million mt) in 2014 to 9.4 Bcm (6.9 million mt) in 2016.

FUTURE MIDDLE EAST DEMAND

Going forward, LNG demand in the region is expected to continue to grow over the next two years, before stabilising above 40 Bcm (29.2 million mt) per year, according to forecasts from Platts Analytics’ Eclipse Energy.

Egypt is expected to remain the largest importer of LNG in the region over the next two years, after which domestic gas supplies from Zohr and other smaller gas fields is set to displace much of the demand for LNG.

Even with declining requirements from Egypt, regional demand is forecast to remain relatively stable – averaging between 40 and 45 Bcm (29.2 and 32.9 million mt) between 2018 and 2021.This is mainly due to expectations of higher imports into Pakistan and Kuwait.

Pakistan is set to become the largest regional importer by 2019, based on the expected installation of an additional two FSRUs by early 2018.

Meanwhile, Bahrain will be the next Middle Eastern country to enter the LNG market, with a planned 8.2 Bcm (6 million mt) per year capacity Floating Storage Unit- based import facility expected to come online in July 2018.

Kuwait, which is already an existing LNG importer, is scheduled to complete construction of an onshore regasification terminal by 2020, at which point demand is expected to grow above 7.5 Bcm (5.5 million mt) per year.

Imports into the UAE are expected to continue to increase as well, with the delivery of the country’s second FSRU to Abu Dhabi in 2016 and a third import terminal set to be installed in the emirate of Sharjah in mid-2018.