Liquid Natural Gas (LNG)
The global LNG market continued to grow rapidly in size and complexity in 2019,
driven by abundant new flows from the US and Russia, the development of a more
liquid spot market in the Far East, and sustained low gas prices resulting in a
record amount of LNG being delivered to Europe. More countries are buying LNG, and
buyers are becoming more flexible and more willing to buy from the spot market as
opposed to traditional long-term contracts, recognising that security of supply can
better be provided on a liquid, open and transparent spot market. With supplies
plentiful and prices low, a significant driver of demand was gas-for-coal switching
among power utilities both in Europe and across Asia.
The LNG team strongly increased volume, with growth up 27 percent to 12.6 million metric tonnes equivalent. This year marked the start of shipments under our 15-year offtake agreement with Cheniere and several other mid-term contracts. With weak demand in Asia redirecting trade flows, the European market absorbed the bulk of our Atlantic cargoes, often in conjunction with our natural gas desk, while we continued to build our position in the Far East with regionally sourced LNG.
Given the greater integration of global gas prices, we reaped considerable benefits from our integrated approach to trading LNG and natural gas in one team.
Our natural gas book grew significantly during the year, both in scale and scope. Volume traded grew by 147 percent to 17.1 million metric tonnes equivalent. We were again the largest supplier of natural gas to Mexico from the US, while in Europe we expanded our business, in particular in Spain, Italy and the UK. We increased sales in Ukraine despite ongoing political uncertainty, and we remain committed to this market. We continue to grow our footprint in new gas markets: for instance, this year we became the first foreign company to acquire a gas sales license in Pakistan. Looking ahead, we expect the pattern of growing LNG production, increasing demand and greater market liquidity and transparency to offer more opportunities for our integrated LNG/natural gas operation in the US, Europe, Asia and Latin America.