Peru Gas Trade Forecast
|Fitch Solutions Sector Intelligence
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Peru Gas Trade Forecast
- 24 Nov 2021
- Oil & Gas
Key View: Peru's is an important LNG net exporter, with LNG exports of 5.1bcm in 2020. We expect this number to remain relatively constant throughout the forecast period but note downside risk to our outlook based on strengthening domestic demand and the risk of production outages.
- Bolivia and Peru have begun talks over plans to link Bolivian gas production to southern Peru and Peruvian LNG export terminals via a cross-border pipeline. No timeline for the proposed project has been given, however, the Southern Gas Pipeline (GSP) system would have to be in place before this project can proceed.
- We note upside risks to gas net exports over the second half of the forecast period, when China National Petroleum Corporation (CNPC)'s Block 58 gas project could come online. We currently do not include the project within our gas production forecasts given uncertainties on timing, following the cancellation of the GSP contract in 2017 after the Odebrecht scandal. As highlighted earlier in this report, there are reports however that the pipeline contract could go on tender in H222.
- Peru LNG has had operational difficulties since May 2021, notably due to an issue with a compressor. This could result in lower overall LNG exports over the year.
Peru became Latin America's first LNG exporter, following the launch of the 4.45mtpa Pampa Melchorita liquefaction terminal in June 2010. The liquefaction project, known as Peru LNG, shipped its first cargo in the same month despite growing uncertainty over demand from the US and strong public opposition towards gas exports.
Peru's LNG exports peaked at 5.70bcm in 2014, representing nearly 94.0% of capacity. We expect LNG exports to remain high, at around 5bcm or higher throughout the forecast period, with the LNG export terminal operating close to full capacity. Nevertheless, we note downside risk to this LNG export forecast due to rising domestic consumption from the power and mining sectors.
We note upside risks to gas net exports over the second half of the forecast period, when CNPC's Block 58 gas project could come online. We currently do not take the project into account within our gas production forecasts given uncertainties on timing, following the cancellation of the GSP contract in 2017 after the Odebrecht scandal. However, as highlighted earlier in this report, there is a possibility the project will go on tender in H222.
Significant LNG Exporter
Peru - Gas Net Exports (2019-2030)
e/f = Fitch Solutions estimate/forecast. Source: EIA, Fitch Solutions
Continued growth in natural gas output in Peru, coupled with an increasingly well-supplied LNG market, will force the country to identify new offtakers for its liquefied exports. The expansion of the Panama Canal in June 2016 has resulted in traditional trade routes for Peru and resulted in an oversupply of LNG in the Americas.
Transit times from the US to the southern region of Latin America are significantly reduced, with imports to Chile now able to be delivered nearly three times faster than before. However, tankers out of Peru will also take advantage of this new corridor, allowing for greater access to import demand in previously less accessible markets, including Europe.
As expected, LNG exports to Mexico have dropped considerably from 2.9bcm in 2016 to near 0 by 2018, as LNG from the US is a cheaper alternative. Peruvian LNG is finding an alternative by shipping more to Northeast Asia, notably to South Korea, its main export market in 2020 (about 48% of Peruvian LNG exports in 2020 went to South Korea), to Japan (21% share), China (19%), and increasingly to Europe and notably to Spain, France and the Netherlands.
The low variable cost of Peru's LNG exports will ensure shipments should remain competitive as the availability of global LNG supplies rises strongly over the next five years. Peru's LNG export facilities are integrated, with conventional gas fields directly feeding the liquefaction plants. As such, we estimate variable costs of production of around USD1.00/mnBTU. As a point of comparison, 2020 annual average price for the US Henry Hub benchmark came in at around USD2.13/mnBTU, while our forecasts for 2021 and 2022 are USD3.90/mnBTU and USD4.20/mnBTU respectively. This will support the continued price competitiveness of Peruvian LNG exports, despite rising pressure from the US.
Gas Net Exports (Peru 2019-2024)
|Indicator ||2019e ||2020e ||2021f ||2022f ||2023f ||2024f |
|Dry natural gas net exports, bcm ||6.6 ||6.4 ||6.6 ||6.5 ||6.5 ||6.6 |
|Dry natural gas net exports, % y-o-y ||-0.6 ||-3.6 ||4.4 ||-1.8 ||0.0 ||0.9 |
|Dry natural gas net exports, USDbn ||2.1 ||1.3 ||2.2 ||2.2 ||2.3 ||2.4 |
|Pipeline gas net exports, bcm ||1.5 ||1.3 ||1.5 ||1.5 ||1.4 ||1.4 |
|Pipeline gas net exports, % of total ||22.6 ||19.7 ||23.1 ||23.2 ||21.6 ||20.8 |
|LNG net exports, bcm ||5.1 ||5.1 ||5.1 ||5.0 ||5.1 ||5.2 |
|LNG net exports, % y-o-y ||2.0 ||0.0 ||0.0 ||-2.0 ||2.0 ||2.0 |
|LNG net exports, % of total gas exports ||77.4 ||80.3 ||76.9 ||76.8 ||78.4 ||79.2 |
|e/f = Fitch Solutions estimate/forecast. Source: MEM, Fitch Solutions |
Gas Net Exports (Peru 2025-2030)
|Indicator ||2025f ||2026f ||2027f ||2028f ||2029f ||2030f |
|Dry natural gas net exports, bcm ||6.6 ||6.7 ||6.7 ||6.8 ||6.9 ||6.9 |
|Dry natural gas net exports, % y-o-y ||0.9 ||0.9 ||0.9 ||0.8 ||0.8 ||0.8 |
|Dry natural gas net exports, USDbn ||2.5 ||2.5 ||2.5 ||2.5 ||2.6 ||2.6 |
|Pipeline gas net exports, bcm ||1.4 ||1.5 ||1.5 ||1.6 ||1.7 ||1.7 |
|Pipeline gas net exports, % of total ||21.6 ||22.3 ||22.9 ||23.6 ||24.2 ||24.8 |
|LNG net exports, bcm ||5.2 ||5.2 ||5.2 ||5.2 ||5.2 ||5.2 |
|LNG net exports, % y-o-y ||0.0 ||0.0 ||0.0 ||0.0 ||0.0 ||0.0 |
|LNG net exports, % of total gas exports ||78.4 ||77.7 ||77.1 ||76.4 ||75.8 ||75.2 |
|f = Fitch Solutions forecast. Source: MEM, Fitch Solutions |
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