LNG market rebalancing to stall until 2020s, study says

LNG market rebalancing to stall until 2020s, study saysIllustration purposes only (Image courtesy of Santos)

The LNG market is expected to hit the bottom of a boom-bust cycle over the next five years, a report by Aurora Energy Research shows. 

This comes as a result of the depressed prices, a virtual halt in investment and the drop in contracts value.

Over the five-year period, a wave of new supply, predominantly in the US and Australia, will increase the total liquefaction capacity by up to a third, only accounting for committed projects, with any upward supply-side pressure only beginning to emerge beyond 2021.

The report further claims that even at that point weak demand is likely to impede a swift recovery. Although buyers are far more diverse than ever before, fundamental reasons will stall a full rebalancing until at least the mid-2020s.

Gas demand growth is currently squeezed out by renewables deployment, energy efficiency gains and depressed GDP growth expectations. New windows of opportunities in the transport sector and petrochemicals, while boosting the long-term prospects, are unlikely to bring a significant uplift in the short term, according to AER.

Largely in response to these conditions, and with growing numbers of increasingly sophisticated participants, the LNG business model is transitioning towards flexibility to unlock value. Buyers are increasingly trading to benefit from price volatility by redirecting cargoes, and shipping providers are also capturing a significant share of the value of flexibility through freight rates. Opportunities for structural changes in the market with shorter contracts, emerging supply hubs, and new pricing formulas are starting to shape new rules for the industry.

In Europe, these emerging market dynamics boost buyers’ negotiating position against historic suppliers, as LNG is increasingly eroding Russia’s market power.

Share this article

Follow LNG World News

Events>

<< Mar 2017 >>
MTWTFSS
27 28 1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 31 1 2

CIMPC 2017

The 2017 Chine International Marine Corrosion & Protection Technology and Innovation and Application Development Forum will be held in March in Shanghai, China.

The Forum will continue to maintain a high standard, specialization, and internationalization. In addition to focusing on marine areas, it will also extend to the corrosion and protection of land and air engineering.  By showing the outstanding results of China in the aspects of corrosion technology research and engineering applications, as well as by introducing the advanced anti-corrosion technology and products, it is aimed to promote the development of China’s corrosion & protection technology and engineering application.

More info

read more >

LNG Pricing, Trading & Risk Management / 2-Day Course

Come join us for this truly exceptional LNG learning and professional development experience.

read more >

Gastech Conference & Exhibition

Gastech Conference & Exhibition represents and addresses the current commercial and technical challenges spanning the entire natural gas & LNG supply chain..

read more >

06th OIL & GAS KENYA 2017

The 06th Oil & Gas Africa – Int’l Trade Exhibition, 11 – 13 April, 2017, is a hub for key players in the oil and gas community…

read more >