Publications

The global liquefied natural gas (LNG) market is transforming. In early 2016, the US is expected to start LNG exports from the Gulf coast, a plot twist that was unthinkable even 10 years ago. Australia will soon be an exporter on a scale to rival Qatar. LNG importers are becoming exporters and vice versa, but low prices threaten new projects and the profitability of existing ones. The LNG industry is cyclical, exposed to sweeping and sudden change in geopolitics, regulation, economics, technology, natural disaster, alternative energy sources etc., so in a best effort to predict LNG supply/demand and pricing based on current macro-analysis and research, supply is probably viewed best from the viewpoint of the different sectors and the timeframe involved. Analysis shows a sector engulfed by global oversupply (variable supply outlets) and comparatively weak demand because of China’s internal energy policy and moderating economy. Both will weigh-down upon LNG prices. Moreover, the fact that 75% of LNG is currently oil-indexed will compound downward price pressure unless the underlying commodity (oil) price bounces back. Prices will eventually pick up on the back of a more liquid and active spot-market emboldened by heightened demand (global push toward de-carbonisation – Paris 2015) and the fact that LNG projects are likely to be deferred over the coming years (due to low prices), eroding supply potential. In essence, there is likely to be a re-balancing between supply and demand.