FOCUS: LNG exporters face a future of low prices, weak demand and too much gas
| DOI | http://doi.org/10.1111/oet.12362 |
| Date | 01 April 2016 |
| Published date | 01 April 2016 |
FOCUS
LNG exporters face a future of low prices, weak demand and too much gas
Liqueed natural gas (LNG) export capacity planned in
times of booming demand and higher gas prices is still
coming on-stream despite much less favourable market
conditions now. Global capacity is forecast to rise by up
to 18 bncfd over the next ve years: equivalent to about
half the entire global LNG trade during 2015. Demand
growth over that period is expected to be less than 5%
a year, giving a projected increase of 9 bn cfd at most by
2020, which should keep LNG prices under downward
pressurefor much of the period.
Faced with this scenario, many gas producers are
beginning to rethink their plans. A number of strate-
gies are under consideration, including postponing or
even cancelling s ome projects. S ome producers have
proposed the establishment of some sort of gas cartel on
the lines of OPEC, while others look set to try and protect
or even increase their sales by improving the terms on
which they supply their gas, for e xample by oering more
exible arrangements on volumes and prices. In the end,
though, there mayb e noother way of dealing with weak
demand and rising supplies other than by cutting prices.
Too many projects
A number of projects are s cheduled to come on-stream
between 2016 and 2020. Many of these are accounted
forbyAustralia,theUSandRussia;butothershavealso
been proposed for Africa, Latin America, Iran, Canada,
Papua New Guinea and Indonesia. Some of these will
end up being postponed: others are likelyto b e cancelled
altogether as falling gas prices cause capital spending to
be cut.
Highonthelistofnewprojectsbetweennowandthe
end of the decade is Australia withsix, total ling5.9 bncfd
of new capacity. e rst of these is Chevron’s Gorgon
project, o Western Australia, which exported its rst
cargoinMarch.Alsodueon-streamthisyearareaddi-
tional export trains at two projects that began operating
in 2015, at Gladstone and Australia Pacic in Queens-
land, while next year new terminals will be commis-
sioned at Wheatstone,Prelude and Ichthys, serving elds
o the western and nort hern coasts (see Table A).
e projects currently planned for Australia account
for nearly a third of the projected global increase of
18 bn cfd in LNG export capacity between nowand 2020,
and almost two-thirds of the likely increase in actual
demand. When added to the country’s existing capacity
they will give Australia a total of 11.3bn cfd by the end
of the decade, which couldenable it to overtake Qatar to
become the world’s largest exporter of LNG.
e six projects (Table A) are not the only ones pro-
posed for Australia. Several others have been mooted
Table A
Australia: LNG Projects, 2016-2017
Project Capacity On-stream
(bn cfd)
Gorgon 2.1 2016
Gladstone LNG 0.5 2016
Australia Pacic LNG 0.5 2016
Ichthys 1.2 2017
Prelude 0.5 2017
Wheatstone 1.2 2017
Total 5.9
Totals rounded
Source: Government of Australia
to serve proposed new oshore developments and an
expansion of the coal-seam gas industry of Queensland.
Amongthose that have been proposed arenew terminals
for existing eld developments, as well as for new and
yet undeveloped o shore reserves. Low gas prices and
weak global demand have led to the postponement or
cancellation of s ome of the projects and others are likely
to encounter the same fate. Some projects now in oper-
ation are already run ning at a loss under present market
conditions.
Australia’s LNG proje cts will have to nd new mar-
kets. At present, Australian exporters are dependent on
Japan for about 80% of their sales. ere is little sc ope
for any increase for Australia or any othe r LNG supplier,
as Japanese imports have fallen since 2014 and are fore-
cast to go on decreasing, as nuclear power stations are
slowly brought back on-stream aer their closure fol-
lowing the tsunami of March 2011, which damaged the
reactor at Fukushima. ere are also plans for more elec-
tricity generation from renewable sources, and there is
even the possibility of an increase in the coal-burn [1].
ere could therefore b e a decrease of ab out 1 bncfd i n
Japanese LNG demand between now and 2020.
Australia’s exporters are actively seeking new markets
elsewhere in Asia, including China and India. In the
longer term, there may be new export opportunities in
Asia, including Indonesia and Vietnam. ese markets
will be the target of other exporters, including Russia
and the US, which also have ambitious plans to export
more LNG.
Russian ambitions
Russia is planning even morenew LNG capacity than in
Australia, although uncertaintysurrounds most projects
and nearly all those that may still b e regarded as rm
are subject to delay: in some cases by a number of
years. Russian export schemes are largely resource-led
© 2016 John Wiley& Sons Ltd
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