• 3 minutes Looming European Gas Crisis in Winter and North African Factor - a must read by Cyril Widdershoven
  • 7 minutes "Biden Targets Another US Pipeline For Shutdown After 'Begging' Saudis For More Oil" - Zero Hedge Monday Nov 8th
  • 12 minutes "UN-Backed Banker Alliance Announces “Green” Plan to Transform the Global Financial System" by Whitney Webb
  • 27 mins GREEN NEW DEAL = BLIZZARD OF LIES
  • 2 days China's aggression is changing the nature of sovereignty.
  • 3 days Building A $2 Billion Subsea Solar Power Cable From Chile To China
  • 1 day Ukrainian Maidan after 8 years
  • 2 days OPEC+ Expects Large Oil Glut In Early 2022
  • 1 day Delta variant in European Union
  • 2 days Hunter Biden Helped China Gain Control of Cobalt Mines in Africa
  • 4 hours Communist China Declared War on the US Long Ago Part 1 of the 2-part series: The CCP's War on America
  • 2 days Forecasts for Natural Gas
  • 2 days Microbes can provide sustainable hydrocarbons for the petrochemical industry
  • 8 hours Сryptocurrency predictions
  • 2 days NordStream2
  • 2 days CO2 Electrolysis to CO (Carbon Monoxide) and then to Graphite
  • 2 days President Biden’s Nuclear Option Against OPEC+ - Waste of Time
  • 3 days Big Bounce: Russian gas amid market tightness - new report by Oxford Institute for Energy Studies
Big Oil Is Fighting For Clean Fossil Fuels

Big Oil Is Fighting For Clean Fossil Fuels

While much has been made…

Omicron Doom And Gloom May Not Be Justified

Omicron Doom And Gloom May Not Be Justified

The wider commodities complex nosedived…

U.S. Shale Industry To Spend $83 Billion In 2022

U.S. Shale Industry To Spend $83 Billion In 2022

US shale expenditure is projected…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

Is LNG Moving From A Buyers’ To A Sellers’ Market?

When Petronas announced the cancellation of its biggest investment abroad, its US$28-billion Pacific NorthWest LNG project, the news sounded an alarm for the LNG industry, which is already plagued by a glut that has been dragging down prices and eating into producers’ margins.

The glut continues, making it a buyers’ market with a decided shift towards short-term contracts. In China, the move is particularly pronounced. Smaller, independent energy companies are rushing to build LNG terminals along the coast to take full advantage of the growing domestic demand for the fuel. Low prices don’t bother them—they are happy to tap the spot market while the getting is good. However, according to at least one industry insider, this may soon change.

The chief executive of LNG terminal maker Liquefied Natural Gas Ltd. told Bloomberg in an interview that the shift towards short-term contracts may come back to bite LNG traders. Greg Vesey said that the only way to secure funding for new export/import capacity is through long-term contracts, and failure to ink some may tip the scales towards a shortage as soon as 2021.

The Pacific NorthWest LNG is a case in point. The Malaysian state oil and gas company terminated the project because of low gas prices. In this price environment, the company simply could not afford the investment.

Another terminal builder is backing Vesey’s warning. Kathleen Eisbrenner from NextDecade Corp. told Bloomberg the investment needed for the construction of an LNG export terminal requires a 20-year supply contract. Some—notably large—Asian utilities, are aware of this and are committing to 20-year contracts, but many still insist on riding the spot market wave.

Even so, long-term contracts are still considered the norm, which means that the concern expressed by terminal builders may be a bit premature. Last year, according to the International Gas Union’s 2017 World LNG Report, short and medium-term LNG contracts accounted for just 28 percent of total trade, or 72.3 million tons. This was an increase of 400,000 tons from the previous year. Yet, the IGU noted that the share of short-term contracts has been declining since 2013. Related: Tesla Successfully Raises Funds As Cash Bleed Continues

Total LNG trade reached a record-high of 258 million tons last year, up 5 percent or 13.1 million tons from 2015. A 5-percent growth rate may not seem like a big deal, but in the context of the four-year average rate up to that year, which stood at just 0.5 percent, that rate increase is huge. Demand for LNG is undoubtedly rising, and so is production and export capacity. For now, production is still above demand but most of the new capacity seems to be backed by long-term contracts. In the Asia-Pacific, the IGU pointed out, most of the LNG terminals that came on stream in the last two years were supported by long-term contracts, in line with Vesey’s and Eisbrenner’s stance.

Even with a direct link between long-term contracts and LNG capacity, more such projects may be canceled in the coming months. Prices are low, supply is more than demand, and sellers are scrambling to secure contracts by offering even lower than market prices. There is a distinct possibility that the unbalance in the LNG fundamentals will persist into the next decade, some analysts warn, which should quench concern about a potential shortage in a few years because of lack of export/import capacity.

By Irina Slav for Oillprice.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News