• 14 hours Oil Pares Gains After API Reports Surprise Crude Inventory Build
  • 15 hours Elon Musk Won’t Get Paid Unless Tesla Does “Extraordinarily Well”
  • 15 hours U.S. Regulators Keep Keystone Capacity Capped At 80 Percent
  • 16 hours Trump Signs Off On 30 Percent Tariff On Imported Solar Equipment
  • 18 hours Russian Funds May Invest In Aramco’s IPO To Boost Oil Ties
  • 19 hours IMF Raises Saudi Arabia Growth Outlook On Higher Oil Prices
  • 20 hours China Is World’s Number-2 In LNG Imports
  • 1 day EIA Weekly Inventory Data Due Wednesday, Despite Govt. Shutdown
  • 1 day Oklahoma Rig Explodes, Leaving Five Missing
  • 2 days Lloyd’s Sees No Room For Coal In New Investment Strategy
  • 2 days Gunmen Kidnap Nigerian Oil Workers In Oil-Rich Delta Area
  • 2 days Libya’s NOC Restarts Oil Fields
  • 2 days US Orion To Develop Gas Field In Iraq
  • 4 days U.S. On Track To Unseat Saudi Arabia As No.2 Oil Producer In the World
  • 4 days Senior Interior Dept. Official Says Florida Still On Trump’s Draft Drilling Plan
  • 4 days Schlumberger Optimistic In 2018 For Oilfield Services Businesses
  • 5 days Only 1/3 Of Oil Patch Jobs To Return To Canada After Downturn Ends
  • 5 days Statoil, YPF Finalize Joint Vaca Muerta Development Deal
  • 5 days TransCanada Boasts Long-Term Commitments For Keystone XL
  • 5 days Nigeria Files Suit Against JP Morgan Over Oil Field Sale
  • 5 days Chinese Oil Ships Found Violating UN Sanctions On North Korea
  • 5 days Oil Slick From Iranian Tanker Explosion Is Now The Size Of Paris
  • 5 days Nigeria Approves Petroleum Industry Bill After 17 Long Years
  • 6 days Venezuelan Output Drops To 28-Year Low In 2017
  • 6 days OPEC Revises Up Non-OPEC Production Estimates For 2018
  • 6 days Iraq Ready To Sign Deal With BP For Kirkuk Fields
  • 6 days Kinder Morgan Delays Trans Mountain Launch Again
  • 6 days Shell Inks Another Solar Deal
  • 7 days API Reports Seventh Large Crude Draw In Seven Weeks
  • 7 days Maduro’s Advisors Recommend Selling Petro At Steep 60% Discount
  • 7 days EIA: Shale Oil Output To Rise By 1.8 Million Bpd Through Q1 2019
  • 7 days IEA: Don’t Expect Much Oil From Arctic National Wildlife Refuge Before 2030
  • 7 days Minister Says Norway Must Prepare For Arctic Oil Race With Russia
  • 7 days Eight Years Late—UK Hinkley Point C To Be In Service By 2025
  • 7 days Sunk Iranian Oil Tanker Leave Behind Two Slicks
  • 7 days Saudi Arabia Shuns UBS, BofA As Aramco IPO Coordinators
  • 7 days WCS-WTI Spread Narrows As Exports-By-Rail Pick Up
  • 7 days Norway Grants Record 75 New Offshore Exploration Leases
  • 7 days China’s Growing Appetite For Renewables
  • 8 days Chevron To Resume Drilling In Kurdistan
Alt Text

A Rare High-Profile Utility Takeover

Dominion Energy, Virginia’s largest utility…

Alt Text

Blockchain Tech Is Transforming The Energy Industry

Blockchain may be the buzzword…

Alt Text

The OPEC Deal May End In June

Oil prices have rallied above…

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

LNG

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:




Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News