Spot LNG prices in Asia-Pacific are hovering around the $6/MMBtu level at a time when seasonal winter demand usually pushes them higher. The reason is not hard to see – excess liquefaction capacity coming on-stream in the US, compounding the build-up of capacity in recent years in Australia, as well as additions in Russia and elsewhere.
There is also a year-round seasonal impact. A mild winter generally gives way to weak summer pricing and a certain amount of residual LNG in tank. Buyers can fill up cheaply and enter the next winter season well stocked. Gas storage in Europe was full early this year, owing in large part to the availability of cheap LNG and a relatively weak drawdown over the previous winter.
But it is on the mid-2020s to which LNG developers focus has turned, perceiving a demand gap as South Asian countries in particular ramp up their demand for LNG, adding to still strong annual gains from China.
Yet the demand gap in 2020 appears to have been filled. According to GlobalData, the US will add 156.9 million metric tons per annum of new liquefaction capacity by 2023. Not all of this capacity is certain by any means, but even when only projects which have taken Final Investment Decisions (FIDs) are counted, in the US and beyond, the expected demand gap now looks narrow to non-existent.
Qatar plans an expansion from 77 million tons per annum (mtpa) to 110 mtpa come what may. Four 8 mtpa ‘megatrains’ are planned and expected…