• 4 minutes Permian already crested the productivity bell curve - downward now to Tier 2 geological locations
  • 12 minutes Western Canada Select price continues to sink
  • 18 minutes Starvation, horror in Venezuela
  • 1 hour WTI @ 67.50, charts show $62.50 next
  • 3 hours China still to keep Iran oil flowing amid U.S. sanctions
  • 24 mins How To Explain 'Truth Isn't Truth' Comment of Rudy Giuliani?
  • 2 hours Is NAFTA dead? Or near breakthrough?
  • 5 hours China goes against US natural gas
  • 7 hours Japan carmakers admits using falsified emissions data
  • 5 hours Saudi PIF In Talks To Invest In Tesla Rival Lucid
  • 4 hours Corporations Are Buying More Renewables Than Ever
  • 4 hours Desperate Call or... Erdogan Says Turkey Will Boycott U.S. Electronics
  • 21 hours Hey Oil Bulls - How Long Till Increasing Oil Prices and Strengthening Dollar Start Killing Demand in Developing Countries?
  • 3 hours Saudi Fund Wants to Take Tesla Private?
  • 2 hours Batteries Could Be a Small Dotcom-Style Bubble
  • 2 hours Are Trump's steel tariffs working? Seems they are!
Cracks In Global Economy Weigh On Oil Markets

Cracks In Global Economy Weigh On Oil Markets

Oil prices fell this week…

New Gulf Of Mexico Leases Raise Concerns

New Gulf Of Mexico Leases Raise Concerns

The Trump administration just wrapped…

LNG May Suffer Boom-Bust Cycle

A flurry of construction around the world will greatly expand liquefaction capacity for shipping natural gas. Companies are hoping to move low-cost natural gas in places like the United States and Australia and sell it to high-priced markets like East Asia. However, the rapid build out of export capacity may suffer from a classic boom-bust cycle, according to Rice University’s Kenneth Medlock III.

He argues that the Fukushima meltdown created a significant, but temporary, shortage in supply. This opened up a wide gulf between natural gas prices in Asia and other regions in the world. LNG exporters are now planning billions of dollars in newly constructed or retrofitted terminals to take advantage of that disparity. Plans are underway in Australia, the United States, Malaysia, Mozambique, and Qatar.

But the price window may begin to close as capacity comes online and Japan restarts some nuclear reactors. Meanwhile, many projects are rushing to compete for what may actually not be that big of an economic pie. “Capital flows to where it sees opportunity and everybody’s trying to grab that flag first,” Medlock, said in a March 3 interview, according to Bloomberg News. “What happens is that you see too many people trying to grab the flag.” This may result in a bust in a few years when lots of capacity comes online at the same time.

Related Article: Can U.S. LNG Break Russia’s Gas Grip on Europe?

However, John Watson, the Chief Executive at Chevron, disagrees. He argues that billion dollar projects will not move forward if they don’t have the customers ahead of time. “Even companies the size of Chevron don’t build LNG plants without having contracts in hand,” Watson said.

There are many factors that go into determining the profitability of exporting LNG, but a lot will ride on the ability of the U.S. natural gas industry to keep prices low, as well as how big the appetite will be for LNG in Japan, South Korea, and China over the next decade.

By Joao Peixe of Oilprice.com



Join the discussion | Back to homepage

Leave a comment

Leave a comment

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