• 4 minutes China - EU: Xi Says Cooperation Is Mainstream In Their Ties
  • 8 minutes The Mining Industry Has Had It Easy For Far Too Long
  • 11 minutes Lawsuit-Happy Councilor Wants to Take Big Oil to Court
  • 15 minutes U.S. Shale Output may Start Dropping Next Year
  • 3 hours Dutch Populists Shock the EU with Election Victory
  • 2 hours Venezuela Says Russian Troops Land to Service Military Equipment
  • 5 hours Trump to Make Allies Pay More to Host US Bases
  • 2 hours Mexico Demands Spain and the Vatican Apologize to Indigenous People for the Spanish Conquest
  • 23 mins Multi-well Pad Drilling Cost Question
  • 1 hour Public Companies that attended OPEC "THREAT DINNER" at CERRAWEEK must disclose any risks in their SEC Financial filings.
  • 3 hours 3 Pipes: EPIC 900K, CACTUS II 670K, GREY OAKS 800K
  • 23 hours U.S.-China Trade War Poses Biggest Risk To Global Stability
  • 50 mins England Running Out of Water?
  • 6 hours Read: OPEC THREATENED TO KILL US SHALE
  • 2 days One Last Warning For The U.S. Shale Patch
  • 1 day European Parliament demands Nord-Stream-ii pipeline to be Stopped
  • 2 days Climate change's fingerprints are on U.S. Midwest floods
China Can’t Get Enough Of This Discounted Oil

China Can’t Get Enough Of This Discounted Oil

China is taking advantage of…

Flurry Of Bearish News Sends Oil Lower

Flurry Of Bearish News Sends Oil Lower

Renewed demand concerns are spooking…

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