Soft Global LNG Demand | Russell T. Rudy Energy LLC
“World Oil” cites analysis by the consulting group, Wood Mackenzie, which indicates that in spite of weak demand and possible oversupply, a large number of additional LNG projects are still being considered. This is in stark contrast to 45 major upstream project cancellations.
Current global LNG capacity is around 250 million tons per annum (MMtpa) with an additional 140 MMtpa under construction. Wood Mackenzie contends that with demand in China, South Korea and much of the rest of Asia seeing less than anticipated economic growth and cheap oil, there is little appetite for additional supply. Consequently, the projects still under consideration would only exacerbate, and potentially flood, the market with an additional output of approximately 100 MMtpa. Fully 50 MMtpa of this capacity would be built in the U. S. Were this to happen, oversupply in Asia could extend into 2025.
Thus far, only British Gas (BG) has recognized this potential market imbalance and has canceled its Lake Charles, LA, project. However, Shell, Petronas, ENI, Anadarko, BP, ExxonMobil and Woodside are all still considering new facilities.
This raises the question as to why other operators have not followed BG’s lead. Noel Tamnay, VP-Global Gas and LNG Research at Wood Mackenzie, explains the reluctance to cancel projects as a result of several factors. Postponements could invalidate contracts for LNG which has already been sold. Also, many operators have fought long and hard for regulatory approvals and community support and hesitate to relinquish this momentum. Finally, some companies fear that postponements would be perceived as cancellations and thereby favor their competitors.
However, Tomnay concludes that “Mackenzie’s view is that the global LNG market does not need all this LNG at the pace proposed and, as companies confront this reality, a raft of project postponements will follow.
To read the article in its entirety, please go to http://www.worldoil.com/news/2015/9/04/wood-mackenzie-where-are-all-the-lng-project-postponements .
