Exporters of Liquefied Natural Gas, including Nigeria, have been told to brace for an oversupplied market and weaker-than-expected global demand depressing prices for their output for another two years.<\/p>\n
Nigeria, which is among the top 10 largest exporters of the LNG in the world, has a capacity of 22 million tonnes per annum. This it does through the Nigeria LNG Limited.<\/p>\n
The company owned by the Federal Government and three international oil companies took the final investment decision in December on its Train 7 project, which aims to increase its capacity to 30mtpa.<\/p>\n
Market participants who gathered during the first day of the American LNG Forum in Houston said the LNG market would be highly competitive.<\/p>\n
The outlook is expected to force a reckoning among the more than one-dozen US projects that are actively under development and have yet to reach final investment decisions, according to S&P Global Platts.<\/p>\n
\u201cWill there be another wave of the US LNG? Our view is yes. We\u2019re going into a period of a pause button pressed on the pace of development. But, certainly, another wave of investment is likely,\u201d said Alex Munton, principal analyst, Americas LNG, at consulting firm Wood Mackenzie.<\/p>\n
Benchmark prices in both Asia and Western Europe are now clearly signalling oversupply, though spreads into Southern Europe and Central Europe still remain marginally profitable.<\/p>\n
However, given the recent downward shift in the outlook for vessel costs, combined with very bearish price movement at the US Henry Hub, the forward netback remains positive through the balance of 2020, S&P Global Platts Analytics data show.<\/p>\n
Though weak, these marginal spreads could still incentivize strong utilisations of the US LNG export capacity, particularly if the US LNG offtakers have hedged their cargo loadings in either the financial markets or though physical tenders.<\/p>\n
The bigger question is said to involve the impact of the market fundamentals and geopolitical concerns on further liquefaction development.<\/p>\n
\u201cWe know the US is going to probably be the largest exporter of the LNG in the world. We already have the plants up and running,\u201d Paul Sullivan, senior vice president, LNG, at Australian engineering and consulting firm, Worley, said at the conference. What do we do about the next phase?\u201d<\/p>\n
By 2026, as many as 18 liquefaction projects would be operating in North America, a number that assumes that some of the active US projects advance to construction, Sullivan said.<\/p>\n
\u201cThe feeling is if we can maintain a level of pricing \u2013 I\u2019m not going to give you a benchmark other than $6\/MMBtu; that\u2019s what people are settling around. If we look at that being the normal, the rapid rate of expansion of our industry can be maintained in a figure around that setup,\u201d he said.<\/p>\n
Analysts note that at least in the short term, it is hard to see those prices being achieved, especially in Asia.<\/p>\n
North Asian spot LNG prices plunged to a historic low on Monday around $3.50\/MMBtu, on a weaker demand outlook from China and softer European gas prices.<\/p>\n
Unusually warm weather in Japan, coupled with the likelihood of extended Lunar New Year holidays in China, also has reportedly weighed on an already sluggish market.<\/p>\n
Added to this is the coronavirus, amounting to a \u201cperfect storm\u201d of challenges for the global LNG market, Munton said.<\/p>\n
\u201cThe market is very tough right now for sellers and developers,\u201d Munton said, adding, \u201cBut we do see a recovery period, not necessarily this year or next year, but in 2022 things will recover because the current wave of new supply will flatten out and we see demand continuing to grow. Then, as we look forward, the next stage after the recovery, which will likely be 2022-2024, is really a period of uncertainty.\u201d<\/p>\n
The calculation for the market, Munton said, is \u201chow to think through this uncertainty from the mid-2020s onward, which is the key window for any developers now in the pre-FID stage.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
Exporters of Liquefied Natural Gas, including Nigeria, have been told to brace for an oversupplied market and weaker-than-expected global demand depressing prices for their output for another two years. Nigeria, which is among the top 10 largest exporters of the LNG in the world, has a capacity of 22 million tonnes per annum. This it […]<\/p>\n","protected":false},"author":62,"featured_media":18542,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[24,14],"tags":[1368,228],"class_list":["post-20982","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-policy","tag-lng","tag-oil-production"],"yoast_head":"\n