Methane gas (what used to be known as ‘natural gas’) is an inherently volatile commodity.
Recent spot price volatility around the globe has led to tenders being cancelled. Prices are being offered at uneconomic rates, recently affecting customers in both Pakistan and Bangladesh.
Methane gas is an inherently volatile commodity.
Spot prices have increased 18-fold from lows seen just six months ago. A spot cargo out of Western Australia purchased by a Japanese company recently changed hands for a reported US$37/one million British Thermal Units (MMBtu).
While contract prices have been relatively stable in the recent past, this stability is likely to give way to a renewed period of volatility as drilling activity has been low, gas industry investment in production and development has stalled, and oil and gas companies continue to experience financial instability and poor financial health around the world.
IEEFA expects the lower investment and reduced drilling activity will lead to price spikes and volatility at a higher level than experienced in the last three years. Gas customers globally can expect an unpredictable time ahead with substantially higher prices being a distinct possibility.
Gas customers globally can expect an unpredictable time ahead with substantially higher prices being a distinct possibility.
Emerging markets such as Vietnam, Pakistan and Bangladesh, amongst others, that are looking at Liquefied Natural Gas (LNG) to provide a source of power, will be faced with more volatile and also higher prices. This will inhibit each country’s ability to fully utilise their existing LNG powered electricity generation plants.
Vietnam, Pakistan and Bangladesh have over US$50 billion of proposed gas-fired power projects at risk of cancellation from unaffordable LNG prices. The extreme volatility of spot prices combined with the increasing volatility of contract prices will see many projects become unbankable.
Press release: IEEFA: For price-sensitive LNG buyers in Asia, now is not the time to build new LNG import terminals
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