April 29, 2020 Read More →

Trade group says LNG oversupply situation likely to last through 2021

S&P Global Market Intelligence ($):

LNG developers “need to brace themselves for a continued glut” in world gas markets with rising supplies potentially outpacing demand growth for another two years, the International Gas Union said in an April 27 outlook.

“This will mean continued depressed prices,” said the International Gas Union, or IGU. “This is then likely followed by a period of recovery, with renewed uncertainty around the middle of the decade.”

The 42.5 million tonnes per annum of worldwide liquefaction capacity that came online in 2019 is expected to extend the oversupply into the mid- to late 2020s, significantly longer than the forecast issued just a year ago by the IGU, which represents all sectors in the gas value chain. If Qatar moves forward with its North Field LNG expansion, which the industry group described as one of the world’s most cost-competitive projects, another 49 mtpa of supply could come online between 2024 and 2027, causing the global glut to last another couple of years.

The market was oversupplied even before coronavirus pandemic began hitting world demand, with the global liquefaction capacity reaching about 430.5 mtpa by the end of 2019, the IGU reported. LNG prices slumped as rising supplies, especially from the U.S., met weaker-than-expected demand in a mild winter. But the pandemic made the situation worse as lockdowns imposed by world governments to control the spread of the coronavirus hit commercial and industrial demand for gas.

New additions of LNG production capacity in 2020 are expected to reach 24.35 mtpa. In the U.S., new liquefaction units are in the late stages of commissioning at the Freeport LNG Development LP facility in Texas, Kinder Morgan Inc.’s Elba Island LNG plant in Georgia, and the Sempra Energy-led Cameron LNG terminal in Louisiana.

“The current market environment lowers the expectations of seeing a recovery in prices any time before the coming winter,” the IGU reported.

[Corey Paul]

More ($): LNG glut to persist years longer than previously thought, industry group says

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