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Increased Global LNG Supply Leading To A Negative Outlook For The Industry
London, London, United Kingdom ( 30/06/2010

"LNG Industry To 2016 - Increasing Gas Supply Challenges Future Growth Prospects"

The global economic crisis has led to a significant drop in natural gas demand globally. The global natural gas demand dropped drastically in 2009, which led to a huge slump in natural gas prices. Excess production and low demand have forced natural gas prices to remain low at an average of $4 - $4.5 per million British thermal units (MMBTU), even with crude oil prices hovering at around $80 a barrel. LNG demand too has suffered, as a result of it being interdependent with natural gas demand. As a result, LNG prices have dropped significantly in the recent past. Prices of spot LNG in Asia for immediate delivery slumped to as low as $3.8 per MMBTU in May 2010 from about $25 MMBTU in 2008 as the global recession cut demand from Japan and South Korea.

While the global LNG demand dropped substantially, the supply of LNG improved, with new LNG liquefaction plants becoming operational in Qatar, Yemen, Indonesia and Russia. The new planned LNG terminals may further deepen the LNG supply glut. During 2009-2016, approximately 233.5 million tones per annum (MMTPA) of new LNG liquefaction capacity is expected to come on-stream. The major contributors to this increase are Australia, Iran, Nigeria and Qatar. Even in the Asia-Pacific region, where demand in India and China continued to grow, the drop in demand from major consumers such as Japan, Korea and Taiwan created a major slump in the overall LNG demand. The excess of natural gas supplies in the world has led LNG spot prices to hit new lows. The drop in spot LNG prices has made buyers rethink on long term LNG contracts. Importers can now easily tap the global market for spot cargoes at lower prices than the long-term supply agreements.
Consequently, the LNG industry will be buyer driven until 2011, as supplies will continue to exceed demand as in 2009. The ‘tough phase’ of the industry could be potentially aggravated by upcoming additional new LNG facilities. This is in sharp contrast to the supplier-driven LNG market of 2008. Along with this, the major factor of increasing natural gas supplies from unconventional sources is expected to adversely affect the industry. These factors have significantly altered the supply situation, inducing a surplus in supply.

Surging energy demand from developing economies of China and India in Asia and the desire for diversity of energy sources worldwide have acted as contributing factors for growth of LNG imports. As the fastest growing economies, with rapidly rising energy demands as a result of a massive population growth rate (the two together represent almost 40% of the world population) and limited domestic resources, the two countries together are set to become major LNG importers by 2016. The governments of the two economies are encouraging their respective National Oil Companies (NOCs) to participate in LNG regasification projects. China’s demand for natural gas has been increasing and would continue to rise significantly. Hence, China will be looking forward to achieving long-term LNG contracts to secure a sustained LNG supply for its domestic needs.

GBI Research’s new report “LNG Industry To 2016 - Increasing Gas Supply Challenges Future Growth Prospects” provides an in-depth analysis of the global LNG industry and highlights the various concerns, shifting trends and major players in each geographic region. The report provides forecasts for the liquefaction and regasification sectors of the LNG industry, of planned liquefaction and regasification terminals and of planned major global LNG projects to 2016. The report also provides segmental forecasts of the global LNG market in different regions worldwide and highlights the major countries in the region. The report provides in-depth analysis of the key trends and challenges for the LNG industry in the different regions. An analysis of LNG economics, capital expenditure and deals are also provided.

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Rajesh Gunnam

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