Industry experts say that last year’s strong demand for liquefied natural gas (LNG), coming mostly from Asia, will continue this year and absorb some of the new supply coming onstream.
The global LNG industry has been expecting prices to be depressed by a rush of supply as projects to produce 40 million to 50 million tonnes per year of LNG are coming online, mainly in Australia and the United States, over the next two years.
But, a surge in Asian demand last year took the market by surprise, with some producers now expecting the new supply to be easily absorbed by the increasing consumption across Asia.
“For the past three years, we were told at every conference that we’ll have a gas bubble, that gas is oversupplied, that we won’t be able to sell LNG… but it’s a bubble that never came,” said Jean-Pierre Mateille, vice president of trading at Total’s gas and power division.
Trade flow data on Thomson Reuters Eikon show global liquefied natural gas (LNG) imports have risen 40% since 2015, to almost 40 billion cubic meters (bcm) a month. Growth accelerated in 2017, with imports up by a fifth, largely because of rising demand in China, but also in South Korea and Japan.
China, which overtook South Korea as the world’s second-largest LNG importer in 2017, will still import large volumes of LNG this year though at a slower pace, the executives said.
China’s LNG imports soared after the government ordered millions of homes to switch to natural gas and electric heating from coal to counter rising air pollution.
This switch will continue to boost LNG imports into the country this year, Total’s Mateille told the LNG Forum 2018 conference.
Despite the new Australian and U.S. supply, demand will catch up in the long run, said Royal Dutch Shell Energy’s Executive Vice President Steve Hill.
Trafigura’s head of LNG Hadi Hallouche said: “If we move away from the next one, two, three years, the industry is growing at 20 to 30 million tonnes every year but we’re not taking FIDs (final investment decisions) for that kind of volume.”
“There seems to be a consensus that from two years onwards we have a (supply) crunch because we have under-invested in production,” he said.