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India betting on natural gas

India’s state oil refiners are planning an aggressive push into natural gas in the coming years.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

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Gas exporting countries meet as global buyers' market rises

Reuters are reporting that top officials of major gas producing countries gathering this week in Bolivia will face a harsh reality: Expanding supplies of the fuel are giving global buyers greater sway over purchase and contract terms.

This week’s Gas Exporting Countries Forum (GECF), which aspires to be the OPEC (Organisation of the Petroleum Exporting Countries) for natural gas suppliers, is expected to draw energy ministers from Qatar, Iran, Russia and Venezuela to Santa Cruz, Bolivia as market oversupply reduces revenues.

These countries increasingly are competing with exports from and prices set in the US, which is on track to become the world’s third largest exporter of LNG after Qatar and Australia.

At least 25 countries are now capable of receiving LNG supplies and new regasification plants are expected to start operating in the coming months, giving buyers greater flexibility and increasing competition for suppliers.

Even though LNG represents only about 10% of the world’s gas trade, new suppliers are willing to offer sweeter terms to customers, roiling traditional markets and turning up the heat on some producers trying to hold onto more rigid terms.

The US has been the most aggressive in shaking up the market, through flexible contract terms.

US suppliers such as Cheniere Energy are allowing customers to resell cargoes, which has created a profitable market for trading houses. A growing number of spot LNG sales and swaps is also taking place. Cheniere plans to open its fifth liquefaction plant in the coming months while seeking new buyers.

The US’ rise as a force in global LNG markets and its growing gas sales to Mexico via pipeline have contributed to greater price certainty. This is reflected in a long and flat North American dry gas cost curve that should limit abrupt price increases.

Price indexes are becoming a factor not only in LNG contracts but also in sales via pipeline.

Pricing at the US Henry Hub fell in the last decade from a peak of around US$11 per million British Thermal Units (BTUs) at the end of 2005 to a low of US$1.96 in March 2016. Since then, prices have remained stable around US$3 per million BTUs.

In markets such as the Caribbean, some sellers also are customising their gas supplies by linking contracts to fuel oil prices, which is also used for power generation.

The gas glut has fuelled some mergers among producers, just as the terms of some of the world’s most important gas trade deals are being renegotiated ahead of their expiration dates, including some contracts between Qatar and Japan, South Korea and Taiwan.

Other traditional gas suppliers such as Russia, Norway and Algeria seem determined to maintain market share in key markets such as Europe.

In Latin America and the Caribbean, where US LNG supplies have lowered prices for importers such as Chile and Argentina, traditional suppliers Trinidad and Bolivia need to attract upstream investments, cut costs and offer consumers more pricing flexibility to remain competitive. 

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