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LNG price drop spurring demand

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LNG Industry,

Bloomberg are reporting that LNG prices falling to the lowest in a decade last year spurred fresh demand while suppressing investment in new production. This development could potentially lead to shortages and price spikes in the next decade.

Global annual LNG consumption is predicted to rise to 422 million t by 2030, almost two-thirds higher than last year and almost 13% above previous forecasts. China, India and multiple smaller countries quickened up buying after prices fell and as they sought to shift to the cleaner-burning fuel amid air pollution from burning coal.

Buyers are poised to take advantage of an array of under-construction projects expected to come online over the next few years, which will keep fuel prices low. That poses a long-term danger, though, as producers may continue an investment drought that may eventually result in future supply deficits.

Small LNG buyers are key to the new demand growth. Countries that imported less than 5 million tpy accounted for 19% of total consumption last year, up from 15% in 2014. Those nations will account for 31% of global use by 2030, larger than the combined volume from China and India.

Conversely, demand from the world’s two largest users, Japan and South Korea, is expected to decline or remain flat through next decade. Japan in particular, with several supply contracts from the US about to go into effect, will emerge as an important LNG merchant as it redirects unneeded cargoes elsewhere.

While demand is seen growing faster than previously forecast, the recent price crash has left approximately 250 million tpy of supply projects shelved or delayed indefinitely.

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