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LNG outlook: Asia in focus

LNG Industry,

In recent years, domestic gas production in many consumer nations has declined, prompting a search for alternative sources of gas supply. Furthermore, in many countries, gas demand is forecast to increase substantially as a consequence of population growth and a shift in the energy mix from coal to gas. Consequently, LNG will be a key solution to ensuring future gas supply for many nations. However, due to sustained low oil and gas prices, there have been concerns regarding the economic viability of many LNG projects. Asian LNG demand is expected to be impacted in the short-term by slower than expected economic growth and by an increase in nuclear power generation in Japan. This is likely to result in oversupply in the LNG market persisting beyond 2021. Despite these near-term concerns, the long-term outlook is largely positive. LNG demand from other countries in Asia will ensure a demand-supply balance over the long-term. The Chinese government’s commitment to switching from coal to gas power generation to reduce greenhouse gas (GHG) emissions is expected to continue – the construction of hundreds of coal-fired plants was recently halted. Furthermore, economic growth forecasts for India remain strong – the government aims to narrow its domestic demand-supply gap by using LNG.

Global market overview

CAPEX on LNG facilities is expected to increase over the forecast period of 2017 – 2021. This is primarily due to a number of large North American liquefaction projects currently under construction. Total expenditure on LNG facilities is expected to reach US$284 billion over the forecast period – an increase of 50% compared to the 2012 – 2016 period.

The expenditure outlook over the forecast period is one of fairly steady growth. However, 2017 and 2018 are likely to be weaker years, due to reduced project sanctioning as a result of current market oversupply, which has largely influenced LNG spot prices. In Asia, average LNG prices in June 2016 were 69% lower than June 2014. Despite reduced expenditure in the near-term, spending is expected to increase in the latter years of the forecast period. This will be supported by continued investment in North America and an expected resurgence in the LNG carrier market…

Written by Mark Adeosun, Douglas-Westwood, UK.

This article was originally published in the September 2016 issue of LNG Industry magazine. To read the full version of this article, please sign in or register for a free trial subscription.

For more information on Douglas-Westwood's 'World LNG Market Forecast 2017 - 2021', please click here.

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