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Moody’s expects LNG prices to remain constrained beyond 2020

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LNG Industry,

Moody’s has published a new report, in which it claims that it expects LNG prices to remain constrained beyond 2020, as a wave of new supply capacity comes online at a time when demand from the largest importers in the world is declining.

Tomas O’Loughlin, a Vice President – Senior Credit Officer at Moody’s, said: “Strong LNG demand growth from China, India and new markets will not be enough to absorb the fresh supply capacity coming online, particularly with demand falling in the largest importing countries, Japan and Korea. The market will not rebalance until the early years of the next decade, when global demand and LNG import infrastructure catches up with supply.”

The key points of the report are as follows:


  • Global oversupply will continue to grow, peaking in 2019 at approximately 55 million tpy. During this period, a significant volume of LNG from the US could be destined for Europe.
  • Global LNG demand growth is expected to continue to be robust, boosted by low prices, as well as environmental concerns and the build-out of infrastructure in new markets allowing greater volumes of LNG to be imported.
  • This demand growth, combined with a pause in development of supply capacity, will allow the market to rebalance in the early 2020s.
  • By 2020, Japanese imports will fall to approximately 80 million tpy. This is a 9% reduction from its 2014 period and will be caused by nuclear power restarts.
  • Demand from the world’s second largest consumer – South Korea – will be flat over this period.
  • At the same time, new global supply will jump 44% by 2020 to 455 million tpy vs 2015, as LNG construction projects in Russia, the US, and Australia, costing over a quarter of a trillion dollars, come online.
  • These projects were boosted by a spike in demand from Japan following the tsunami in 2011 and the consequent nuclear shutdown, as well as abundant US shale gas supplies.
  • Until the market rebalances, investment returns for developers of Australian projects will be weak, and US LNG offtakers will find it difficult to recover all of their liquefaction costs.

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