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IEA releases new LNG market report

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LNG Industry,

The International Energy Agency (IEA) has released a new report that aims to provide more transparency into the LNG market.

In its ‘Global Gas Security Review’, the IEA suggests that LNG markets are less flexible than is commonly believed. The fact that a growing share of LNG capacity is offline means that the market has less extra capacity than assumed. Between 2011 and 2016, the level of unusable export capacity has doubled, disabling about 65 billion m3 of gas. The IEA warns that a period of low oil and gas prices could worsen the situation.

However, the IEA report also suggests that LNG contract structures are becoming less rigid, which is helping to increase market liquidity. Last year, approximately 40% of LNG contracts had fixed destination terms, down from 60% for contracts signed up to the year 2014. The report also notes that while shorter term contracts are becoming more common, buyers are also accepting longer contracts in exchange for increased flexibility in the final destination in order to better respond to market conditions.

The report forecasts that LNG’s share of the global gas market will increase in the coming years.

Fatih Birol, the Executive Director of the IEA, said: “The growth in the global gas trade, along with the diversification of supply sources, is improving the security of supply […] But there is still a need to be vigilant on gas security as the changing nature of the market means that regional demand and supply shocks may now be felt in more distant places than ever before.”

The report, which provides detailed case studies on Europe and Japan, builds on an extensive set of data and other substantial inputs from industry and will be produced on an annual basis.

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