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Supply overhang can last longer than projected-I: Find out why Wood Mackenzie can be wrong
Apr 11:   The latest LNG production and demand data of Wood Mackenzie shows a massive upsurge in demand as supply tapers off
8The projection shows supply staying ahead of demand until 2022 but the gap reverses subsequently
8The projections are however based on existing ground realities which do not take into consideration projected plans
8Demand gets a boost as gas is used as cheaper feedstock for power producers and chemical manufacturers, and in transportation, heating and broader electrification.
8But there are other factors too that can impact gas prices that Mackenzie's projections have not taken into account.
8One such factor could be the elimination of the destination clause which could trigger 'a flurry' of unrestricted outbound cargoes from Japan that may push down LNG prices for as long as 5 years. About 80 percent of long-term LNG supply contracts between major Japanese and South Korean buyers and suppliers are estimated to include destination restriction clauses.
8New sources of supply can come in. Last week Qatar, still the world's biggest LNG exporter, said it would end its self-imposed moratorium on development of the North Field, adjacent to Iran's gigantic South Pars fields. Together with Iran, both these countries can upset the supply equation to the extent that the supply overhang projected now continues well into the next decade.
8If a dearth in supply is to emerge in the coming years, Qatar and perhaps Iran will be ready to help fill it, and fight for a share of the market.
8And in a world of abundant supply, the low-cost producers like Iran and Qatar will be in a preeminent position to wrestle the initiative.
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